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Paul Graham explains why in Why to Start a Startup in a Bad Economy.

This makes sense. It squares with my experience. I’ve seen three economic downturns. I was an employee for one of the downturns and worked for myself through two.

I learnt the hard way working for myself in a downturn was more secure than being an employee for three reasons:

  • First, being self-employed meant my income was dependent on a dozen or so separate sources. Some fell over, but they never all fell over at once. On the other hand, as an employee, my entire income halted when my employer got into trouble. Putting all your employment eggs in a single basket doesn’t make sense in a recession.
  • Second, I’ve discovered that my decision-making is good, not perfect, but better than average More importantly I’m better at making decisions than most of the managers I’ve reported to over the years.
  • Third, when the upswing comes, I’m in a position to make the most of it. I’ve found larger companies tend to stay traumatised and are too conservative to take the opportunities that arise as the economy picks up.

3 thoughts on “Bad economy good time for business start-up?

  1. I agree that being self employed and not putting all your eggs in one basket can be much more beneficial during an economic down turn. It does take some planning to make sure you have enough of a nest egg to get you through a lull in business, but eventually business does pick up, and like you said, it almost never dries up completely for the self employed who have several clients.

  2. I totally agree. There are more possibilities being self-employed when everything goes south. It is easier for a small business to roll with the punches.

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