Is the Economy Primed to Start Business in 2020?

Starting a business in any economy should be a calculated decision. Multiple factors need to be considered. Let’s look at a few key areas:

by Dave Jones, Consultant, The Franchise Consulting Company

What about lending and interest rates?

The average 30-year fixed mortgage rate started 2019 at 4.68% and steadily declined before closing out the year at 3.93 percent. In 2020, rates are expected to remain mostly stable, not straying too much higher or lower from the 4% mark. Greg McBride, CFA, Bankrate.com chief financial analyst, predicts mortgage rates will stay relatively stable around 4% in 2020. How the Federal Reserve could impact rates: It’s challenging to predict where rates will head in the future, as daily news has the power to sway rates. But if the Fed’s attitude is any indication, then rates should remain low next year.

What about the economy?

Jobs gains were surprisingly strong in November, showing the economy still has a lot of oomph left. 266,000 jobs were added in November of 2019. Monthly job growth in 2020 is likely to average 150,000 jobs per month, down from 180,000 in 2019 and 223,000 in 2018. Partly, that is because there are fewer available workers to hire, given the low unemployment rate. But the smaller gains will also signal that the economy is slowing down to a more moderate growth rate.

Top performing industries in a more moderate economy.

While it is impossible to guarantee that an industry is “recession proof,” there are certainly industries that do well — or even thrive — during times of widespread unemployment and economic recession. Economic hardship does not necessarily equate to personal financial downfall. In fact, people tend to turn to franchising in times of a strained economy (as well as in times of prosperity). “Franchising has historically done well under most economic conditions,” said Franchise Business Review CEO and Managing Director Eric Stites. “During boom periods, the fear of missing out on a great opportunity fuels strong franchise growth. During a downturn, on the other hand, the fear of job loss and financial security drives many people to take control of their own futures by investing in a franchise business.”

According to The Franchise Business review, below are some of the top industries:

1. Food and Beverage: No matter the state of the economy, people must eat. Whether they’re looking for a healthy option to sustain themselves throughout the day or a tasty treat to aid them through a stressful situation, there are business and franchise opportunities just waiting to be cashed in on.

2. Retail Consignment: The craze hit during the recession. Although clothing stores’ sales were down by 10 percent in 2009, the average sales at thrift stores had increased by an average of 35 percent, according to CNN Money.

3. Information Technology: With continuous technological development and increasing dependence on our gadgets comes the need to understand how to work these devices and programs. There is a steady market for technology support, like with the franchise: TeamLogic IT, which services small companies looking to stay up-to-date with their technology.

4. Repair Industry: Hate to break it to you, but we are far from a day when cars don’t break down, roofs don’t leak, and windows don’t shatter. This is bad news for the consumer, but great news for the repair industry. Especially during times of recession, people tend to spend their money on repairs, as opposed to trashing their broken goods and buying new items.

5. Health and Senior Services: The Bureau of Labor Statistics (BLS) predicts that the health care and social assistance sector will add more than 5.7 million jobs from 2010 to 2020, the largest projected growth for any industry. BLS also estimated that demand for in-home health aides and personal health aides is expected to grow by 70 percent because of the aging baby-boomer generation (the U.S. Census estimates that there will be over 57.8 million baby boomers between the ages of 66 and 84 by 2030). This industry is experiencing enormous growth and promises job-security, a very tempting offer for those striving to open their own businesses. There are many franchise opportunities in the senior care and health care sectors.

6. Cleaning Services: While residential cleaning services may seem like a luxury for many, it is relegated by law that all workspaces be clean. Just think about it: Classrooms, office space, conference rooms, lobbies, windows… it all needs to be cleaned on a daily or weekly basis. Cash in on this industry, one mop at a time. Corporate cleaning companies, no matter the state of the economy, will offer a reliable income.

Inflation.

Inflation is simply the rate of price increase during a specified timeframe. Typically, inflation impacts small businesses (less than 500 employees) more than mid/large businesses. 99% of all companies in the US are classified as “Small Businesses”. 1. Most of the inflation is driven by less buying power, which makes franchising even more attractive. A simple review of supply and demand in the short-term and long-term inflation due to the money supply should be considered.

Am I the right age to start my business?

The best time for starting a business has nothing to do with how old you are. People of any age can start a business and you may be surprised to know that most small business owners in the U.S. are older; 51% of owners of small businesses are 50-88 years old, 33% are 35-49 and only 16% are 35 years old and under.

Dave Jones — Consultant

The Franchise Consulting Company 412-400-9209 David@thefranchiseconsultingcompany.com