With global recession looking more and more likely, many businesses are battening down the hatches and hoping to weather the storm. But for agile entrepreneurs with an appetite for innovation, now could be the perfect time to start a business of your own. So if you’ve been thinking about what your life will look like after lockdown, don’t rule out becoming your own boss…
Have any successful businesses started in a recession?
Yes! Some of the biggest brands in the world started during a recession. An economic downturn can create a range of unexpected opportunities for entrepreneurs with an appetite for innovation. Here’s a few big names you might know…
Four of the biggest brands that started in a recession
1. Burger King
In the 1950s, after the Korean War laid the US economy low, two brothers in Louisiana recognised the need for fast affordable food. Already running their own burger joint, they maximised on the public appetite for their product by selling franchises of their business.
A real startup success story, FedEx began as a university project for Fred Smith during the 1969-71 depression and turned into a business with almost $70 billion revenue.
This global tech giant started in 1975, in a period of high unemployment, rising inflation and stagnant GDP in America.
4. General Motors
Showing a lot of business-savvy, GM didn’t start during a recession but really used it as a boost. In the early 1900s, the founder used economic uncertainty to buy up smaller struggling manufactures and expand their empire.
Is a recession a good time to start a business?
Yes, there are lots of reasons why a recession can actually be good for business startups. As a responsible lender, we aren’t going to pretend that every business will succeed in the current climate of financial uncertainty – as they don’t at any other time, either. But here’s some reasons why a recession can be good news for startups.
Five ways a recession benefits businesses
1. Necessity drives innovation
They say necessity is the mother of invention and that is especially true during a financial downturn. Recessions cause problems that people need solutions to. And Coronavirus has caused a very specific set of problems that startups are clamouring to cure.
The current pandemic has seen a flurry of innovation, with small businesses filling gaps left by bigger businesses (like local food deliveries when supermarkets can’t meet demand) and innovating to offer new services (like online course).
Startup businesses are innovative and agile – exactly what the world needs right now.
2. Borrowing is accessible
It might seem counterintuitive, but economic uncertainty creates a great environment to seek funding. Interest rates are lower, means loans are more affordable. And savvy investors use a downturn to get more for their money by investing in cash-strapped startups.
3. Top talent is available
A sad fact of the pandemic is that a lot of great people are going to find themselves out of work. Whilst that is bad news for them, it is good new for businesses, who can snap up top talent that is usually unavailable.
Freelancers are a great source of flexible resource during a recession too. Put simply, you can hire better people without the premium price tag.
4. Competition is lower
Many businesses will find themselves with less competition as competitors struggle to restart after the pandemic. For those that are able to innovate or borrow to survive the storm, this can be an advantage when they re-enter the marketplace.
5. The (negotiating) power is in your hands
With many businesses actively looking for new custom, now is a good time to negotiate for better terms and lower prices. If you’re in a positive cash position yourself, now could also be a time to buy up other businesses or their assets, if they’ve decided to stop trading. It worked for General Motors.
What are the best small businesses to start in a recession?
There is a definite trend in the types of businesses that are starting and thriving right now – albeit in a pandemic, not a recession (yet). They all demonstrate the need to ‘read the room’ and understand what potential customers need.
Best businesses to start during Coronavirus
- Food delivery
- Delivery gigs
- Deliverable gifts and luxuries
- Online tutoring
- Online sales
Individuals and businesses offering specialist services are also thriving, for example accountants and communication technologists.
The beauty of these businesses is that there’s no reason they shouldn’t continue to be successful after the pandemic is over. Whilst some elements of life will return to normal, businesses that meet and exceed customer needs now can look forward to ongoing success.
Can I start a business with no money?
Yes, there’s dozens of government-backed schemes and grants available to new businesses as a result of Covid 19. You can start some of them now, even during restrictions. Others will have to wait until social distancing rules have been relaxed. But all of them require no money or low money to start.