Get ready to roll in a recession
Starting a business during a downturn can be nerve-wracking, but some of the best-known brands were launched during economic crisis. Airbnb and Uber started trading during the 2008 global financial crisis; Burger King opened in 1953 amid the US recession, while Hewlett-Packard was founded in a Palo Alto garage in 1939 during the Great Depression. With the R word threatening to rear its head again, the key question is why?
According to Associate Professor of Management Practice at London Business School and author ofbreak the usual!Six iconoclastic ways entrepreneurs can help anyone change the world‘, mainly for the following three reasons.
“First, as we’re seeing today, during or in anticipation of a recession, big companies are cutting costs and meeting their ambitions, which means less innovation and less competition for other innovators,” he said. Second, many resources that start-up companies need, such as manpower, real estate, etc., have become more abundant and cheaper. Third, entrepreneurs with great business ideas may be more inclined to think, why not try this good idea?
That’s why entrepreneur David Davis decided to start the Sovereign Beverage Company during the 2008 global recession. About a year ago, as part of his full-time job, he identified a market gap while visiting breweries and realized that many had untapped avenues for global export sales.
He said: “Why launch at the start of the global recession? My first thought was, why not? If I can get the business to thrive, I know it’s going to be strong and sustainable, and 15 years later, This has been proven.”
Although the business faced challenges from a lack of cash flow and resources, it eventually developed a durable business model. “We don’t hold stock, we sell before we buy, we pay before we collect,” Davis said. A wide range of products while leaving the logistics to one supplier.”
Their timing has an advantage. The breweries they work with are trying to find new ways to increase sales. Sovereign Beverage Company provided them with a new, risk-free source of sales revenue. Since then, the company has focused on finding customers in markets less affected by the financial crisis.
“The recession forced us to develop a very smart and efficient way of operating that we still do today,” Davis said. “I would absolutely do it again for that reason. Start trading during a recession, but in my opinion, this is the best time to start.”
2008 was also the year Konrad Bergström founded Swedish tech giant Zound Industries. Zound turned the famous Jim Marshall rock amplifier (used by Jimi Hendrix at Woodstock) into a line of home speakers and headphones sold in 130 countries.
Prior to that, he founded the lifestyle distribution company Megascene Agency and led the success of international brands such as Quiksilver and Burton in the Nordics. But in 2004, Bergström had to file for bankruptcy. Despite huge debts, business contacts who have turned their backs on him and having to sleep in his car with his dog, he believes better things lie ahead. Not even a recession will dampen his belief in Zound and its market-disrupting potential.
“When the economy is plummeting, it’s easy to think of doom and gloom,” he said. “What I see is a huge opportunity to create a lean, fine-tuned business and position it for long-term success.”
Lack of external funding in the form of investments, bank loans and government start-up funds is a major challenge. “We found solutions to adjust payment terms, secure and benefit from distribution rights, and get family and friends to invest,” he said. “Building distribution through companies that have survived and are still aggressive is also key, but as the market is less forgiving , so more planning is required.”
With a recession becoming more likely, Bergström’s advice to other entrepreneurs considering starting a business is to stay positive and focus on the facts. “A lot of people think a recession is a hellish scenario,” he said. “It’s an opportunity, and you have to really believe in it to be successful.”
John Mullins agrees that this mindset is critical to improving an entrepreneur’s chances of success in unfavorable entrepreneurial conditions, enabling them to break the traditional rules of many established business operations, and encouraging them to focus on narrowly defined target markets, addressing urgent The problem.
“Large companies tend to overlook opportunities that don’t ‘change the status quo,'” he says. Entrepreneurs “borrow” underutilized assets owned by others rather than investing their own money, at least until market demand is proven. They ask their customers to pay upfront and use that cash to fund their business growth, paying suppliers long after the product is manufactured and delivered.”
Finally, he added, entrepreneurs with the right mindset don’t ask for permission. Faced with legal or other ambiguities, they persevere, thinking they’ll ask for forgiveness later if they have to. Mullins added: “Uber, and the rest of the gig economy, probably wouldn’t exist today if Uber’s founders had asked for a license from San Francisco’s taxi regulator.”