Owning a business can be tough, but that doesn’t keep people from doing it year after year. As the New York Times reports, even in “good times,” one out of five businesses don’t make it past the first year. In a particularly challenging time, when unemployment is high and people are supposedly tightening their belts, is it foolhardy to buy or start a business?
As it turns out, now might be the ideal time to start your own company or to buy an existing business from an owner. If you’re considering buying or starting a company, take a look at some benefits of doing it now versus waiting for another time.
Loan Relief Is Available
In the wake of the coronavirus pandemic, the U.S. government passed the CARES act, which introduced loan programs such as the Paycheck Protection Program (PPP), which were designed to help keep companies afloat. The CARES Act also included other loan relief programs, such as debt relief assistance for certain SBA loan programs. The follow-up stimulus package, passed in December 2020, included additional debt relief for businesses. It extended the relief offered by three months. The SBA will pay principal and interest for the first six months (up to $9,000 per month) for new loans taken out by September 2021.
If you qualify for business financing, buying or starting a business now can make financial sense, especially if you’re able to take advantage of SBA loan relief.
Even if you don’t qualify for an SBA loan, your business is likely to get a loan with a lower interest rate now than you would at another time.
People Are Retiring
According to Pew Research Center, Baby Boomers have been unusually reluctant to retire. For the most part, that started to change in 2020. During the third quarter of 2020, 3.2 million more Baby Boomers retired than in the same quarter of 2019. The increase in people retiring can mean that there are more opportunities to buy a business now than in the past.
There are some benefits to buying a business versus starting one from scratch. For one thing, an existing company most likely has a strong client or customer base. You don’t have to build from the ground up, you can take advantage of the work done by the previous owner. One thing to cautious about though, is if the previous owner didn’t do a great job of managing their business. Be sure to take the temperature of the company before you invest in it to make sure it’s doing well and will be able to grow and produce a profit for you once you take over ownership.
Downturns are Typically Good for Fresh Ideas
While many existing companies are struggling during the pandemic, particularly those in the hospitality and service industries, downturns tend to be fertile times for new ideas and new businesses. If you have an idea that’s been at the back of your mind for a while, there might be no better time to give it a try than now. Many now-successful companies, such as Airbnb and Venmo began life in the midst of a recession.
If you are planning on starting a business now, think about how it meets people’s needs in what’s being called the “new normal.” Some of the more successful companies that got their start in the midst of the pandemic are those that responded to a direct need, such as a service that reroutes non-emergency calls to a virtual doctor’s office, rather than 911 dispatchers.
The World is Starting to Open Up
As vaccinations increase, the world is beginning to open again. People are starting to venture out and are doing things like meeting friends for meals or booking vacations. The world is beginning to look more like the “old normal” again, meaning there is likely to be more opportunity for businesses. Starting or buying a business now means you’ll be ready to go once things have hit their stride and the world is once again fully open for business.
Look Before You Leap
As with any decision, it’s a good idea to look before you leap. Do your research into an existing company before you buy a business and investigate the market before you start a new company. A virtual CFO can provide financial expertise and advice to help you see if buying a business is the right choice right now. Hire your virtual CFO at New Direction Capital today to learn more.