Pitfalls for Startups During a Recession

Last month, we looked at the benefits for startups during a recession. This month, I’ll highlight a few issues that make it difficult to build a startup business during a recession.

Thankfully, the good news outweighs the bad news as long as you know how to avoid the common pitfalls. Here are the pitfalls to be on the lookout for when starting a business during a recession:

5. Beware of failing companies.
If you are going to rely on other companies, make sure those companies are recession-proof. For example, many subcontracting companies in the auto industry have gone out of business after relying on companies that are now struggling to survive.

4. Don’t rely on excessive consumer spending.
The first thing to disappear during a recession is consumer confidence. Once consumer confidence is gone, consumer spending is going to drastically drop.

3. Price means more than quality.
When the economy is booming, you may be able to beat the competition as a startup by offering better quality. However, in a recession, it’s almost impossible to beat the incumbents in the industry without offering lower prices.

2. Consider starting part-time.
A lot of people quit their day job to begin a startup. That is a riskier proposition during a recession. With fewer and fewer jobs available, now is not a good time to quit and follow your dreams without a backup plan.

1. Don’t rely on outside funding.
It’s not impossible to secure funding for your business during a recession, but it’s a difficult and long process. If possible, your startup should be able to get off the ground without any outside aid.