I recently posted the question, "Should you start a business in uncertain times?" on my Twitter and received some interesting responses and real-life accounts — many of which I’ll share below. But one response stuck out to me: "There is no such thing as a certain time to start a business."
It’s true. Starting a new business is one of the most unpredictable, tumultuous adventures you can embark on — but it also has the potential to be one of the most gratifying, lucrative ones as well.
Here, we'll explore whether starting a business in uncertain times is worth it, review some tips on how to do it right, and determine whether starting a business in 2021 is in your best interest.
So, should you start a business in uncertain economic times?
I spoke with a handful of entrepreneurs about their personal experiences with launching businesses in 2020. Their feedback is detailed below.
Brendan Hufford, founder of SEO for the Rest of Us
Hufford founded SEO for the Rest of Us as a community dedicated to helping people stop learning (and start doing) SEO.
"If these times have taught us anything, it's that our world is farther out of our hands than we may have ever imagined. Multiple income streams can provide security and a level of freedom that, in a way, make things more certain," shared Hufford.
Hufford learned that, while starting his new business was stressful, he was also able to bring a bit of certainty and peace to people looking to learn SEO. "It's been a privilege to help others grow their business during the pandemic," he shared.
Should everyone start a business during uncertain times? Hufford says no. "You shouldn't start a business if you're gambling on more than yourself," he said. "Adding that level of stress to your relationship with your significant other or children isn't something I'd ever advise doing."
Melissa Pedigo, CPA, founder of A CPA Writes
Pedigo is a CPA who writes tax, accounting, and finance content exclusively for CPAs, tax accountants, and financial advisors — she’s also dubbed herself Chief Nerd Officer and tax writing wizard.
"If you already know what you want to do and are sure there's a market for your product or service, then starting a business in uncertain times is no different than starting one in certain times," said Pedigo.
However, she warns that if you’re not certain of the demand for your idea, you should wait until a more stable time when consequences may be less impactful.
On the other hand, having a certain idea can negate the uncertainty of the market, economy, and world at large.
Moreover, with a solid support system (like a spouse, friends, or business partners), you're better suited to start a business during uncertain times. "Having a supportive spouse, both financially and emotionally, is underappreciated and under-recognized in providing the security to make big decisions like starting a business," Pedigo shared.
Doug Davidoff, founder and CEO of Imagine Business Development
Davidoff and his team enable companies to orchestrate all elements of their sales, marketing, and customer success efforts to generate more impact.
"Asking if one should start a business in uncertain times infers that there's an option to start them at certain times," Davidoff countered. "In my experience, there is no such thing as certainty, especially when it comes to starting and running a business."
In fact, Davidoff believes that uncertain or difficult times are, in fact, the best times to start a business — for three reasons:
- Tough times (like recessions) have a greater impact on larger companies. If you’re a new company, there are still plenty of opportunities available for you.
- Companies and people alike are more likely to be actively considering change in turbulent times than they are in smooth times.
- Good decision-making pays off far more in difficult, uncertain markets than in good, solid ones. Companies don't become great when times are good — they become great when times are difficult.
"Businesses should be started in uncertain times, because if they weren't, they would never be started," Davidoff stated. "I do believe there are exceptions for who should start a business in uncertain times, but it would be the same answer if times weren't uncertain — starting a business is not right for everyone."
Dr. D'vorah Graeser, CEO and Founder of KISSPlatform
Graeser founded KISSPlatform as an agile competitive intelligence toolkit to help you innovate and validate your ideas to bring them to market faster.
When asked about starting a business during uncertain times, Graeser said, "Times of crisis offer unique opportunities to take control of your future. [During crisis], only the companies that ventured to do something new were available when things ‘calmed down’."
According to Graeser, crisis provides a novel scenario in which we can succeed while other companies fail. To reach that success, she encourages new entrepreneurs to make decisions quickly and take chances. "Limitations and constraints make us think better and faster," she shared.
She agrees that while starting a business in uncertain times isn’t for everyone, it can be a smart move. "[Starting a business] will test you … but I've worked with many companies that look back to uncertain moments and are thankful for taking bold actions, making plans for the future, and investing in their businesses."
Tips for Starting a Business in an Uncertain Economy
Starting a business — no matter how "certain" times might be — is easier said than done. Here’s some actionable advice about starting a business during uncertain times from entrepreneurs who’ve actually done it.
