Company Formation – Should You Form a Company in a Recession


Beginning the company formation process in a recession, is not the easiest time .Historically, recently formed companies require a lot of capital to begin trading and in a recession investors are less willing to inject capital into a relatively high risk venture. However, if you are planning to form a small business with low overheads- such as an internet based company- it may be the ideal time. Have a look at these three reasons why:

1) A recession forces founders to be disciplined with finances. Beginning the company formation process in a recession, makes founders consider every element of expenditure. Subsequently, this encourages careful accounting and creative thinking, both of which are key practices for future business growth.

2) Recessions make people really consider their business concept. Limited finances and an uncertain economic future encourage entrepreneurs to interrogate the commercial viability of their business and if there is space in the market. Crucially, these questions are asked before the company formation process begins.

3) Recessions make businesses more resilient. Starting the company formation process in a recession is not an ideal time. That does not mean that entrepreneurs should back away from the challenge; a business formed in a recession will emerge streamlined and strong, and the founders will have developed skills and qualities that are vital for a future success and growth.