Everyone’s been talking about it—Americans may find themselves in a recession soon. A professor at John Hopkins University recently told CNBC there’s an 80% chance of the U.S. falling into a recession in the next 12 months, a figure significantly higher than previously predicted. When CNBC did a survey in September and gathered the opinions of economists, fund managers, and strategists, the chances of a recession over the next 12 months were sitting at 52%.
Learning this information may be discouraging if you’re hoping to start a business. No one wants to create a brand in an environment that’s not suitable for them to succeed. However, just because a recession could be on the horizon doesn’t mean you should stop pursuing your dreams of being a business owner. There are reasons and ways you can succeed in an economic downturn.
Benefits of starting a business in a recession
Surprisingly, your entrepreneurial spirit can thrive during a recession, primarily because there are benefits to starting a business when the economy is experiencing a downturn. Don’t believe it? Consider some of the brands that are major successes today.
Over half of Fortune 500 companies were created during a recession, including HP. Brands like Slack, Uber, Airbnb, and Warby Parker were also launched during the 2007-2009 recession, and today, they’re huge successes. One investing partner at Wing Venture Capital, which helps fund early-stage startups, even believes that starting a business during a recession is a good idea and points to specific advantages, including the following:
- There’s less competition: Most companies cut back on their marketing efforts during a recession, making their promotional strategies scarce. That means you have fewer people vying for your audience’s attention, which you can capitalize on to grow your business.
- Securing capital is more probable: With fewer competitors, you may have an easier time getting capital. In the first half of 2022, venture firms in North America raised $88 billion.
- There’s increased access to top talent: More than 21,000 U.S. tech workers have been laid off, giving you access to a large talent pool that’s looking for employment. If you’re open to hiring remote workers or creating a hybrid work structure, your access to top talent can increase even more.
- Easier to attract customers: Recessions have a way of impacting consumer trends and creating new problems. If your business can help solve growing issues, you’ll have a chance to attract a wave of customers.
These are just some of the reasons you may find it advantageous to start a business during a recession, but they’re enough to prove it’s possible to move forward in unideal circumstances. A recession doesn’t have to be the end of your entrepreneurial dreams or the reason to pause any of your efforts. If you want to build a business during an economic downturn, you can do so and be successful.
Succeed during a recession
While there are benefits to creating your business during a recession, you still need to consider the way you approach it. Implementing the right tips will ensure you actually have a chance to encounter the benefits of starting a company in a recession. So, if you want to take this path, here are a few tips you can use to increase your chances of success.
1. Build your dream team
There are many factors outside of your control when you’re a business owner, which is why it’s great to get a handle on the things you have power over. One of those things is the team you assemble. You should carefully consider the people you hire, especially during a recession. The last thing you want is to onboard workers who don’t believe your company will succeed or who are simply looking for employment to ride out the storm.
You need employees who are skilled in their field, hard-working, effective communicators, encouraging, and disciplined. These attributes will do wonders in helping your business not only survive but thrive. So be intentional about the people you hire. Take time to build your dream team to ensure you attract and hire top talent.
2. Maintain your standards
During a recession, it’s easy to find business owners lying about their products or services to maintain cash flow. While this strategy may get new customers or clients through the door, it doesn’t lead to long-term relationships, which you’ll need to keep your business afloat.
Establishing trust goes a long way in sustaining your company, especially when it’s new. Customers need to see that you can deliver what you promise and being able to do so when other companies don’t will ensure you develop a strong customer base.
3. Build a contingency plan
It doesn’t matter when you’re starting a business—there will always be risks. And even though starting a company in a recession can be a positive experience, it will still come with challenges. That’s why you need to have a contingency plan. Maybe that means having alternative products and services to offer if your initial ones fail or trying to appeal to a different target audience if your primary one isn’t buying from you. Whatever the case, think of what you’ll need to do to address potential problems that may arise. Consider every “what if” and have backup plans for each scenario.
Don’t be afraid to start
The above strategies are just a few steps you can take to jumpstart your business in a recession. But there are many other things you need to consider to experience success, including your marketing, sales, social media, and employee engagement strategies. However, with the right tactics in place, you can launch your company with the hope it’ll survive and potentially thrive. Many brands that started during a recession have become household names, so who’s to stay yours can’t as well?