Illustration by Michael Driver
The rapid spread of coronavirus that first emerged in China and now affected the whole world has led to an unprecedented jump in the global market. The business impact of coronavirus is noticed in every sector, from education to healthcare.
Now Wall Street is going through its worst period since the Great Depression times and it has already reported about the biggest fall in value (over $5 trillion in losses). The virus outbreak is now one of the biggest threats for the global economy with many businesses forced to close down.
However, the main reason is not the number of cases of coronavirus but the restrictions taken by countries that raise the level of disruption to economics.
As Sequoia reported, all businesses experienced a drop in business activity as all customers are not leaving their homes. There are supply chain disruptions started with the lockdown in China, canceled meetings and dropdown of sales due to the ban for non-essential travel that may cause trade wars.
In this article, we will talk about:
- whether it's worth to start a business during a crisis;
- what great companies succeeded in recession;
- what opportunities coronavirus creates for businesses;
- how you and your business can succeed.
If the coronavirus goes on for too long, it may cause another global recession. This is the time when your business can either be flexible and prosper or wait until it all ends and hope for the better, and it's up to you to decide.
Starting a New Business in a Recession
Bill Ford Jr. had been working for many years to get the company's focus in cars direction but without much success. 2007 became the year when the Great Recession hit all the businesses. However, Ford convinced his family who had control over 40% of company shares to let him pledge the trademarked blue Ford oval. Thus, he received the financial package required to survive the crisis. It created the willingness to take risks that helped the company overcome the old barriers and make real changes.
Recessions are hard times when people lose their jobs and companies go bankrupt, but it's not all that dark and Ford`s example proves it.
During the crisis, people have a new level of service demand, since it becomes harder for them to give away their money. Their values and interests are changing and therefore, business owners can make use of economic downturns to start new companies offering services based on current demands.
Startups with their inherent agility can take advantage of a weaker economy more than anyone maximizing their value for the customers from day one.
Illustration by Lennon Cheng
While economic uncertainty is not the best situation to benefit from, many of the world's most successful businesses started during a downturn or crisis. Check these companies that were born out largest economic downturns in history:
- General Motors. At the beginning of the 20th century with The Panic of 1907 and no central bank yet, GM founder stopped making horse-drawn carriages and switched to automobiles. His innovative idea turned him into the first car manufacturer later buying other carmakers like Cadillac, Pontiac, and Oldsmobile;
- King Kullen. With the idea to start the modern supermarket with the wide choice of goods and self-service, the first King Kullen store opened in 1930. The low prices matched the budgets of the Great Depression era and the success came quickly making it the first iteration of the modern supermarket;
- FedEx. With an increase in fuel prices almost 4 times in the 1970s, the US experienced a period of recession, bankruptcy, and high unemployment. The company started in 1971 and was almost destroyed. However, the founder’s commitment to overnight timeframes, the right strategy, confidence and an innovative ad campaign convinced customers that its service was necessary thus bringing the first profits. By 1980 FedEx efforts paid off when the revenue reached $38,7 million.
Apple, Disney, Microsoft and Fortune Magazine - all started during a recession while their competitors feared to fail and found tremendous success even when the economy was at its worst.
They all are excellent examples of how a crisis can accelerate innovations. Just like in the case with coronavirus, it creates an environment where under normal conditions it would be impossible to get rid of boundaries.
Although the global crisis and significant financial losses are always bad news for startups and businesses, they can still make use of it and here is why:
- Cutback of economic activity can lead to great innovation launching products that might not have fit in better times;
- People that lose their jobs can now transform into entrepreneurs;
- Downturns create absolutely new customer demands for businesses to focus on.
Coronavirus creates problems...and opportunities
The coronavirus pandemic is a serious global problem but besides overall panic, the power of crisis makes it an ideal time to invest in your business.
Although many entrepreneurs hesitate to open new markets during hard times, just hoping that everything will get better is useless. Downturn means you have nothing to lose so you can make those decisions you would never risk doing under normal circumstances.
Illustration by Latham Arnott
Is it Worth Starting a Business During Corona Crisis?
There are 9 good reasons to start a business during this period:
- Things cost less. Weak economics means that many businesses sell off their assets and thus things become cheaper. You can benefit from lower rates and discounts to cut costs for opening your business: get a cheaper credit in the bank, negotiate with suppliers to get a more profitable deal as now you are the one who sets the rules;
- People want innovation. During a crisis, there is a slowdown in innovation investments while consumers require particular problem solutions. It gives startups opportunities to come up with the right ones;
- Experienced employees are looking for a job. The team is very important and as during the downturn many people become unemployed, you can easily find the qualified staff for your project;
- Incumbents become vulnerable. As startups are more agile and flexible, they can easier go through a crisis compared to giant corporates;
- Less competition. Many startups open when the economy is strong so they go directly for funding easily squashing the bootstrappers. However, fewer people start a business in a downturn as there are less funding options which gives an opportunity to self-funded startups;
- Incubation time. Great technology takes time to be developed so the economic crisis is a good period to work on your idea. Use this time to nail down the core features of your product and when the economy gets going you will have a ready product to conquer the market;
- Investors want to invest. During a crisis many angel investors look for new opportunities and move their money out of the stock investing in promising startups;
- Great experience. Business built in a downturn will make you develop strong business practices and it will stay with you when the market recovers giving you an advantage over competitors. When money is limited, you focus on critical operations. Besides, you have enough time to improve your operational efficiency, eliminate waste and make all the processes lean and you will see a payoff down the road;
- Exploring new markets. While competitors stay away, sizing up new markets is another thing to do, so research your chances and make use of them.
Illustration by Uran
Key Indicators of Success
To take an opportunity and succeed, you will have to:
- Take leadership. Steve Jobs chose the right time to debut his company but he also was unshakably confident in what he was doing. You need to become a strong leader and be the one making the decisions even if they are hard and risky;
- Be ready for changes. During a crisis, the world is rapidly changing and you need to react and adapt quickly. Never become too comfortable with what you have: successful people don`t wait for a bad thing to happen, they predict it and plan their actions ahead;
- Improve all the time. Opening a business, you need to keep it updated, strategically innovate, evaluate what's working and what's not and offer people things they want and need to attract a loyal customer base. Bring value by predicting gaps in the market and creating products to bridge those gaps.
There is never the right time to start a business, especially if it's aimed for the long-term: you will likely have to deal with economic changes that are out of your control.
The coronavirus crisis will no doubt cause many difficulties but it will also create many opportunities across the industries for more innovation. This is the time when you should take risks, focus on what really matters and learn how to be a leader.
Going through these hard times will help you set your company up for the future and the sooner you start, the better.
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