Is 2022 a bad time to start a business or will 2023 be better?

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Is this a bad time to start a business, or could it be the best time for you to become a small business owner?

2022 could be a perfect time to start a small business because opportunities exist everywhere all the time. However, your personal readiness is far more important than the economic conditions.

The “Great Resignation” or “Great Re-shuffle” has exposed a huge amount of unhappiness among employees. Now, of course, owning a business will appeal to many of these employees desperate for change.

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How can it be a good and bad time to start a business?

The current state of the economy will always present opportunities for some businesses. 

Because a set circumstances that might be bad for one business idea may be excellent for another. So, for example, while international tour operators might suffer, domestic tourism operators might enjoy massive demand. Consequently, there are always winners and losers. 

This means there is never a simple answer about the timing to start a business based upon the general economy. The key to choosing the right time is make sure You are well prepared to be an owner and to carefully evaluate your business idea.

Part of your preparation is to consider if your circumstances are aligned with starting a business. Considering your financial resources, the impact on your situation if the business fails and the strength of key relationships are all important factors.

History shows how some companies get stronger during a downturn.

In previous downturns or recessions like the Great Financial Crisis, we saw businesses that continued to invest in innovation and marketing emerge more potent than their weakened competitors. This Harvard Business Review article How To Market In A Downturn explains this nicely.

The weakest businesses fail during economic stress, and the stronger ones survive-nothing new there.

So in simple terms, your chosen business model must cope with rough times and be ready to grow stronger as the upswing happens.

Goldelucks Doughnuts is an example of re-inventing an existing family business that faced extinction in the lockdowns. Podcast 29 is an interview with the owner of Goldelucks and how he succeeded to become a national e-commerce business.

What are some of the opportunities that downturns can bring?

A downturn or recession can provide some surprising gifts such as :

  • Fewer competitors when weaker businesses fail
  • Less marketing noise as defensive businesses cut costs
  • More talented people may be available for hire
  • Government financial incentives may be available
  • Lower interest rates

Will The Great Resignation lead to more business failures?

The Great Resignation, also known as The Big Quit, is a trending subject that refers to an increase in the long term rate of voluntary resignations. While this is observed in the USA, some pundits predict it will also occur in other countries.

Some of the people who resign will start or buy businesses.

The Great Resignation will likely lead to new business failures as many new entrepreneurs will not be prepared for business ownership. 

The failure rate of new businesses could spell disaster for some who transition from an employee to a business owner.

Owning a business is simply not for everyone. But how do you know if it’s Right for You? Well, read on.

What are the reasons behind the Big Quit?

As a result of several factors, voluntary resignations have soared beyond long term averages in the US. 

The pandemic amplified issues in our work and home life. As a result, we live through a sustained period of uncertainty across many aspects of life.

Our Work-life balance shifted rapidly during lockdowns. Additionally, the lockdowns triggered a forced self-reflection and the re-evaluation of priorities. Furthermore, the news coverage of the looming threat caused us to face something we often avoid-our mortality. 

What am I doing with my life?” type of questions circled in our heads.

Self-reflection takes a considerable time, and most employees never get a long enough break to undertake the process. 

It’s almost like the lockdowns morphed into a mass “finding ourselves” workshop in real life. 

It appears that one thing to explode from this self-reflection is unhappiness with our jobs.  

This Microsoft survey cites that up to 40% of employees are looking for a change.

Is the Great Resignation a USA phenomenon?

In HBR (Harvard Business Review), some recent analysis Who Is Driving the Great Resignation? lifts the lid on the USA.

The report shows two interesting trends in data covering 9 million employees across 4000 companies.

Firstly, the leading age group in the Great Resignation shift is 30-45-year-olds. Their number increased 20% between 2020 and 2021.

Secondly, tech and healthcare had the biggest proportion of resignations. But, again, this is assumed to be related to increased pandemic workloads and burnout.

This Gallup article, The “Great Resignation” is Really The “Great Discontent”, makes an interesting point.

Their data suggests It’s a workplace issue because the highest quit rate is among not engaged and actively disengaged workers.

This ABC article Here comes the Great Resignation suggests March 2022 for an Australian wave. 

There seems to be a jump in new businesses in Australia.

Whatever the statistics or experts say, You can probably relate to what is emerging.

Why are so many employees unhappy with their jobs? 

Perhaps our self-reflection suddenly caused chronic issues that we accepted for many years into clearer focus. Job burnout, disillusionment, inequality, wage stagnation and boredom are some ingredients that are in the cauldron.

These can often be associated with a particular role or organisation, perhaps, where poor management and poor culture grind employees down.

Behind the scenes, though, I suspect we have a deeper and more innate desire for more creativity and autonomy in our lives. 

The holy grail of the elusive work-life balance will also motivate many employees to change as they wish to invest their time and energy differently.

The pandemic forced changes to enable widespread remote working, eliminating commuting which opened employees eyes to new possibilities.

Additionally, we perhaps are seeking more meaningful and rewarding ways to spend our lives. Being your own boss could be one avenue to directly benefit from your own efforts.

How much of a risk is starting a business?

Starting or buying a business seems like an attractive option and undoubtedly a fantastic outcome for some individuals.

