Recession 2023 – as this economically challenging year draws to a close, the new year doesn’t look much better.
The 2023 recession is expected to be “long and ugly” according to the man that predicted the 2008 financial crash, the economist, Nouriel Roubini.
Many people will see the recession 2023 as a time of despair, and for good reason. But there are also opportunists who see the 2023 recession as a time to take advantage of the situation and rise to the top.
For those brave enough to start a business during the 2023 recession, there could be rewards that last long after the economy has recovered.
Let’s look at some of the advantages of starting a business during a recession – because yes, even recessions can have advantages!
Recession 2023: What is a Recession?
A recession is normally defined as when Gross Domestic Product falls for two consecutive quarters. GDP is a measure of the health of a country’s economy over a fixed period of time – normally a quarter (three months).
Recession 2023: Is the World in Recession?
The world economy is slowing more than was predicted.
Apart from the horrific cost of life and the physical destruction of the nation of Ukraine. The war is massively impacting energy and food costs.
The fallout from the COVID-19 pandemic has also contributed to the economic downturn.
With energy and food costs being more expensive, this causes inflation to rise and when this happens governments around the world increase interest rates to curb people’s spending to try and bring inflation back to more manageable levels.
At the moment economies across the globe are shrinking. The UK was officially announced to be in recession in November 2022. Other nations’ economies are slowing but the UK is bottom of the table for G7 nations in economic growth. In fact, the UK economy is still below pre-pandemic levels.
Recession 2023: Is Starting a Business a Good Idea?
As an entrepreneur or a business start-up owner, it can seem like the future is always full of uncertainty – but amid gloomy economies, there can lie hidden opportunity.
So don’t panic! It doesn’t have to be all doom and gloom; with careful planning and research, you could find yourself in the perfect position to capitalise on a stagnant economy by launching a new business.
Remember it’s all about being risk aware, not risk-averse, fully understanding your market and keeping a grip on your finances.
Today we are going to look at the following 7 positive factors if you were to start a business during the 2023 recession:
- Innovation is key
- Be more Ross from Friends & PIVOT
- Fewer competitors to deal with
- Everyone wants to save money
- New staff are easier to find
- Create a lean, focused business
- Investment from non-traditional sources
1. Innovation
Smart entrepreneurs know that recessions often give rise to innovative solutions, providing new opportunities for success.
Companies like Air BnB and Uber defied convention when they launched during the 2008 financial crisis, and now their services are ubiquitous.
Who can forget the explosion of Zoom during the pandemic, as people sought new ways to stay in touch with loved ones.
We don’t yet know what recession 2023 will bring but it’s a safe bet it’s business as usual for smart entrepreneurs who can create focused solutions to problems brought on by a recession.
With hard work and creativity, even a recession won’t stop great ideas from taking off!
2. Master the Pivot
They say the definition of insanity is doing the same thing over and over again and expecting different results.
Well, business is no different.
If you find that a particular area of your business is not working, study the market and find out what’s happening, see what your customers want and what your competitors are doing and then, as Ross Geller would say PIVOT!
Can you find a solution to a problem, can you tweak an offering in a way that opens up a new market?
Do you remember when Netflix was a DVD rental company, that posted DVDs to your home?
When the company realised that digital streaming was the way forward for people wishing to consume TV and movies they pivoted into streaming and changed the course of broadcast TV.
In the business world be a Netflix, not a Blockbuster!
3. Less Competition
When it comes to business, competition is usually fierce and relentless.
But during recessions, some businesses don’t survive due to a lack of funding or customers cutting back on spending.
This means potentially less competition, in certain markets, for you when you start your own business.
This gives you an opportunity to establish yourself in the market with fewer obstacles in your way.
Make yourself stand out and become the market leader.
4. Consumers Want to Save Money – Give Them More Value
Recessions cause inflation and higher interest rates, which means that consumers’ purchasing power becomes more limited and more targeted on the products and services they really need.
They want to save money whenever they can, so if you can offer them something that helps them do that, all the better.