1. Be real with people.
"Far too many people attempted to gloss over the realities that so many were facing [in 2020]. More than ever, people need to feel seen," Hufford encouraged.
“When times are uncertain, being a rock for others and supporting them outside of your core business is crucial.”
2. Prepare to adapt.
"Prepare for business to be slow, and be open and willing to adapt [in response," shared Emerson Lee, founder of personal gaming brand, Raggammufyn.
He started 2020 as a freelance writer but added a few additional services throughout the year as needed. "Now, I’m working on designing a new roleplay therapy service with a local niche therapy clinic, and I couldn't be happier," said Lee.
3. Track your expenses and have a plan.
"Keep track of your finances, and I'm not saying that because I'm a CPA," said Pedigo. "In uncertain times, you need to know where every dollar goes and make sure you're invoicing for all your work in a timely manner. Cash flow becomes more important in times of uncertainty."
Additionally, create a thorough business plan for starting and growing your company. This will help you stay focused on your goal when things inevitably get tough. It'll also help you attract investors and financial support when the time comes.
4. Get clear on your audience and their problems.
"Be clear on who your target audience is — and equally clear on the problem you're going to solve better than anyone," explained Davidoff.
He encourages new business owners to know the answer to these three questions on behalf of their audiences:
- Why should I change?
- Why should I change now?
- What should I change with you?
Tamara Sykes, SEO Strategist at Next Level Presence agrees. "You need to ask yourself if there's a need you can provide a solution for," she stated. "If the need is apparent, go ahead and start the business, because you know the market exists. But if it isn't, starting your business during an uncertain time is unwise — particularly since it will take more time to get traction."
5. Build an audience first.
"Network and build an audience before launching," shared Jack Kitterhing, founder of EatsWP, a company that allows restaurant owners to build mobile-friendly digital menus accessible by a QR code.
One way to build an audience is by sharing knowledge for free through a blog and on Twitter. "People will follow you, become invested in your story, and could end up as customers," said Kitterhing.
Podcast producer Eva Sheie agrees: "Everything you read about starting a business advises that you get customers before you do anything else, and that's what I’ve done. I'm currently working from a waitlist of clients — so I don't have a logo or a website. I'll get to scaling and hiring later this year… for now, I'm happy to just be happy and do good work.”
6. Get moving.
"Get moving now," Graeser urged. "Especially during these times when you feel like everything is standing still — it's your turn to start moving. Crises inevitably end and, if you start moving now, you'll be the one standing while others take time to get back to business again."
7. Be brave.
Tom Rankin, a freelance writer for WordPress businesses, deals with various health issues. To start his business during uncertain times, he had to make a brave decision to put aside some of his plans, double-down on others, and pivot anyway. "Big, bold decisions are tough to make, whether it’s business or life," he shared. "[But now], I have work, personal time, and life balance — the things I originally set out to achieve."
Megan Sayers, founder of Make Good Design, has also relied on bravery during these times. "We're not out of the woods yet, but there's something comforting about knowing that so many are in the same boat — it's almost given us permission to fail, which has in turn made us feel braver."
The Truth About Uncertainty
While uncertain times surely make it harder to build a business, the truth is that there truly is no certain or perfect time to do so. If you’re considering starting a new venture, evaluate your life, relationships, and bank account and decide if they’re sturdy enough to ride the waves of entrepreneurship.
If they are, and you’re prepared for the ups and downs of business-building, then there’s likely no better time to get started.
Take this note from Joe Clarke, a freelance writer who launched his business in 2020: "Should people start businesses in uncertain times? It depends on the uncertainty. If it's a personal situation rife with instability, I'd say it's probably not a great idea to add more to your plate. If it's instability in the world, then you're going to be waiting for a long time for the right time to start your business," he said.
"Do what you can to add safety nets before starting your business (whether that's having X months' living expenses saved, a healthy pipeline of leads, etc.), but know that there's always risk involved.
"But the thing about risk? Reward usually comes with it.”
Is 2021 a Good Year to Start a Business?
The end of 2020 brought a collective sigh of relief, but is the promise of a new year enough to successfully start a business in 2021? The answer isn't so simple.
Due to the complexity of the pandemic, data on 2020 and 2021 business exits and formations are still being collected and analyzed. But a preliminary report from the Federal Reserve suggests that business exits are about one quarter to one-third above historical levels.