Owning a business is a risk. Australian 2021 business failures statistics show that over 22% of new businesses will fail within 2 years. After another 2 years, that failure rate increases to over 35%. 

Also, remember that of the 65% that survive, not all meet their owner’s initial goals. Survival does not always mean the business meets the owner’s definition of success.

 AUSTRALIA Number of Businesses Number of exits Cumulative exits %
Operating in June 2017 2,137,796    
Survived to June 2018 1,864,559 273,237 12.8
Survived to June 2019 1,659,152 205,407 22.4
Survived to June 2020 1,504,868 154,284 29.6
Survived to June 2021 1,388,347 116,521 35.1

Data from Australian Bureau of Statistics-Business Survival Rates 8165.0 2017-2021.

These numbers are mind boggling! Imagine that in Australia alone, over a 4 year period about 750,000 businesses exited.

Hidden within these three quarters of a million stories there will personal and family calamities.

Our purpose is to help avoid some of these avoidable business failures.

Are business failures rates common around the world?

Comparing a similar period, it appears that 45.7% of American private establishments exited between 2016 and 2020. Again this represents over one third of a million business failures!

While there may be differences in the detail between how the statistics are defined, the broad trend is still mind boggling.

Annual openings Year ended: March 2016 Surviving Establishments Survival Rates Since Birth %
Year ended March 2016 733,085 100.0
Year ended March 2017 583,804 79.6
Year ended March 2018 504,459 68.8
Year ended March 2019 448,782 61.2
Year ended March 2020 398,366 54.3

Data for United Sates Bureau of Labor Statistics Survival of private establishments 2016-2020

Preparing for owning a business makes sense wherever you are.

Is running a business easier than working for someone else?

In our experience, many new business owners are shocked and overwhelmed by what’s required in running a business.

While the Great Resignation might provide the impetus to change, it’s vital to know that change will be for the better. After all, downsizing your career may come at a trade-off of the increased demands of running a new business. 

Will you be happy running a business, or will it become a financial black hole with heaps of stress?

Before starting a business, there are many points to recognise that have nothing to do with your business idea or its financial success.

For example, the effect on you, your family and friends.

If your goal is to have a better work-life balance and less stress, then be careful. But, unfortunately, few new business owners would enjoy these elusive benefits.

Will you make more money in a new business?

There is a rude shock for some new businesses owners as their income shrinks. Some, unfortunately, find they are earning less than their employees!

Therefore, it’s important to do realistic money planning before you start a business.

The Australian Bureau Of Statistics publishes average weekly earning by sector that you can compare yourself to. 

Needless to say, there are big disparities across industries.

For example, in 2020, the Mining industry had the highest Full-Time Adult Average Weekly Ordinary Time Earnings in Australia at $2,697.50. In comparison, the lowest Earnings was the accommodation and food services industry ($1,139.30). 

Further differences can be seen between the gender gap and private versus public sector jobs.

Again, many employees are in casual, less secure employment with limited career options to increase their earnings.

Whatever your circumstances, having a realistic expectation of what a new business can make is vital.

Part of our Before Business Guide examines a topic often overlooked-your attitude to money. Since running out of cash is a major killer of new businesses, we include practical tips to avoid this calamity.

The right attitude to money and knowing how to use it to grow a business are arguably more important than a business plan. A great business plan will be torpedoed by a poor money attitude.

An alternative to starting a business is buying an existing business with many advantages outlined in our article comparing the three different ways to own a business.

What should You do before joining The Great Resignation?

We suggest, the place to start is You rather than your business idea.

Our ecosystem of content helps You decide if owning a business is the right choice.

Initially, we suggest you start our Before Business Guide by considering your Personality, Mindset and Motive. As we said above, some people are just not suited to owning a business. Others underestimate how their comfort zones can destroy their business. We explain the importance of understanding your motivation to own a business as we are all different. Success to one person means something very different to another.

We cover issues such as the Owner vs Employee Mindset and give You worksheets to crystalise your thoughts. This is particularly important in establishing the reality of running a small business and what it entails.

In the next section is Choosing The Right Business and how to evaluate a business idea with practical ideas to reduce the risk of failure. This helps you avoid your first and possibly biggest business mistake.

The final step on the Pathway is to consider your knowledge, skills and gaps to make your business a success. We suggest ways of building a support team around You, along with the thorny question of whether you should have a business partner.

The Before Business Guide gives You a structured way to achieve clarity about becoming an entrepreneur.

The Great Resignation 2022 may be a wolf in sheep’s clothing.

One thing is for certain. Things seldom turn out how we imagine them. 

The Great Resignation may be pivotal and cause shifts for employers and employees. However, those employees who plan to start a business to change their lives can prepare to make the difference between success and failure. Understanding the reality of business ownership will be quite different to the vision in Your head.

Considering business ownership holistically will help avoid unintended negative outcomes.

Don’t let the Great Resignation become the Great Failure.

Take our Entrepreneur Personality Quiz for more insight into what it takes to be a successful business owner.

 

Written by Brendan Barrow
Brendan Barrow is the Co-Host of the Should I Own A Business Podcast. Brendan has a wealth of business experience across many different businesses and 3 continents.

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