Seize the day and launch your own business
When economic times are bad, setting up a business may not seem the most sensible thing to do. The Federation of Small Businesses estimates that 40% of small firms were refused lending by the major banks in the third quarter of 2012, and start-up funding is particularly hard to find.
But many big names, including Google, Virgin and Disney, have started up and grown during recessions. If you have a strong business idea, now could be a great time to become a business owner. Here are the reasons why.
People think differently in downturns. In a less favourable financial climate, businesses consider ways of saving money and improving efficiency, be it by changing suppliers or revamping procedures. This creates opportunities for start-up firms that recognise what an industry needs and are quick to provide it.
Sharon Stephens, 31, set up her translation business, Veritas Language Solutions, in the dark days of 2009 when she realised that many firms were looking beyond recession-hit Britain for opportunities overseas. Three years later, Sharon's Swansea-based business employs 12 people, offers translation in 156 languages, including Zulu, and counts Nokia, Manchester United and the British Red Cross among its clients.
"In the downturn, all businesses are looking at ways to be better. Growing internationally and speaking to overseas customers in their own language is one way to gain an edge on competitors. We've helped our clients do that," Sharon says.
Scope to negotiate
There is room for negotiation when times are tough.
Landlords may be prepared to do deals on leases or suppliers might offer better terms on buying goods or hiring equipment.
Clive Lewis, head of enterprise for the Institute of Chartered Accountants for England and Wales (ICAEW), has also seen more commercial property owners agreeing to give start-ups very short-term leases.
Lewis comments: "Pop-up shops have been a recent phenomenon as a lot of landlords realise it's better to have a business in their premises for a month or two, paying rent, rather than having a place sitting empty. It's a great opportunity for a new enterprise to test its products, service and pricing before tying itself in to a long lease."
Snap up the best talent
Some of the best people are also available. While high unemployment is a great concern for the economy, it offers a remarkable opportunity for employers to sign up some of the best talent. There are also initiatives to help smaller firms and the ranks of the young unemployed.
The National Apprenticeship Service is offering £1,500 grants to companies with fewer than 250 employees who recruit their first young apprentice. New businesses, in particular, can benefit from getting talented employees on board from the outset.
Lewis adds: "Hire the best people you can afford. They'll grow with you and the business, they'll be enthusiastic and loyal if they've been there from the early days. And having access to that ability will make growing your business easier."
Cheap set-up costs
Technology has made setting up a business quick, cheap or even free. Government-backed initiative StartUp Britain estimates that 60% of businesses are started from home.
Websites such as wix.com, weebly.com and webeden.co.uk allow people to build a basic website for free and create a transactional online presence in a matter of hours. Sites such as 1and1.co.uk offer templates to build websites for less than £5 a month, while mrsite.co.uk costs from £25 a year for a new website that can subsequently be moved to another domain name.
Emma Jones, of small business community Enterprise Nation and co-founder of the StartUp Britain campaign, says: "There has never been a better time to start a business, as niche markets open up and costs of operating come down. Record numbers of people are spotting a gap in the market and embracing free or low-cost technology to reach customers at home and abroad."
In response to the lack of small business lending from high street banks, peer-to-peer funding has become popular. Websites including crowdcube.com, ratesetter.com and fundingcircle.com allow individuals to loan money to high-potential new businesses for periods ranging between six months and five years.
This is a growing area, with more than £200 million estimated to have been lent through zopa.com, one of the biggest UK sites, alone. The government recently gave this form of lending its seal of approval by pledging £55 million from its Business Finance Partnership coffers to peer-to-peer lenders.
Business secretary Vince Cable says: "These new forms of finance are still small in scale, but they should, over time, bring additional choice and greater competition to the lending market."
Survival of the fittest
There are opportunities in other people's failure. Competitors may be too busy struggling to survive to think about innovation or may even go out of business altogether, leaving clients and customers looking for someone to fill the gap.
Lewis also points out that there can be great value in investing in a failing business. Even if a company is on its last legs, buying up its intellectual property, recruiting existing staff and giving the whole operation a new lease of life can yield rewards.
But he warns: "People should know the industry well if they hope to succeed where others have failed."
The redundancy push
Many employees dream of setting up their own company, but lack the courage - and funding - to do so while they have a secure job. When people are paid off, some realise that becoming their own boss is the best option.
Lewis concludes: "Periods of recession can be some of the best times to set up a business, but the reality is that survival rates aren't good. This puts a premium on proper preparation, and the key rules still apply. Don't stray from business areas you know, always do your forecasts for cash flow, profit and loss and do allow for unforeseen circumstances. Research and planning are everything wherever you are in the economic cycle."
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.