By Yhordan Serpentini | October 3, 2022
When a recession is in effect, it’ll impact the economy in many ways. For most individuals and entrepreneurs, a recession is strictly a negative thing, but that is not always the case. There are several instances where a recession can be a good thing—where something new, innovative, or revolutionary emerges.
Not too long ago during the COVID-19 pandemic lockdowns, where talks of a recession were and are as high as they are now, a large majority of businesses tried changing their functions as a means to adapt or “prepare” for if or when the recession would hit; this preparation led to a revolutionary change where the business would either fully or partially convert their functions remotely. Working from home is an opportunity that has never been easier and more accessible since the 2020 lockdowns.
Working remotely is just one of many doors that a recession can bring to the economy, and more specifically, you as an entrepreneur. So, here are 5 ways a recession provides business opportunities.
1. Fewer Competition
It is unfortunate and morally challenging to ever wish for the failure of one’s future or their business’s future; however, building a business is not easy, and the challenges of the competition are even worse. There is no room for wanting your competitors’ business to not fail because if it is not them, it will be you. Take advantage of the recession’s effect on your competitors, and learn from what mistakes they made to help prepare you for when the next recession inevitably emerges.
What was most impactful about the recession on your competitors’ companies? What could’ve been done to prevent that? Ask yourself these questions and analyze very closely the different ways your competitors try to adapt to the recession—both successfully or unsuccessfully.
2. Reduced Prices Equals Reduced Expenses
One of the other things a recession can also provide is lower rates. Lower rates basically mean that businesses will entice their target market with their products or services at a lower rate than retail—in other words, better deals. This is great for you, a small business owner, who is just starting up because you’ll have access to the supplies you’ll need at a lower cost; your start-up would be cheaper.
Additionally, you should take advantage of these lower rates to make improvements in your business that will overall increase the quality, efficiency, and productivity of your product or services.
3. Your Target Market is Easier To Attract
As mentioned with fewer competitors, businesses shutting down from a recession will consequently mean less competition for your business. The benefit of this impact is that former customers who may have been loyal to your once-competitor will now be forced to look elsewhere for the same, similar, or alternate product(s) and/or service(s). Consumers having to look elsewhere can be a wonderful thing because it provides you an opportunity to attract them quicker and easier than what it normally would have been with your former competitors still in the picture.
4. Consumer Behaviors Change
Another very positive factor to the impact of a recession is that customers will change how they make decisions about what to buy when to buy it, why they should buy it, and how to do so. If you take advantage of these behavioral changes, it could provide an opportunity for increased traffic, increased leads, increased consumers, and increased synergy.
There are four types of consumer behaviors:
- Complex buying behavior
- Habitual buying behavior
- Variety seeking behavior
- Dissonance-reducing buying behavior
When a recession hits, consumers change their typical behavior based on the flexibility and convenience that businesses are offering them. As an example, we can look back to the COVID-19 pandemic lockdowns from 2020. Since a large number of businesses had to adapt by means of switching to remote, online, digital, or delivery-only services, it allowed customers to also switch their typical behavior patterns to such lengths. E.g. an individual who used to shop in stores all the time may now prefer the convenience of online shopping, exclusively.
5. Improved Opportunities For Investments
You might have been wondering about the literal economic and financial impacts that recessions provide—such as inflation—but there is a positive outcome from that effect—investments. As the market goes down in value, so do stocks. This is the perfect time for others, and even yourself, to invest in these stocks. Investing in the stock market is more than just investing in a company, it also protects you from inflation, which is one of the top killers of companies during a recession.
Other benefits of a recession are that it makes it easier for others—like angel or venture investors—to invest in your company, as well as receiving much better deals from other ventures. A better opportunity for your company to be invested in is a better opportunity for your company to become successful during a recession.
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