The report also shows that, despite initial predictions of disaster, certain industries have had exits that are closer (or lower than) historical levels. Those include accommodation, food services, arts, entertainment, and recreation.
In other words, we expected many more businesses to close shop in 2020. But a lot of companies made it through the pandemic with fewer exits than initially imagined, as you can see by data from the first quarter of 2021.
At the same time, another report from the US Courts shared that bankruptcy filings are down by nearly 30%. This includes businesses — 21,655 businesses filed for bankruptcy in 2020, which is less than the 22,780 filings in 2019.
So the initial data continues to support those looking to start a new business. The Census Bureau reported that more than 4.4 million new companies were created in the U.S. during 2020 — a record-setting high.
This is a 24% increase from 2019 and 51% higher than the average from 2010-2019. It's easy to see this spike in new business applications, which is tracked on a monthly basis by the Census Bureau.
The influx of entrepreneurial activity during 2020 didn't just set records in the US. It was also the largest increase of any country in the Organization for Economic Cooperation and Development or the G20 with available data.
While it's too soon to declare the pandemic slump officially over, businesses are slowly rebounding. That's good news for the entrepreneurs who started a business during the pandemic — as well as those looking to become their own boss as economies around the world recover.
Before taking the leap, it's important to consider which industries have been most affected by the pandemic and which may be the most profitable. Retailing, food service, and logistics have seen major losses — while finance, construction, and eCommerce barely slowed down. Shopify shared a list of the best small businesses to start in 2021, predicting companies in health and beauty, subscriptions, and B2B and B2C will have the most success.
So is 2021 a good year to start a business? Yes, it can be. Your chosen industry plays a part, as well as the amount of additional funding you can get from the government and private stipends. But it's clear that the economy is getting back on its feet, and more people than ever before are setting up their own businesses.
When Is The Best Time to Start a Business
Ask any entrepreneur whether or not it's a good time to start a business, and you'll likely get similar answers. There is no perfect time. Every business takes dedication, strong leadership, a great product or service, and a little luck.
It doesn't matter if you start a business in the rebirth of spring or the dead of winter, but one thing does matter: you.
Research from the Kauffman Foundation found that 30% of new entrepreneurs in 2020 were unemployed when they started their companies — about double the pre-pandemic rate. This spike in entrepreneurship may have jumped for a number of reasons.
Some new founders had ideas brewing for a while and took advantage of downtime during lockdown to create their dream companies. Others found themselves out of a job and put energy into becoming their own boss.
If you feel ready to hand in your resignation or turn your side hustle into a full-time business, make sure to spend time checking off a few key steps and considerations.
Have you researched your product and target audience?
Nearly 50% of small businesses fail within the first five years. That number jumps to almost two-thirds by 10 years.
There are plenty of reasons why a business fails, but CB Insights found that 35% of startups fail because there's no market need. No customers are vying for your product or service.
The way around this is to research your target audience before starting a business. Look into economic trends, consumer behavior, audience demographics, and competition.
Is there a need for your particular niche? If so, test it out. Take on a client or two to see if your service works for them. If it's a product, offer a small group of your target audience free samples. Make sure to collect feedback — it will tell you whether or not you're heading in the right direction.
Do you have the time, energy, and resources?
Running your own business can be draining. The exhaustion of entrepreneurship has been documented both by research and hundreds of personal accounts. So seriously consider if you have the time, energy, and financial backing to be your own boss. This includes how you want to spend your time and how you're planning to fund your business.
It's smart to build a business budget and map our income and expenses. You also want to consider your savings, credit score, network, and capital. Who may be willing to invest in your idea? How much money can you secure to get your product off the ground?
As you work through these details, remember to keep your mental health in mind. Researchers from MIT Sloan helped new founders reduce the stress of starting a new business by managing self-awareness. Participants who created a routine for mental and physical health were more willing to ask for help and valued their well-being.
So before the panic sets in, know that it's possible to kickstart a new business without depleting your health and all of your extra free time.
What's your plan?
In business, success rarely comes from winging it. Instead, you need a well-devised strategic business plan. This outlines how you're going to execute your ideas and maintain your business over time.
A strong business plan utilizes research on your competitors and target audience. It considers competitors' offerings, pricing models, options, KPIs, delivery, timelines, customer feedback, marketing channels, and areas for growth. The goal is to understand where your industry is at, where it's heading, and how you can set up your business to succeed in the space.