The coronavirus (COVID-19) pandemic has disrupted economies and business corporations around the world. With the economy in shambles, financial experts around the world have proclaimed that we are amidst a global recession with increasing certainty. Many well-established businesses, particularly the ones which were smaller or family-owned, have gone bankrupt or have been forced to close permanently, due to lack of revenue.
Alongside this decline in economic activity, however, there has been a curious surge in business start-ups. Have you been thinking about starting a business for some time now? Have you refrained because of the instability COVID-19 has brought to the world? It may be time for you to reconsider.
Why may you want to start a business during a recession?
Although it may be unexpected, there are numerous corporations which have had a booming start during times of economic strife. To name a few, FedEx began during the 1969-1971 recession. Microsoft was launched around a similar time in 1975, during a period of unprecedentedly high unemployment. General Motors got their start in the early 1900s by masterfully using the economic uncertainty to their advantage; they continuously bought smaller, struggling manufacturing companies to expand.
So how did they do it? Why did it work? There are several concrete reasons why starting a business during a time of economic instability is, in fact, beneficial.
Borrowing and Lending
Economic uncertainty often creates an environment of increased funding opportunities. Interest rates are usually much lower than when financial systems are thriving. This is because banks and money lenders are eager to continue their line of work as robustly as possible. Lower interest rates mean that loans are more affordable for the consumer, both immediately and over time.
The dynamic power shifts and the negotiating rights go from being on the lender’s side to the borrower’s side.
Let us face it: whether the economy is booming or waning, some businesses are not going to make it. A bad business plan, a poorly thought out distribution scheme, lack of leadership or inadequate staffing. These are all things that can hurt a business in the long-term and are mostly independent of economic change. They are, however, magnified during a recession because of other factors.
Many companies, both newly started and with longstanding histories, may find themselves struggling for economic reasons. Competitors may collapse at rates far higher than they would if financially stable. For those reasons, the companies which can thrive and survive the recession will have a definite advantage once the worst has passed.
As mentioned above, having the right staff is infinitely essential in any successful business. Of course, educated, efficient, and highly skilled employees are sought after by all employers. When the economy is at its peak and jobs are plentiful, there is more competition for these competent workers. The sad reality is that many well-qualified and intelligent people find themselves out of work during a recession.
Take Uber, for example. In April of 2020, following COVID-19 downsizing, the company was forced to let go of nearly one-fourth of its staff. Employees who had worked at Uber for years in senior positions related to marketing, engineering, computer science, and human resources, suddenly found themselves in an unthinkable situation: unemployed. The only upside of this upsetting situation is that these people are now free to find new employment, and are eager to do so.
The best businesses to start during a pandemic
Of course, there are practical limitations on starting a business that should be considered given the specifics of COVID-19. For example, because of the emphasis on distancing and minimal person-to-person contact, businesses which rely on large gatherings, such as an event planning scheme should naturally be avoided. If you have a business plan, you are considering getting off the ground, think about how it adds to a niche that COVID-19 has created. Some COVID-19-friendly business plan ideas include:
- Food delivery services
- Online tutoring
- Deliverable gifts
- E-commerce and online marketplace (deliverable option included)
- Specialist services
An e-commerce surge!
During the coronavirus pandemic specifically, there has been a surge in e-commerce sales. E-commerce sales in the UK have outperformed sales in the US, China, and other major countries in terms of growth. At the time of the UK’s lockdown order, sales were up around 20% for the year, but by April 12th has risen to over 80% as more and more individuals have sought to minimise offline contact. The Office for Budget Responsibility (OBR) has projected a 13% decline in the UK economy for the current fiscal year. The e-commerce section defies these numbers, boasting an 83% growth rate.
Due to the rise in sales, it is natural that online entrepreneurs have sensed a unique opportunity. In the week before the UK’s COVID-19 lockdown was made public, over 500 e-commerce start-ups were developed. Only a month and a half later, that number has risen to almost 1,300 new e-commerce start-ups a week. There has been an estimated 60% rise in online business formed daily, compared to this time last year. Many of these businesses are doing well, thriving off of the new need individuals feel towards staying at home. As more and more people look to complete their tasks online, entrepreneurs are starting up online businesses to fill those needs.
Get ready, get set, go!
Do you feel ready to launch a new chapter in your life? Is the pandemic, despite all of its inconvenience, precisely what your potential business has been waiting for? Are you feeling financially unsure as to whether or not you could make it work? Use this loan calculator for an approximation of what your monthly repayments may look like.
Now is your time! Start networking, talk to potential staff, finalise your business model. Your service may be just what someone needs during these trying times. Be sure to reach out to a specialised commercial/business law solicitor for legal questions regarding your start-up’s launch today!
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