‘Is it a bad time to start a business?’ That’s what one Startups reader asked on the forum this week.
The following question also popped up: ‘Credit crunch: has it affected your business yet?’.
I guess it was only a matter of time. Every day seems to deliver a new economic low as mortgage lenders pull back their offerings.
This week the changes to Capital Gains Tax come into force with entrepreneurs and investors still vocal in the derision. We hear report after report about the burden of red tape, while the Budget offered little to lighten the load let alone the mood.
Even the positivity of rising start-up stats was dampened by the acknowledgement more businesses are failing as well.
It’s undeniable: the economy is tough and there’s no sign a revival is imminent. The days of carefree consumer borrowing and disposable incomes are shrinking.
So, all considered, I understand why some of you have started to question, ‘is it a bad time to start a business?’
My answer? Emphatically, in one word: NO.
There has never been, and never will be, a bad time for well-researched new businesses providing products or services people operating on robust models.
As one reader suggested, if you’re only prepared to start-up in a more positive economic climate then you can’t be that confident about your idea in the first place. Instead, flip it and consider if your business model is robust enough to withstand a recession, it’ll flourish in kinder conditions.
But why believe me? I edit a website for people starting their own businesses. I’ve an obvious incentive to keep you lot at it. Banks, now they’re a far better barometer.
Banks operate purely on perceived risk and just as they’re cutting mortgage and credit lending, if they considered it a bad time to start-up, they’d cut business lending. But they’re not.
In fact, British Bankers’ Association figures released this week, revealed loans to small businesses rose 10% in 2007 to £41.7bn. Split quarterly, the stats also showed a steady year-long increase in lending, albeit tempered by a 1% drop in overdrafts, providing no evidence banks are losing their appetites.
I’ll concede innovative unproven business models might prove more difficult to finance and it’s likely every business plan will come under greater scrutiny than in the previous five years, but that’s not necessarily a bad thing either if it ensures more thought goes into profit generation and robust models.
So don’t stop plotting just because we’re in a downturn, just start planning.
