by Alyce Herndon, MA, CEO Onyx Business Consulting
As the coronavirus pandemic continues causing furloughs, layoffs, and uncertainty, the thought of launching a business may seem intimidating at best and ridiculous at worst. This year, many people have been forced to reevaluate their priorities when it comes to both their careers and their lives—and, surprising at it may seem, this environment has actually created a great opportunity for entrepreneurs.
During the first half of 2020, the rate of entrepreneurs and new business startups rose by more than 25 percent, with a four percent increase in women small business owners from 2019 to 2020. Whether you’ve been considering starting your own business for a while or have only recently been forced to look at your career from a new angle, in many ways, starting a business in 2020 is a strategic win.
As established businesses are forced to pull back and become more cautious with their funds, entrepreneurs will be the ones to stimulate the economy. Several months into the pandemic, it is clear that fresh entrepreneurs and start-ups are capitalizing off of new opportunities. From filling an increased need for certain products, to finding new ways to use old materials, to pivoting into new services, the current landscape is ripe with opportunities for innovation – and success.
A Historical Perspective
History provides us with plenty of examples as to why starting a business during an economic downturn helps propel recovery and success. Small businesses and startups that begin during a depression or recession consistently thrive afterwards. IBM started during the panic of 1911, shortly after the Sherman Antitrust Act was passed to regulate monopolies and change how businesses operated. Many of the companies most familiar to us now, like HP, Microsoft, and Trader Joe’s, were launched during recessions. CNN started its news broadcasts in 1980, when US inflation hit almost 15%. Businesses started during dire times often thrive and support the economy during the upturn.
Small businesses – particularly those owned by minorities — are often both the most detrimentally affected by economic uncertainty and the most well-poised to re-stabilize the economy during recovery. We don’t have to reach very far back to see this fact in action: during the recovery from the Great Recession in the early 2000s, female and black-owned businesses contributed 1.8 million jobs, while firms owned by white males lost 800,000 jobs, and firms equally owned by white men and women lost another 1.6 million.
Strategic Advantages for Entrepreneurs
Right now, financial assistance is at a historical high, labor is consistently available, and the world is open to new ideas and proposed change. Though economic uncertainty remains, it really is a once-in-a-lifetime opportunity to start your own business and define your future – especially if you are a minority-owned business. From new funding options to an increasing need for innovation, there are several strategic advantages for entrepreneurs in the current business landscape as it continues to feel the impact of the pandemic.
When considering a startup or new business, money is typically the first thing that you think about. Cash is the most popular form of small business financing over the last five years, with nearly 40 percent of new business owners choosing this option. 401(k) business financing (also known as Rollovers for Business Start-ups or ROBS) is the second most popular form of financing, with just over 10 percent of new business owners opting for this route. Assistance from friends and family and the use of a line of credit round out the most common choices for funding a new business. Right now, however, there are additional funding opportunities available for entrepreneurs – especially minority business owners.
The Small Business Association has programs that offer access to both credit and capital, including funding specifically for female entrepreneurs through the Office of Women’s Business Ownership. The 8(a) Business Development program helps minority-owned businesses compete in the marketplace. Minority-owned small businesses can also take advantage of SBA loan programs and the Women-Owned Small Businesses (WOSB) Federal Contracting program, which helps female-owned small businesses compete for federal contracts.
On top of the funding available from the SBA, companies like JP Morgan Chase, Global Capital, and Bank of America (just to name a few) are offering zero/low interest economic loans through local community development financial institutions, quick credit approvals, and funding of up to $1 million without requiring financial statements. Local governments are stepping up to the plate as well through Cares Act Funding, various grants, lending programs, and development partnership programs that include loans with zero interest. By learning about the funding options available, you can begin creating a roadmap that effectively supports your business goals.
Urgency and Opportunity
90% of people who want to start a business don’t actually go through with it. Taking that first step towards owning your own business is difficult and sometimes a little scary, and making the final decision to commit to the launch of a new business is one of the biggest mental blocks that entrepreneurs face. In many ways, the uncertainty of the current pandemic has made this first critical roadblock easier for entrepreneurs to tackle. Those who have been considering starting a small business may now find greater motivation to take the leap due to potential uncertainty caused by the pandemic in the form of furloughs, pay adjustments, changing work environments, or layoffs.
In addition to creating new urgency for would-be small business owners who are now reevaluating their careers, the impact of COVID-19 has also created even greater demand for innovation. The current business landscape is hungry for new ideas and new leaders who are ready to bring innovative products, services, and business models to a multitude of industries that find themselves needing to adapt and evolve at a rapid rate. Shifting consumer demand has also created new openings for small businesses that offer delivery services, new technologies, remote work solutions, innovative ways to communicate, and more. A new normal for the world means a new normal for every industry – and budding entrepreneurs can seize this opportunity to make an impact.
The same relentless passion and drive that makes entrepreneurs want to start a business to begin with also often makes them anxious to make big leaps forward quickly. However, momentum doesn’t always align with real-world timing, and that can be a major mental block. Between waiting for funding, meeting with consultants, drafting a strategic business plan, and more, the typical startup takes at least 6 months from concrete idea to launch – and the timeline only grows from there if you need to hire employees, manufacture products, design or build software, and other more complicated details.
Just as the effects of the pandemic have created urgency for potential entrepreneurs, it has also given many a precious new resource for developing their business plan: time. With community spaces closed, events postponed, and social distancing in effect, Americans are spending nearly 20% less time on retail and recreational activities. For aspiring entrepreneurs, this time can be spent business planning, goal-setting, aligning funding, and preparing for launch. Even with substantial political and economic changes happening daily, startups consistently share a positive forecast for improving business conditions.
After the Pandemic
We can’t be 100% certain what the post-pandemic business environment looks like. What we can say for sure is that starting a business before, during, or after a recession or global crisis is not what will determine your success in the long term. Global and economic challenges like the one we face during this pandemic highlight the next generation of problems the world needs to solve in order to move forward – creating opportunity for new companies, new markets, and new industries to rise up. The initial idea of entrepreneurship typically emerges from one important moment in time: a realization. For many, that moment has come during COVID-19, opening up a plethora of opportunities to build new products, find new solutions, and be a part of redefining a new world. Whether you are setting out on a new business venture because of necessity or opportunity, remember this: there is no time like the present.
Alyce Herndon is the President & CEO of Onyx Business Consulting, a business consulting practice with a mission of providing the tools for new and small business owners to maneuver through challenges and elevate towards their highest potential. She holds a bachelor’s in Psychology, a master’s in Management and Leadership, and a Certificate in Not for Profit Management from Webster University. Fueled by her passion for helping and inspiring others, she is currently completing a Doctorate in Business from Walden University, specializing in Organizational Leadership.