The economy is heading towards the biggest recession of all the recent times and things are only going to get worse before getting better. That means tough times for startups, lower fundings, concerned consumers, and almost no alive exit from the market.
No doubt, all such information you are reading on the internet is true. A recession itself means an economic downturn. But, does this mean that innovation should be stopped? Not at all!
It is said that a smooth sea never makes a skilled sailor. Those who want to shine bright have to sweat blood in order to nurture their business and a recession shouldn’t be a full-stop for them.
Yes! That’s right! If you are a newbie entrepreneur, founder, or corporate leader there must be a number of question in your mind, like:
This only answer is NO! For a passionate entrepreneur, there is nothing like “Wait.” And recessions are the best time to make the world fall in love with your idea. Here’s why:
To set up a successful business, you have to take the bull by the horns. If you are a determined and passionate entrepreneur, it will become easy for you to take the benefits of a weaker economy and no competition to corner the market.
While a financial crisis is never a desirable situation, some of the world’s most successful and greatest businesses are born in a recession or because of an economic downturn. Uber and Airbnb are one of the many examples. Here are 5 reasons with 5 examples it’s worth starting a business during a downturn.
1.People Prefer Cheap Solutions In Recession
At the time of recession, every individual aims to save money. Everyone – including you and me – are planning to cut costs by opting for cheaper services or products. And, that’s why it is the best time to disrupt any market with an amazing idea.
During this time, if you become successful in helping people save money by offering better services for their day-to-day needs – there is a good chance that you will build a loyal customer base for your product or services.
You can build up a healthy relationship with them now by becoming a reason behind their survival during the tough times which will eventually turn them into advocates of your business.
As the economy improves, you can try to increase the cost or add new features to your products that these users will be happy to embrace because you helped them previously.
For example, when Uber – the ride-hailing app – was founded in 2009 the world was on its knees. Because of the economic downturn, people in the USA were looking for cheap ride-hailing options and wanted to ditch the royal and expensive cab system which was almost failing in the major cities of the USA.
And then Uber made a grand entry to solve the problem – right in the middle of a recession. By offering all three benefits (cheap, convenient, and easy to book cabs) Uber’s founders were able to provide a service no one knew they needed. And, we all know the big fat shining results – at present, Uber is valued at billions and is operating in a number of countries.
Even after starting amid a recession – Uber is one of the most renowned names in the world. Its story is not just inspirational but the way it works has set a benchmark for every budding entrepreneur. To find out the nitty-gritty of How Uber Works – Check out our comprehensive blog on Uber Business Model.
2.There Will Be Less Competition Out There
When the economy is at its best, everyone wants to start a business. A lot of these budding entrepreneurs go straight into the market without legitimate planning and they succeed first but in the long run fall flat. While in recession, there are fewer chances of people jumping straight into the market and you will not have to face immense competition.
A strong economy attracts more competition. Though all of that apparently vanishes in a crisis, however, it effectively leaves space for those ready to take a risk. So, if you want to set an example by proving yourself in tough situations – it can be your golden ticket to include your business in the list of unicorns.
NerdWallet – an app that helps you make your money moves – is the best example that took advantage of no competition in the market amid a recession.
When NerdWallet was launched at the start of 2009, nobody else was trying to start a personal finance company and existing players of the market were too “hamstrung” as they were laying off staff – said Chen (the founder of NerdWallet). In a downturn, Chen says, “You don’t need to participate in a race against 10 well-funded competitors to win a market. There’s a lot less competition and your chances of success increase.”
3.You Will Find Smart Investors
One thing that doesn’t generally stop during a financial crisis, is investors looking to fund strong and innovative startups. Generally, during this time angel investors are searching for promising prospects that let them move money out of the stock market and to invest in a potentially lucrative venture.
You simply need to ensure that you can exhibit your competitive advantage, market position, and any proof that your target market is really searching for a product or services that you are planning to provide.
In 2007, Joe Gebbia and Brian Chesky got the idea of renting out an air mattress in their living room in San Francisco. They never knew that December of the same year would be a month of the great recession that would open a new door of opportunities for them.
In the midst of that recession, both of them launched Airbnb and disrupted the market of short-term living quarters for those who were looking for accommodation at low prices. In 2009, they got funding from top-level VCs and experienced immense growth.
Want more inspiration? Check out our detailed blog on Success Story of Airbnb and find how it works and earn money.
4.You Will Build a Bullet-Proof Business
A startup launched during the recession is designed from the beginning to be a lean and mean efficiency machine. When you start in recession, you will obviously offer your services in less than that of your competitors. And, that’s for sure a win-win situation.
If your business survives generating fewer bucks in revenue – nothing can beat it, not even another recession. However, do remember that these operating habits should stay with you when the market recoups, as it will give you higher overall revenues since you’ll have the option to lift prices once customers start spending again.
If you develop and grow a business when the confidence of customers is down and businesses are restricting their services, your business will be bullet-proof when things improve.
Netflix is recession-proof. No, we are not saying it – but, experts believe the same. It was established in the years leading up to the dot-com bubble. It almost surrendered to financial hardship in 2000 when it put itself available to be purchased, just for the $50 million proposals to be rebuked by Blockbuster.
However, Netflix handled that storm very carefully by harnessing the innovative minds behind it to lead the on-demand video streaming industry leaving its brick and mortar competitors far and far behind.
Today, Netflix is worth about $34 Billion and Blockbuster — which filed for bankruptcy in the year 2010 — shut its last retail store and dropped its copycat DVD-via mail services three years later. This is another reason why it is a great idea to start a business in recession – your competitors will think you are weak and you can let this misconception become your ladder to success.
5.Recession Is a Great Time to Tap the Untouched Market
Tough times lead to tough issues. These issues come from a present need or pain that people are feeling and that often doesn’t have a promptly accessible solution. See how consumers are handling this issue now, and find who is providing the best solution currently. This will help you define what you need to offer so that they switch to your services.
Concentrate on positioning your business as a new and better solution. Regardless of whether there are substitutes available, show how your solution is increasingly prompt, affordable, and reliable. And, you will emerge out to be a winner.
Its founders solved a huge pain-point of the market – it was almost impossible to buy an affordable pair of stylish glasses online around then. They exploited the chance of their clients’ tightening wallets and proceeded to nurture Warby Parker into not just a flourishing business but also an online business pioneer.
The examples above prove that there is no better time to start a business than a recession, particularly if individuals around you are progressively OK with their own list of reasons why they shouldn’t invest in their dreams as of now. It only means that you will be facing a lot less competition and better opportunities.
“Never let a serious crisis go to waste.” – Rham Emanuel (Chicago’s Mayor).
It is not just believed by experts that a recession is a great time to start a business but the fact is proven as well by many businesses. What I mean is that recession is an opportunity to pursue your dreams that you couldn’t do before.
Listed above are some of the biggest startups that didn’t waste the 2007-2009 recession. Back then, entrepreneurs came forward to do developments and disrupted a lot of industries – may it be entertainment, shopping, transportation, or vacation rental. Furthermore, the advent of smartphones in 2007 gave numerous companies a new platform for their applications.
Now, 2020, is your turn to do something out-of-the-box. CoronaVirus Pandemic is changing a number of things around the world and you have immense opportunities to create wonders with the help of emerging technologies. Are you still in doubt? Let’s talk to our business consultants.