The small business community is vibrant, entrepreneurial, diverse and interesting. In 2020, with COVID-19, lockdowns and economic turbulence to face, SMBs have had a lot to deal with. So a blog post about starting a business in a recession might sound counterintuitive!
There are lots of good reasons why times of change are ideal for new ventures. And as 2021 looks set to continue the economic uncertainty we saw in 2020, now is the time to offer your SMB customers as much support as possible. So here are 8 reasons why starting a new business during a downturn is positive. Feel free to share it with your entrepreneurially-minded customers – we hope it’s useful.
1. You don’t have to quit your job to start a business
If quitting your job to pursue your dreams is too scary, don’t worry – you don’t have to! Start working on your business idea in your spare time. Having a side project that brings you cash isn’t only fun, it’s rewarding and can be a great way to test the viability of your idea as a full-time business. Once you are comfortable with your income and the business’ potential for growth, then you can think about leaving the day job and making your side hustle the thing that gets you out of bed in the morning.
2. A change in the status quo reveals opportunities
Steve Jobs said:
“Innovation is the ability to see change as an opportunity – not a threat”
A recession brings uncertainty, a shift away from what is known and what has gone before. While that can be daunting, such shifts often reveal new opportunities, things that either didn’t exist before, weren’t needed, or couldn’t be seen. The skill of the entrepreneur is not just in building a business, but in actually spotting those opportunities in the first place.
The Coronavirus pandemic provides a useful example: in the first few weeks of lockdown, businesses were forced to close or drastically change how they traded. With physical stores shut, many SMB owners moved to open online stores. They made change an opportunity, something which may have been perceived as a threat.
If you’ve spotted an opportunity, tools such as Google Trends can be a useful way to check out its viability, by exploring what people are searching for. You never know… perhaps your research will lead you to other consumer demands that you hadn’t thought of!
3. More people are online now than ever before
2020 and the lockdowns that the pandemic brought with it forced more people than ever to shop online. It even prompted a wave of people who had never before shopped online to do so. Research suggests that in 2021, 2.14 billion people will shop online for goods and services, which is more than a quarter of the global population. That’s up from 1.52 billion just 5 years prior in 2016.
People have grown used to shopping on the internet: if you’re thinking of setting up an online store or an online business, now is the time. It doesn’t have to be difficult for business owners to get online either. Website builders make it easy to set up a website and start taking safe and secure online payments.
4. Support for small businesses is strong
The impact that the COVID-19 pandemic has had on small businesses is very real, and especially for those forced to stop trading in lockdowns. Public awareness that small businesses are the backbone of our everyday life – from local hairdressers to retailers, florists to restaurants – has never been higher than when those things were taken away.
Campaigns like #shoplocal and #supportsmallbusinesses have made good use of that awareness and encouraged people to commit with their cash to SMBs. With public opinion so strongly in favour of shopping local and getting behind the little guy, the current climate is ideal for starting a business.
And it’s not only customer support that is at its peak. There is a wealth of tools and cloud-based solutions available to small business owners, to help them run successful organisations. From invoicing software to social media management platforms to the all-important website builder, there’s no reason why new entrepreneurs shouldn’t have the support they need to launch a business.
5. The playing field will be level
Times of struggle are a great leveller; what tends to happen in a downturn is that large companies start to struggle. Like an oil tanker sailing alongside a small fishing vessel, their huge size means it’s difficult for them to manoeuvre nimbly. Smaller enterprises are more agile and can adjust their course rapidly.
Large enterprises will also have issues to deal with such as staffing costs and overheads like commercial rent, two of the biggest expenditures for any organisation. Solopreneurs, side-hustles, small businesses run from a spare bedroom don’t have to worry about such expensive outgoings. In the middle of a recession that lack of risk is a huge advantage to a fledgling business. And what’s more, starting a business in a recession teaches business owners from the outset how to run a tight ship. So next time there’s a storm, they’ll be better able to weather it.
6. Cheaper materials and supplies
When demand for goods is lower, as tends to be the case in a recession, businesses can find themselves with excess stock on their hands. Goods that are stuck in a warehouse aren’t making money and may be costing the business in storage fees. So many larger businesses may be looking to shift stock by reducing prices in an effort to keep their cashflow healthy. For entrepreneurs it’s good news, as they can get the materials they need at a slightly reduced rate than when the economy is good.
7. More opportunities for funding
Start-ups with the potential to deliver a healthy return on investment are always an attractive option to a smart investor. In a recession, this is especially true. As the stock market plummets the return delivered to investors does too. Investing in a money-making business is a wise choice, which is good news for business owners. For those businesses that are not quite ready for investment but are looking to finance a new business venture, low interest rates make borrowing money a cheap source of finance.
8. Talent is readily available
The sad fact of an economic downturn is that some businesses will close. Unfortunately, jobs that were secure will become uncertain and even lost altogether. That may even be the reason that many people are thinking of starting a business: without a steady source of income, they become resourceful. Stressful circumstances can lead us to make leaps that we wouldn’t otherwise have done in more secure times. As the saying goes, necessity is the mother of invention.
If you’re starting a business or looking to expand your company during a recession and you need staff, a recession is an ideal time to find talent. As people are let go from jobs, the pool of available skills becomes larger, meaning that start-ups can snap those people up, without having to spend lots on recruitment.
Support your SMB customers to start a business
As the calendar turns to a fresh year, it’s tempting to focus on what’s next, what’s new and what the latest novelty is. But don’t forget about your small business customers! 2020 was a rough year and they need your support more than ever. And if you can help those people who are just dipping a toe in the entrepreneurial waters, even better! Demonstrate your dedication when times are tough and those customers are at the beginning of their journey and they’ll stick with you in the long term.
Want to find out how you can support your entrepreneurial SMB customers with digital products that meet them where they are? Contact our partnership team. We’ll be happy to share how our white label website builder, ecommerce platform, and online booking software can help turn your small business customers into loyal, satisfied customers.