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To many, it seems that it is a really bad time to even ask the question: Is now (2021) a good time to start a new business? Bad economies come and go every decade or so, but worldwide pandemics come along about once every hundred years, at least that’s the current historic experience. So why would now, when the world has yet to make significant progress on eradicating the disease that resulted in a nearly total closure of commerce, be a good time to engage a new business?
Even in normal business cycles, those that don’t include a pandemic, new business success rates can be sobering to consider. Statistical history on new business successes indicates that 20% of small businesses fail within the first year, 30% in the second year, and 50% fail to make it to year five. Only a mere 30% of new business ventures survive the first decade. This reality is often cited to many emerging entrepreneurs by friends and family in attempts to steal the dream, a scenario that will readily play out in any economic environment.
Those who choose to travel the road of self-determination through commerce possess several character traits not shared in equivalent amounts by those who choose an alternative career path: Optimism, an unabridged desire to succeed, perseverance, patience (when appropriate), impatience (when appropriate), foresight, hindsight (learning from a past mistake), and an innate ability to tune out all those nay-sayers. Of course, these traits that often lead to success can, if carelessly applied, just as often lead to failure. So, the question remains: Is now a good time to start a new business? The answer?
It depends. The events of 2020 have changed so much about how people live and consume products and services, and altered traditional buying behaviors once thought to be reliable. Large numbers of well-established, successful businesses failed completely or were dramatically crippled for months, potentially even years, for reasons that none of them could control. While optimism is beginning to arise that 2021 will bring solutions to the virus and a plausible pathway to recovering some new norms, we are not yet beyond the effects of the pandemic. It has been said, “Build it and they will come.” The masses of consumers will come back, but now may be a good time to exercise patience when deciding when to build it. As mandated operational restrictions on certain segments of commerce remain, the answer is simple. It’s fairly clear that now is not a good time to open a new restaurant. But failures in other business sectors may provide opportunities for emerging businesses.
Higher unemployment has created an expanding field of qualified and experienced talent that is available to fill a new venture’s needs. In some sectors, the failures have resulted in less competition or in competitors who are less likely to be in a position to fend-off a well-prepared and aggressive challenger. The closing of business in 2020 created massive supply chain disruptions that will take time to resolve. While some are still in the process of resolving the issues of product shortages and the inability to serve consumers’ immediate needs, other sectors’ product pipelines are experiencing over-capacity. This glut will be a source of opportunity. For would-be entrepreneurs who are personally and financially prepared to focus on the consumers waiting for solutions in these sectors, now may be as good a time as any to enter the business world.
Financial backing is always a leading challenge for new businesses. The current risk of failure is impacting an already scarce and sensitive financial market for entrepreneurs. Regardless of the timing of launch, new business ventures must consider the short and longer-term financial support that is needed to weather the lean years. Under-capitalization is a leading cause of failure of many new businesses.
A strategic marketing approach is essential even in the best of times. Despite the losses, the field of competition is still crowded with capable and hungry players. Identify an under-served market niche and focus on accomplishing what existing competitors cannot do or are unwilling to do. Many competitors, no matter how big or seemingly commanding of the market, will leave a door ajar for a new entrant. Build a brand that recognizes a need with solutions that resonate with an unfulfilled audience. Tell a story that is believable, authentic, and resonates with the customer that is looking for a solution. Listening to customers is now, more than ever, essential for survival and growth in any marketplace.
Having the skill to calculate the length of the curve to the new reality may be the most important aspect of answering the question correctly. None of us have a crystal ball that has demonstrated any reasonable level of accuracy over the past year. Unknowns continue to cloud credible predictions and factors beyond our control still threaten the survival and sustainability of commerce across the spectrum of industry. For those who feel that this is a good time for that new business launch, go, but go with caution.