Even in the best times, starting a new venture is a big step. The unpredictable economy can make it even harder. Many people fear "recession", as it can cause the economy to slow down and even stifle job growth. A recession can be the key to starting a new, successful business.
There are many benefits to starting a new business during a recession. The creativity, flexibility, and resourcefulness that you use during this process can strengthen your business model and resolve long after the recession is over.
You can still reach new heights despite a recession. Your new business can cement its position as a valuable and solid player in your industry with the right information and planning.
What challenges may arise?
A recession is a significant drop in economic activity lasting for several months. The 2008 financial crisis probably influenced people to think of recessions as long-term struggles. The Great Depression, which lasted a decade and left thousands homeless and destitute, is another example. Depressions are more widespread and severe, especially in the case of unemployment.
In the spring of 2020 in the United States, a two-month recession was experienced. The shutdown of the government and its restrictions stopped production, employment, expenditures and the flow of the overall economy.
The economy of the country is growing steadily, despite the ripples caused by the pandemic. Recent polls of economists revealed that the likelihood of a mild and brief recession in 2023 is increasing.
What challenges could your business face in the event of a possible recession? While there are many opportunities for growth, it is important to know what obstacles or challenges may be in your way. They include:
Reduce marketing and research
What are the benefits?
Keep a few historic challenges in your back pocket. They'll be useful later on to help you create a plan of action and overcome obstacles. Although it may be scary to start a business during a recession, the rewards often outweigh any challenges. How can you take advantage of these benefits for your new business in the coming year.
While investment may decline, it doesn't stop. Many investors would be saved by moving away from the stock market to a well-articulated, organized business model. Both your startup and the investor will benefit from this operation, as both parties gain security for their future.
- Cheaper Supplies
Your suppliers have an excess of material on hand due to the reduced demand by consumers and business alike. These suppliers are offering their products for a much lower price than they did before the recession to get money flowing and increase sales.
You'll have to pay a lot of overhead costs when you start your business. These include inventory, shipping, rent, and staffing. You can get your first materials, equipment and infrastructure for a lower price if you start in a recession.
You'll also be building a relationship that will last for decades with these suppliers because you are buying at an important time. Negotiating long-term agreements is essential to keeping costs down after the economy grows.
Recessions are scary, and they may scare away other startups during this period. This leaves you with more space and less competition. The market that was once dominated by large, well-established players has now opened up to allow a startup with a strong but small team to succeed. A recession will impact both small and large businesses, which means that the playing field is leveled.
Unique consumer needs can be met
You can also use recessions to influence your customers. When people are in a difficult situation, or are isolated from the rest of society (as they will be during the 2020 recession), and are reeling after a pandemic -- they want answers. Your business can provide the answer.
Previously, the needs of the customers may have been met by established players in the market. Your new addition will be able to identify problems and provide a timely and relevant solution.
COVID-19 trends, for example, focused on businesses offering contactless delivery and products that could help to combat the quarantine blues.
In 2021 30% of shoppers will order their groceries online instead of shopping in stores. Successful infrastructure can be carried forward into the future. What problems is your product or service addressing, especially in the recession?
Tips for Starting a Business During a Recession
Recessions can be a golden opportunity for your startup. Positioning your business model correctly will allow you to navigate the changing tides of the economic climate and find new opportunities, profits, and leads. Discover the tips below to help you plan your next steps.
- Find Your Niche
Consider what you can bring to the market before opening a business. Remember how open markets can be used to meet consumer demands? Here's your chance to dive into the details of how your products and service are used. You can find out how to best market your product by asking these questions:
Is it a way to have fun during a period of social distress or depression? What are you for? Consider the companies that put people first in 2020.
Consider the value of your startup to investors, partners, consumers and business partners. It may be best to wait until the economy returns to normal if your startup doesn't have a large market or a particular need.
Research Trends & Opportunities
Your niche could be based on trends that are specific to recessions. In recessions, household items such as food staples, cosmetics, and health care are in high demand. Even when people are trying to save money, they still need the necessities of life.
Even "frivolous products" can do well during a recession. In darker times, people are looking for happiness and joy. During the COVID-19 epidemic, people were looking for home entertainment. This led to a rise in leisure products like pet products, sports and magazines. What are the current trends and needs that your audience is looking for?
Create a Trusted Team
You want to have the best team on your side because the economy is unpredictable. It is difficult to hire staff at any time, because people are often wary of startup risks. People are often looking for jobs during recessions because they fear job losses and layoffs.
Share your future plans with your team in order to create a sense of security and confidence. Employees who are motivated by the vision of their company will work harder to achieve goals.
Dial into Customer Connections
In an economic downturn people will be cautious in their spending, so it is important to make a good impression and show your value. Email marketing is a great way to inform consumers about coupons and special offers.
Small businesses can also benefit from social media marketing. You don't have to be a big name on apps like TikTok in order to reach a large audience. Viral videos can be posted on any page through their For You section. Use humor to communicate with your users and make an impact.
Moreover, never underestimate the power of face to face connections. In an age when digital marketing dominates, consumers enjoy chatting with brands face-to-face. Attend seminars and networking events in your area to build a reputation for your company.
You can build a relationship with repeat and new customers by checking in regularly. Invite them to company events such as barbecues, or give small tokens of gratitude like t-shirts or travel bags. Eight out of ten people prefer physical marketing products to digital techniques. These personal touches can make a big difference in your customer base during a difficult time.
Create a detailed Plan B
In a recession there are many opportunities for advancement, but also a lot of risks. They can be unpredictable, both in terms of severity and duration. You need to have a comprehensive and detailed contingency plan.
List all the "what-ifs". What if your raw material prices rise? What if you landlord decides to close your office? What happens if the products are sold out too fast? How will you handle financial issues such as quarterly estimated taxes and any tax relief programs unique to your company?
Make a list of all the good and bad choices and decide on a course. If these events do occur, you will be better prepared if you have a keen eye and are well-prepared.
Remember those investors who are looking for safer money-making opportunities? You can showcase your research and future plans at your pitch meeting. Your financial planning will make them feel more confident about your ability to survive the recession and move on into brighter skies.
You can still find growth in a recession
Recessions by definition are economic downturns, but you can take advantage of this period to benefit your business. You should be aware that starting a business in this period is not risk-free. Startups have the opportunity to meet specific requirements and navigate a more level playing field.
You can turn your dreams of starting a business into reality with meticulous planning, facts and figures, regardless of the economic climate.