The pandemic has brought out the creative side in everyone. Being locked down at home can lead to one of two things; laziness or over-productivity. The economic impact of the coronavirus is unpredictable, but sometimes economic downturns offer some advantages for startups.
What is a Recession?
A recession is a downturn in the economy.
Economists around the world have been predicting a recession for several years (historically, the economy dips around every ten years), the virus outbreak and related global stock market decline have experts anticipating recessions in the United States and around the globe happening this year.
Online business/startups are already growing big in India. If you are wondering why to start an online business or a startup in India, right now during this economic downturn, here are six compelling reasons to dive in.
1. Innovation is the need of the hour!
Recessions tend to create problems. Entrepreneurs are problem-solvers by nature. It also causes slow investments, so business and consumers often look to startups that can solve the given problems; to find solutions. The most successful of them are eager, resilient and flexible. Who then will be the most equipped during an economic crisis? As an entrepreneur, the ability to think on your feet and make detailed plans can give you a competitive edge and also your relatively new startup, with few expenses, catches the attention of potential consumers and prospective investors.
2. Providing Employment/Seeking new Talent
If you’re able to secure funding, or grow your business rapidly, increasing your team is the next thing on the list. This kind of economy can also mean that growing your team is more affordable than in a rising economy. However, finding the right staff can be extremely challenging.
In a downturn, when layoffs are high, highly qualified, talented and effective individuals can be found much more easily than a period of economic growth spurt. Potential employees are more likely to work at a lower salary in exchange for benefits. Consider this as an opportunity to bring fresh perspectives to your business.
3. Less competitors = More Attention
The hardest challenge that businesses face is getting noticed. When the economy is strong, everyone is jumping up on the opportunity to start his/ her own business. With the alarming rate at how fast the industry is, newly incorporated companies may be pushed to the backseat, making it very difficult for them to get the requisite exposure or attention. However, when there is a pandemic of this scale, there are less people attempting to start a business in a downturn because there are lesser investors and funding becomes a tough task.
Nonetheless, one can quickly draw the attention of the media by a strong display of its products which offer a solution to one of the many problems caused by the pandemic and as a result monetise the marketing that the media provides.
4. Downturns give startups negotiating power
When the economy is strong, a startup is just another startup, and the vendor or the investors set the rules. On the contrary, if your company depends on suppliers for all of its raw materials/ products, a downturn is a great time to negotiate or renegotiate because, most vendors despite focussing on aggressive selling techniques will want a deal that will benefit them even after the downturn ends. Meaning, you can strike a deal to purchase from the vendors in the absence of other customers providing them with guaranteed sales while allowing yourself to turn around what could be, a very viable business. Ultimately resulting in a win-win situation.
5. Things are Cheaper
Weak economic growth often leads to businesses cutting costs to stay afloat during the recession. For startups, this means resources are cheaper, and they are in abundance. Things like office space or furniture, advertising costs tend to be relatively less expensive, and vendors are more likely to discount prices to move stock quickly.
Labour both skilled and unskilled is cheaper, as mentioned before.
Interest rates for loans also tend to be at their lowest during an economic downturn. This means that with spending costs low, you can start off your business with a safe budget and manage costs. Some people have waited years to find value in these markets–and now that time has come.
6. Survival is Key
Startups have the ability to thrive during a downturn. This does not always guarantee success during the recession but, with a solid business plan to back up your new venture and family or friends who don’t want to or can’t invest more money into the stock or real estate markets, funding your startup the setting up and operating a business should not be much of a challenge. So it is important to save money wherever you can, and be prepared with plans for every possible outcome.
It is also important to keep in mind that you might experience a slow growth process than in standard times, but you will be well-positioned to grab all of the advantages that come from the next economic expansion, which will eventually happen after all this ends.
I’m sure you’ve heard of Microsoft, Apple, and Disney (to name a few) these companies are examples of some of the most notable entrepreneurs and their ideas came to life during economic downturns. What this means for the startup is there’s no better time than right now to get going. If you’re an entrepreneur who has the motivation to bring those ideas to life, this time is perfect to cook up some recession-proof business plans. Start pursuing your business dreams–in anticipation of the next period of growth and become your own boss!