Is it the good time to start a business?
Economic recession is difficult for both people and companies as there is limited opportunity to maintain or grow financial strength. It is a sad truth that people lose their jobs and companies declare bankruptcy during the economic recession. According to Forbes “The World Economic Growth is forecasted optimistically in 2017 to 2018 with positive world GDP growth”. However, Mongolian economy has classified as “Moderate-High Risk” country according to Atradius Economic Outlook. In 2016, economic growth of Mongolia has slowed further 1.4% in the first half and also, household income has declined 10.4% while unemployment rising - Asian Development Bank (2016). Hence, the Mongolian two giant neighbors of China and Russia have been facing some economic challenges throughout the year. From the businessmen point of view, Mongolian active market mainly relies on a few major industries such as mining, agriculture, and livestock. Furthermore, the Mongolian currency (MNT) is getting weaker by the time.
So is it a good time to start a business? Most people would say no as there is every possible negative factor that would punch down the base of your newly created business. However, depending on the risk attitude of you and your management this economic downturn could be turned into an opportunity of success and followings are the reasons why it is worth starting a business during the downturn.
1. Clients want to save money
With quick startup along with few expenses, the firm should be able to undercut the competitors. As the economy slows down, their clients will be looking for cheaper alternatives and it would be perfect opportunity to make a sales pitch to win them over. If a firm provides good performance the client will stay when the economy recovers.
2. Competent people are looking for work
Finding the right employee is difficult but during the recession, there would be layoffs and qualified, talented and effective individuals can be easily found with reasonable cost.
3. Low cost opportunity
Weak economic growth means most of the ailing businesses are selling off certain assets. There is an opportunity that typical overhead costs such as office space, or one-off purchases such as office furniture, tend to have lower base prices and vendors are more likely to discount prices to move stock quicker.
4. Certain investors looking for business to invest
Depending on the business, certain costs such as plant and equipment couldn’t be avoided but if you need funding there would be many determined investors who are looking for new businesses in order to keep their eggs in a different basket in case the market is no longer attractive.
5. Build business with a good habit
Business startup during tough times gives the habit to be efficient with minimal cost and high performance. These habits would stay with the firm when the market recovers from the recession. Hence, would give higher profit margins by increasing the price once the client starts spending.
There would be plenty of reasons to start a business during the economic recession and there are plenty of business models that are recession proof. Therefore, if you have the courage and the good team, the market recession can be turned as an opportunity to build up.
Source: Asian Development Bank – Mongolian Economy 2016
Forbes – Global Economic Forecast 2016-2017
Atradius – Economic Outlook 2015
Forbes – Reason the best time to start business during downturn