Explore our blog to gain deeper insights into yourself, your workforce, and the profound impact of EQ and IQ on your organization.
Recessions are one of the most challenging economic periods that a society can experience. With the downturn in sales, profits, employment, and disposable income, these circumstances can easily make anyone pessimistic, and searching for growth and opportunity can feel pointless.
However, recessions do bring possibilities for growth and success, it just depends on how you approach these challenges and seek to overcome them. This is why entrepreneurs are so important during a recession. The fundamental role of an entrepreneur is to seek out problems, propose solutions, and organize a business venture to provide them.
With all the fluctuations and uncertainty occurring during a pandemic, it can feel more comfortable and reassuring to remain an employee. But pursuing entrepreneurship during these times may be more rewarding and safer than you might expect.
If you’re on the fence about becoming an entrepreneur and want to know why it would be a good choice for you during a recession, then continue reading as we discuss the importance of this role in society.
An entrepreneur is a person who identifies opportunity, mitigates risk, and executes their plan in a strategic and purposeful way. They are naturally resilient to change because their mindset revolves around constant change and constant analysis. Arguably, a recession is the perfect environment for entrepreneurs to not only survive better than their W2 counterparts but to actually thrive and start on a journey to securing generational wealth and financial security.
The psychology of an entrepreneur is the perfect vehicle to overcome the limitations of a recession that restricts the majority. During a recession, society must grapple with a new normal featuring new restrictions. As prices increase, profits decrease and people have less value for their dollar, entrepreneurs look for ways to still provide for people during this time.
A lot of what occurs during a recession is making organizations more efficient and cutting what is no longer feasible with recession conditions. For entrepreneurs, finding efficient solutions that can satisfy not only a successful business, but happy customers is the ideal scenario.
Some people are inherently drawn to entrepreneurship, as their minds approach issues in a creative and solution-oriented way. However, even if you feel unprepared for entrepreneurship, you can still learn the tricks of the trade. By understanding the goals of entrepreneurs, and learning from previous success stories (and failures) you can start to put yourself in the appropriate mindset to succeed.
With the role of an entrepreneur clearly defined, let’s identify some opportunities for entrepreneurship that can arise during a recession.
When it comes to recessions, there are conditions that arise that make finances difficult for businesses and consumers alike. However, there are also some features that make starting or growing a business a good opportunity as well.
These include such things as:
Increased Talent Pool
Less Expensive Business Deals
Opportunity for better market share
Let’s break down each of these in a bit more detail.
An unfortunate part of a recession is the need to cut back on business expenses in order to stay afloat. For a lot of businesses, this means cutting down on labor as the scope of their business shrinks. Whether this means reducing employee hours, cutting jobs entirely, or turning from salaried workers to freelance/contract ones, the workforce experiences a lot of shifts and changes.
This can provide a lot of opportunity for new and growing businesses to access a talent pool that would normally be much more contested. During economic booms, businesses are willing to intensely compete to attract new talent. During recessions, they may focus more on retention, and for those who they lay off, you can look to appeal to them.
So, if you’re forming a new business or looking to expand, a recession is a great time to appeal to this extended talent pool, which will benefit you even after the recession period has ended.
As sales and profits shrink, businesses will look to remain competitive among sellers. This can provide a great opportunity for you to make deals with businesses at lower prices than would be expected during better economic conditions.
Businesses will look toward making more reliable deals and will be willing to reduce prices if it means they can keep business flowing in. This would be a great opportunity to not only take advantage of short-term deals but build relationships that can serve you in the long term.
Recessions will also mean that some businesses begin to fold as they can’t sustain their current operations. This doesn’t mean it is a bad idea to start a business, what it more often points to is that a particular organization was better accustomed to better economic times and was not able to adapt to the conditions of the recession.
businesses drop out, competition will then logically decrease. This could present a great opportunity to introduce your business and work for customers that are now up for grabs. If you can look at the failures of the businesses that folded, and observe how others maintained success or at least viability, you can start charting a path for your own business success.
With these conditions covered, let’s talk about particular business opportunities that you can aspire to during recession times.
One of the best recession-proof career moves is freelancing. Hiring and retaining permanent employees can be a large expense for businesses. During a recession when they are looking to conserve their budget, they may find themselves having to make layoffs in order to stay efficient. However, this doesn’t mean they don’t still have a level of work that needs to be completed, meaning that they must find the labor for the work elsewhere.
Freelancing can allow you to offer your services to many different businesses while presenting a more favorable dynamic to them.
This may be more specialized, but it is a business opportunity that many should consider aspiring to. During recessions, businesses are looking for ways they can conserve their finances and optimize their business operations. In order to make sure they are maximizing this responsibility, they will want to turn to financial experts in order to review their books.
Accountants and other financial services businesses are of vital importance during a recession. Your service is necessary for making sure that businesses and even entire industries can continue to operate during these new stringent economic conditions.
During a recession, people will have fewer disposable funds to buy completely new products. What this means, is that oftentimes they will look to repair their current items and save money. This presents a great opportunity for businesses.
You can look to refurbish electronic devices, furniture, and many other categories of products. On top of just repairing people’s products and returning them, you can also look to sell refurbished goods for people not looking to spend full price on new products.
This is a business model that will require knowledge of repairs and restoration in the certain industry you are serving but offers a lot of flexibility in where and how you run your business.
The conditions and business opportunities mentioned above all take advantage of the key driving motivation of entrepreneurs, identifying problems and offering solutions.
Everyone knows the red flags that come from a recession, inflated prices, unemployment, and personal financial downturn. However, one of the easiest ways to identify a solution is to look at the inverse of the problem. A solution for inflated prices is to find a way to do it cheaper. Higher unemployment means reduced competition for labor. Personal financial downturn means a large target market with very specific and obvious needs.
As an entrepreneur, you shouldn’t be chasing money, you should be chasing value and solutions. An entrepreneur is someone who looks for a win-win relationship that works in every environment. Arguably what the economy needs during a recession are more entrepreneurs.
So, if you’re interested in becoming an entrepreneur, consider the challenges surrounding you, and how you can look to solve them. Many people think that entrepreneurship is seeking out a billion-dollar idea, and creating a product that revolutionizes the world. But this is not the only function of entrepreneurship, and this is not the story for most businesses.
A lot of entrepreneurship is based upon finding a small problem that many people are facing and strategizing and organizing in a way that you can provide for it. While online services have certainly boomed in recent years, especially due to Covid-19, there is still plenty of opportunity to start a local business based on servicing your community.
Another important thing to consider is your enthusiasm and passion. You should value your solutions and goals. While entrepreneurship is rewarding, you will face challenges on the journey like any other path in life. What keeps you motivated during those times is the desire to realize your vision.
Whether you are looking to start a brand-new business venture, or want to grow your existing one, a recession presents opportunities for either.
For those who already have a business, it’s important to be constantly changing your strategies, especially when going into a turbulent economic environment; complacency kills.
For those who are starting a business fresh, it is important to understand that leverage is key. You must leverage your networks, leverage your skills, and any other strength that can give you an advantage.
Not everyone’s path to entrepreneurship is the same, and some come into the business world with a stronger foundation based on formal and thorough business education. Others have a more colloquial understanding of business and get by through their knowledge gained by simply working in the business world for a while.
Whichever is the case for you, you can always look to gain more knowledge and insight into the business process, in order to improve your business outlook. In that vein, you should look to retain resources focused on developing your business sense and strategy, and that is our aim here at Guidewise.