But beware, don’t simply slash costs like you are running a fire sale. A business exists to make a profit and you need to remember that your margin creates that profit. Don’t ever endanger your margin! Protect your brand.
The great Oscar Wilde wrote in his book Lady Windermere’s Fan, that a cynic was “A man who knows the price of everything and the value of nothing”.
Understand that price and value are two different things.
If you can boost your product by creating more associated value, then your offering becomes more appealing and more purchasable. Your product becomes worth more for no extra cost.
Think along the lines of excellent customer service, free training, extended warranty, premium aftercare etc
5. Easier Staff Recruitment
Recessions often mean redundancies across industries and sectors, which means more talented individuals looking for work.
All of a sudden the talent pool becomes a richer source of talent.
If you’re able to provide employment opportunities during these times – even if it’s just part-time or freelance work – then talented people may be more likely to join your team than if it were a booming economy where job vacancies are abundant everywhere else.
Use your network to find suitable candidates for your vacant roles or use an online recruiter like Indeed.
In a new business smart people mean that you, as a founder, get to learn from their experience. Embrace that and learn from it.
6. Focus on Costs
Starting up in a recession forces you to become focused on costs from day one; something many entrepreneurs fail to do when starting up in good times due to a lack of urgency or experience.
You need cost-effective solutions for everything from marketing strategies right through down the line – staff wages included – and this focus will stay with you long after the economy recovers because focussing on costs and becoming an efficient, lean company will always be beneficial for any business no matter what stage it’s at.
This is why many businesses last a long time, they understand what it costs to run their business, deliver a job and sell a product/service. Make sure you do the same.
7. Funding
During a recession, traditional funders such as banks may have their pockets tightened and therefore cannot invest in expanding businesses.
Those entrepreneurs with an eye for forward-thinking initiatives can normally access funding via other outlets.
Innovative founders can often leverage investment from savvy investors who are willing to back worthy projects.
During the recession 2023, Investors and Angel Investors will be on the lookout for ground-breaking solutions to all sorts of problems, there’s never been a better chance to have your ideas come to life and create something truly unique.Platforms like AngelList, SeedInvest and Seedrs offer a place where founders and investors can come together and explore alternative fundraising.
Pandemic Business Explosion: Success in Chaos
The Covid-19 pandemic was chaotic for the world at large, and the business sector sufferred more than most – hundreds of thousands closed their doors in the UK alone according to the UK Office for National Statistics (ONS).
Despite this recessionary-like global event, there was an unforeseen bright side to the global pandemic: a surge in new businesses.
400,000 new companies were formed in the UK in 2020, with similar increases being witnessed in major economies across the globe like France, Germany, Japan and the US.
Though we will certainly not come out of this recession unscathed – there is an opportunity for the bold and the brave amongst us to use these harsh economic times as a springboard to achieve great success.
Just as Air BnB and Uber flourished in the 2008 financial crisis and the pandemic showed many thousands of founders how to see the light in the darkness, the 2023 recession will offer the same opportunities to those willing to take the first step.
Recession 2023: Success Stories – From the Past
Recessions are cyclical occurrences, on average they happen about every three-and-a-quarter years.
They are not a new phenomenon and history has shown us that companies created in the midst of a recession can and do flourish.
Some of the success stories include:
General Electric
Founded: 1892 (just before the 1893 recession)
Disney
Founded: 1929 (the same year the Great Depression started)
Microsoft
Founded: 1975 (founded days after the 1973 recession officially ended)
WhatsApp
Founded: 2009 (during the financial crash)
Recession 2023: Wrap Up
The Recession 2023 is coming, nothing is more certain, but it could be a huge opportunity.
Most people dread recessions because they bring with them uncertainty and hardship; but they also bring with them opportunities that wouldn’t exist otherwise.
Entrepreneurs who learn how to identify those opportunities often come out ahead while others struggle just to keep their businesses afloat in turbulent times like these.
So focus, understand your market, be innovative, fix a problem, make your margin a priority and keep a tight reign on your costs and you could be the next success emerging from the recession 2023.
Good luck!
