10 Reasons Now Could be the Ideal Time to Start a Business
As the saying goes, “Out of crisis, comes opportunity.” If you have idea to start a new business, do not let anyone just shoot you down. Here are nine reasons now could be the perfect time
Coronavirus suddenly changed the world. One day you were employed. The next day they were not. You were thinking about becoming your own boss and setting up a business. You should turn to your accountant for their advice.
What’s Going Through Your Mind?
Why now? Isn’t there enough uncertainty in the world? You may have other ideas. A lot of people are unemployed, yet between unemployment insurance and the $600 a week top-up the federal government is providing, their unemployment “income” is about equal to the average US wage. People feel this is not stopping anytime soon. They also received a $2,400 check or direct deposit from the Feds.
People feel the social contract between them, and their employer was broken. Business stopped. They were cut. What if they return and business stops again? Will they be laid off again? What if the Feds are not as generous the second time around?
How Can Accountants See the Opportunity?
Accountants can be great at making the case why clients should not do something. Your client may have a brilliant idea. Someone dreamed up Uber, Airbnb, Grubhub, Wayfair and Blue Apron. Let us assume your client is motivated, knows how to run a business and has a decent business plan.
Let us look at nine reasons why this might be the ideal time for your client to start their business:
- Office Space is Available and Might be Cheap: Everyone is talking about “working from home” as the newest business model. Firms do not need all that office space. Commercial property firms need to get rents coming back in again. Depending on your city and the practicality of subletting, your client may be able to get a decent deal on office space. That is assuming you even need an office with remote working arrangements and tools like Zoom.
- There was Supply Chain Disruption: How many major companies discovered there was no Plan B when the virus took hold in China and the country went into lockdown to combat its spread? Lots. Many should be looking for alternative sources of supply. If your client’s new business can fit this need, they may find lots of interest.
- The Government is Buying: They can be your client’s biggest customer. “Buy American” is a popular theme. The government tries to give preferential treatment to companies owned by minorities, women, and veterans. When Samuel Cunard built his first ships in the 1840, it was not because he thought there was pent-up demand for luxury ocean travel. He had a government contract to deliver mail from Britain to Canada via weekly steamship service.
- The Stock Market Will Recover: Your client will need to back their startup with their own money. At one point, the stock market was down 30 percent from its mid-February high. As of June 8, the DJIA was down only about 5 percent YTD. The S&P 500 is about even, and the NASDAQ went up over 9 percent. If the money your client intends to invest in their business is currently in the stock market, it is not looking too bad.
- Has Money Ever Been Cheaper? Your client will need lots more money. The bank likes to see the client is investing alongside them. Assuming they will lend money and your client has a good credit rating, interest rates are at historic lows. The rationale it is a terrible time to put your money in the bank to earn interest makes it a great time to borrow money at a low interest rate. It is likely to be variable, but now it is low to start.
- Talent is Available: Your client will need to hire the right people. We have gone from the tightest job market last December to May’s 13.3 percent unemployment rate. Many people will return to their old jobs as the economy recovers, but there will be some open to new opportunities. Your client may be able to offer them equity participation once the business gets started.
- There’s Still the Online Marketplace: People across generations have been shopping online since the lockdown. It was business as usual for some, but a new adventure for others. According to digitalcommerce360.com, eCommerce sales are up 40 percent vs. pre pandemic levels. This can be a boost for your client.
- There’s Pent-Up Demand: There are plenty of people leaving lockdown and getting ready to spend. Different segments of the economy will recover at different speeds. Bars, restaurants, and hair salons should bounce back immediately. Overseas travel and the cruise industry may wait a lot longer. Can your client’s business tap into pent-up demand?
- Local Advertising May be Cheap: Flip through the local newspaper. Once the lockdown started, plenty of businesses stopped advertising. Why run real estate ads if the offices are closed by state order? Why run car ads if people cannot visit showrooms? Newspapers are hurting. They need to get advertisers back. This could help your client.
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- Remember the saying: “Out of crisis comes opportunity.”