9 Reasons Now Could be the Ideal Time to Start a Business

As the saying goes, "Out of crisis, comes opportunity." If your client has an idea to start a new business, don't just shoot them down. Here are nine reasons now could be the perfect time.

Jun 10th 2020
President Perceptive Business Solutions Inc.
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Coronavirus suddenly changed the world. One day your client was employed. The next day they weren’t. Your client was thinking about becoming their own boss and setting up a business. They have turned to you, their accountant, for advice. It means more business for you, but is it a good idea for your client?

What’s Going Through Your Client’s Mind?

Why now? Isn’t there enough uncertainty in the world? You client has other ideas. They 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. Your client feels this isn’t stopping anytime soon. They also received a $2,400 check or direct deposit from the Feds.

They 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 aren’t as generous the second time around?

Besides, they have this great idea.

How Can Accountants See the Opportunity?

Accountants can be great at making the case why clients shouldn’t do something. Your client may have a brilliant idea. Someone dreamed up Uber, Airbnb, Grubhub, Wayfair and Blue Apron. Let’s assume your client is motivated, knows how to run a business and has a decent business plan.

Let’s 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 don’t 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.
  • 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 wasn’t 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.
  • Stock Market Recovery: 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’s 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’s 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’s likely to be variable, but now it’s low to start.
  • Talent is Available: Your client will need to hire the right people. We’ve 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 can’t visit showrooms? Newspapers are hurting. They need to get advertisers back. This could help your client.

You can discuss the cautionary factors they should consider, but you can let the optimist inside you come out too. Remember the saying: “Out of crisis comes opportunity.”

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