How Will Entrepreneurs Fare In A Recession?
When something gets riskier, you get less of that thing. Just look at how the trend of a decline in venture capital activity has amplified as the economy has worsened.
So consider the following claim a blow against the conventional wisdom about small businesses and start-ups:
Turns out that even in a downturn, the number of business start-ups is pretty constant, hovering at around 640,000 a year. Economic slumps typically last six months, so they don’t tend to affect entrepreneurial plans that have been years in the making. Nor is the start-up success rate hurt by the vagaries of the business cycle, says Brian Headd, economist at the Small Business Administration.
But really, this shouldn’t be surprising. Do entrepreneurs consult the broad economic picture when trying to decide whether or not to start a business? No—if they have a great business idea, then they follow through with that idea regardless of the macro economy. In a poor economy, there are vast opportunities for new ideas simply because there are more economic problems that people need solved.
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