Recession or opportunity, that is the question! You’d be hard-pushed these days to switch on the news, scroll through social media, or flick through the newspaper (people are still reading actual newspapers, right?), without reading or hearing something about credit crunches, global supply crisis, and the astronomical cost of living – ‘heat or eat’, and all that.
And while it’s certainly not the first time in recent years that these phrases have been bandied about, there definitely seems to be a lot of fear and speculation this time around about how people are going to get through this, with energy prices rising to levels the likes of which we’ve never seen.
However, let’s leave the politics and our opinions on the profits of energy companies to one side for a moment and ask ourselves this: instead of worrying about the recession, should we be looking at the opportunities that might be presenting themselves?
When the media starts working itself up into a frenzy about any financial crises, and the public starts running with it, it will inevitably lead to a period of economic decline. People get nervous, and so they start spending less, which means that businesses start making less money than they were before. The knock-on effect of this is that these businesses will slow the pace at which they are hiring, or even start laying off employees…which makes people nervous, so they spend less…and so on, and so on.
However, if you’ve been thinking for a while now about starting your own venture, now could be just the time to do it. It’s going to take tenacity and motivation to make it happen, sure, but a recession or downturn is actually a great time to shed the corporate life, escape from the rat race and go to work for yourself.
And it’s been done successfully before, time and time again.
There are several well-known companies out there that all took advantage of the opportunities that were created by a recession. Airbnb came about during the 2007-2009 recession when entrepreneurs Brian Chesky and Joe Gebbia were so broke that they sublet air mattresses in their apartment so that they could pay their rent.
Cosmetic giant Revlon was born during the Great Depression, when the founders realised that in troubled times, consumers will still look for small, affordable luxuries.
And, after the stock market crash of 1929, Walt Disney realised that people needed something to lift their spirits and make them smile during times of financial stress…and the list goes on: Hyatt, Fedex, Netflix, Uber, Microsoft, MTV…
Recessions can be great levellers, tending to ‘shuffle the deck’ when it comes to businesses of all types, with 20% of the bottom performers in a given industry becoming the top performers, and vice versa. Basically , if you don’t innovate as a business during a financial crisis you’re going to be surpassed by your competitors, and maybe end up dead in the water.
We saw this happen in front of our very eyes to the video conferencing industry during the COVID pandemic – think about what you used before COVID and what you use now…it used to be Skype and now it’s Zoom, right? And why is that? It’s because Skype rested comfortably on its laurels, while Zoom invested in developing a better product experience – and the results have spoken for themselves.
Because Zoom invested in developing a better product experience while Skype rested on its laurels.
And you could be the next ‘Zoom’ – you just need to look at what exactly are the advantages that a recession can provide for entrepreneurs?
1. A lot of companies will slow hiring, it means there’s less competition when it comes to finding talented people to work for you – and all without having to pay over the odds.
2. It was probably a bit of an oversimplification to say that people spend less during a recession. What they ACTUALLY do is pay more attention to what the amount they’re spending, and what they’re spending it on – and this could be great news for your new business.
You see, when the economy is more ‘normal’, people fall into a routine, buying the same things they always do, from the same places at the same time. However, when times are tougher, consumers have to pay more attention to whether or not they’re getting value for money, rather than blindly reaching for the same old product they’re used to. SO, if you can give them an alternative product or service that gives them that, then you’re going to be successful.
3. You’re likely to be more motivated, that’s for sure. Stability breeds complacency as they say, and so a recession that could lead to you losing your job could be just the kick up the arse you need to finally put the effort in and start that new business!
So, the opportunities to turn your fortunes around during an economic slump are there, it’s just a case of how to grab those opportunities and make them work for you.
Here are my 3 top tips for seizing the moment and getting that entrepreneurial dream off the ground:
1. Take advantage of the situation.
Start looking for lower-cost talent and assets that can benefit your new business. DON’T procrastinate – grab the bull by the horns and get in there before someone else does: you snooze, you lose, as the saying goes.
2. Focus on how customer behaviour has changed.
People’s behaviour will have changed due to the recession so use it to your advantage like Zoom did. They recognised that with everyone working remotely because of COVID, video conferencing was no longer limited to talking to your family overseas once a month…the consumer base for such a service had changed, almost overnight, and their needs were much different to someone video chatting to their long-distance girlfriend up in their bedroom.
They swooped in with an easy to use, reliable product that suited remote workers needs much better than Skype, and the rest is history. Think about how a recession will change the behaviour of your target market, and whether or not your product will serve that new behaviour. If it doesn’t, changes and investment need to be made, before your competitors get in there first.
3. Investment.
Which I know is hard to justify during something like a recession – but NOT investing in your new venture could be a big mistake; you’ll be kicking yourself if someone else becomes successful off of your idea.
A recession will see consumer behaviours change, and although there isn’t really such a thing as a ‘recession-proof’ industry, there are certain businesses that historically tend to do better during a recession than others, so the entrepreneur in you might want to consider that.
For example:
- Maintenance services, as people are more likely to repair things that break during a recession than to go and buy new
- Grocery outlets, as more families cook from home rather than going out to eat
- Alcohol retailers – it’s a (perhaps uncomfortable) fact that alcohol consumption increases during tough economic times
- Sweets and chocolate retailers – in fact, during the 2007-2009 recession, companies such as Cadbury and Nestle saw a marked increase in profits. Anything that is marketed to ‘cheer you up’, and is good value for money, is likely to fare well in a recession
And so, even though recessions are hard times, it could still be a good time to start a business. Startups can take advantage of a weaker economy because they operate a leaner business model, and are an attractive prospect for those looking for work because they often scale to become big companies in their own right, and so people are often okay with taking a lower wage in exchange for starting with a new company that is building itself from the ground up – especially when other options for employment aren’t very varied.
Some of the world’s most successful businesses have started during times of economic uncertainty, by people who have sought out the opportunities and advantages in something that otherwise could be seen as a bit of shit sandwich. This time, it could be you.