Could a Recession Be a Good Time to Launch a Business?


2020 has been an interesting year, to say the least. It seems like the sky is falling and things are going down the pan. Economically, a recession is well underway, and due to the Coronavirus, a great depression could be looming. Businesses have been closed, governments are paying out wages and banks are loaning to keep businesses afloat. We are going through tough times, and that is not even discussing other issues, such as healthcare and inequality in 2020.

From a financial perspective, people are worried. Businesses are closing and jobs are being laid off, putting people in dispair on what they should be doing for work and money. Do they look for a new job? Are businesses hiring? Tough times cause for tough measures and some people choose to create their own destiny by setting up a business. Are they mad? Nope. Actually, there are many examples of companies being created throughout a recession such as Airbnb, Netflix and Disney. An uphill battle it seems, but a fight worth a thousand lessons that make these businesses resilient. There is something about the challenge of a recession that forces founders to create cash-savvy and innovative ventures. Businesses made in hard times and are built to last. So what is it that makes startups launched during a recession so resilient? Here are some of my thoughts:

Resource-efficient

Ever heard of the saying ‘Every little helps’? Successful startups that survive economic downfall are usually considerate with their resources and operations. Being resourceful only has its benefits by; saving money, cultivating innovation and can increase the competitiveness of an industry. Resources can be scarce throughout a recession and having to deal with that fact can help businesses learn how to make more from less.

teamwork
Photo by NESA by Makers on Unsplash

Competitive disruptors

New businesses need to think of creative ways to do what their competitors do, but better. Groupon is an American global e-commerce marketplace connecting subscribers with local merchants by offering activities, travel, goods and services at a discounted price. Groupon launched during the 2008 housing crisis as a disruptor of retail’s business model. Stephen George, who was one of Groupon’s first five employees in 2008 said “With discounts, incentives and product discovery, Groupon provided a way for companies to get exposure and consumers to ease back into discretionary spending. In times of market uncertainty, technology companies that provide efficiency, cost-savings and transparent value to all parties are the ones that thrive,”. This is one example of how even in a sluggish economy, there is potential to prosper. I think this particular business benefitted both, industries and consumers when they needed it most.

In 2008 Airbnb was also founded. A simple online platform that allows people to rent out rooms or apartments. When the Great Recession hit later that same year, suddenly the need for short-term, low-commitment living quarters exploded exponentially. The competitive advantage for Airbnb has always been its ability to exploit the weakness of traditional, old ways of renting. Now in 2020, Airbnb has roughly 160 million users. Morgan Stanley conducted a study around Airbnb’s usage and found that 49% of users of the home-sharing service used it as an alternative to a traditional hotel. Others say they’ve used Airbnb to replace bed and breakfasts, staying with friends or family, extended stay hotels, vacation rental sites, and corporate apartments. Airbnb is a truly disruptive platform that reinvented traditional ways of renting, throughout a recession.

 

Reinvest to improve

Businesses that choose to reinvest their profits to make their product or service better, do better. This is just speculation, but to me, it makes sense that startups who continue to invest their money to improve will stay ahead of their competitors. Research and development are what keeps businesses ahead of the game and in touch with what their customers want and need. Many startups focus heavily on evolving their processes, improving their products and services through iterations and learning from their mistakes. Some startups make bold moves in an attempt to reinvent or largely change ways in which something is done.

business meeting
Photo by Austin Distel on Unsplash

 

Conclusion

Statistically, most businesses started during a recession won’t become as successful as Netflix or Disney. In fact, many will probably fail. However, it is interesting to discuss what it could take to be successful when the odds are against you.

Tags
  • Business
  • Recession
  • Startup

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