​Best Time to Start a Business? Right Now.

​The mood in the Calgary business community has been pessimistic for some time now. The price of oil has caused many businesses to cut costs and scale back. This has led to a great degree of turmoil and uncertainty in Alberta, particularly in Calgary. It seems like every other day we are hearing about another company closing its doors. Despite the negativity, the current economic environment actually presents a great opportunity to start a new business.

Some of the world’s biggest and most successful companies started during recessions. Microsoft started during the 1973 OPEC Oil Crisis when interest rates spiralled out of control due to the oil embargo. FedEx started around the same time. Hyatt bought its first hotel during the 1957 recession, and today holds over 500 properties around the world. Each of these companies is among the top in their field and part of their success can be traced to the fact that the companies started at an advantageous time in the business cycle.

There is never a better time to start a business than in a downturn. Here are some of the reasons why:
Having less overhead makes a start-up more agile and flexible, better able to tailor to clients’ needs. Overhead is cheaper during a recession. It is estimated that a whopping 9.2 million square feet of office space in downtown Calgary is vacant as of June 30, 2016. Rents have dropped from $25 per square foot to $17.50 in just one year. Companies that are downsizing their office square footage are looking to offload excess furniture and equipment in a hurry, sometimes taking pennies on the dollar for nearly new items. There are also several commercial buildings currently under construction in downtown Calgary. If the price of oil doesn’t come back up before some of those buildings are finished, we will see a flood of new office space bring prices down even further.

Recessions are a great time to find talented individuals to work for your company. There are capable people who are now out of work due to mass layoffs. Thousands of people in Calgary have been laid off in the last year alone. People with the right skills may be more willing to work for a smaller company or for lower wages than they would when they have more opportunity. You may even be in this situation yourself. Either way, there is an abundance of talented people looking to find something new.
Every business looks for ways to save when the economy is tight. This means that a young and hungry company can take advantage of lower costs to undercut the prices of more established firms. A new company that is just starting out will have the ability to service clients and be more attentive to their clients’ needs. The fact that every company is evaluating all aspects of their business means they are open to new ideas and new ways of doing things. More established firms lack the ability to quickly pivot to fill gaps in the market, creating opportunities for new businesses that might not otherwise exist.

Interest rates are so low right now that it will be the cheapest money you can get. When the economy is strong interest rates go up to control inflation. However, when the economy is weak like it is now, lenders are incentivized to keep up business to business transactions just to keep money circulating in the financial system. The prime lending rate is forecasted to remain at 2.7% for the foreseeable future, so the cost of starting a new business and getting all the equipment necessary is never easier than now.

These are just some of the benefits of owning your own business. Perhaps the biggest benefit to starting now is that you will have your wings open when the winds of change and economic prosperity inevitably return and blow through Alberta again.