Let’s Talk… Financial Crisis
Let's Talk... Financial Crisis
Let’s Talk… Financial Crisis. Unless you’ve been living under a rock, everyone is aware that the cost of living has exploded in the last couple of months, and this is due to many factors – primarily the invasion of Ukraine by Russia, the persistent consequences of COVID, high inflation and tighter monetary policies set globally.
In modern economies, recessions occur every decade or so, and usually, this is followed by periods of strong growth. A recession can last from a couple of months up to a year. There is no avoiding it – it is the natural course of the economy.
All we can do is prepare for it, to cushion its blow as much as possible. As the wise Bruce Lee once said “Empty your mind. Be formless, shapeless, like water. You put water into a cup; it becomes the cup. You put water into a bottle; it becomes the bottle. You put it into a teapot; it becomes the teapot. Now water can flow, or it can crash. Be water, my friend.”
In this unavoidable financial collapse, all we can do is adapt to the situation. Not an easy task – especially if your resources were limited way, way, prior to the recession. However, the many generations of people that passed through a recession before us are proof that surviving a great depression is possible!
So, what do you do if you’re thinking of starting a business at the height of a recession? You adapt. You think smart and plan accordingly. Some of the most successful business plans in history didn’t require exuberant amounts of start-up money. In fact, the best business plans are usually crafted with limited resources, an abundance of creativity and most importantly dedication.
Here are a few Businesses founded during a recession:
- The Body Shop: The Body Shop was founded in 1976 by Anita Roddick during a period of economic instability in the UK. Roddick launched the company as a natural cosmetics brand that promoted ethical and sustainable practices. Today, The Body Shop has over 3,000 stores in more than 60 countries.
- Spanx: Spanx was founded in 2000 by Sara Blakely during the dot-com bubble burst. Blakely invented the slimming undergarment after cutting off the feet of her tights to wear under white pants. Today, Spanx has become a global brand with a range of products, and Blakely has become one of the world’s wealthiest self-made women.
- 23andMe: 23andMe was co-founded in 2006 by Anne Wojcicki during the aftermath of the Great Recession. The company launched as a direct-to-consumer genetic testing service, which quickly gained popularity among consumers. Today, 23andMe has become a household name in the field of personal genomics.
- Airbnb: Airbnb was founded in 2008 by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk during the Great Recession. The three founders launched the company to help people rent out their homes to travellers, and initially funded the venture by selling breakfast cereal during the 2008 presidential campaign. Today, Airbnb is a global brand that operates in over 220 countries and has more than 4 million listings.
- Rent the Runway: Rent the Runway was co-founded in 2009 by Jennifer Hyman and Jennifer Fleiss during the Great Recession. The company launched as a clothing rental service that allowed women to rent designer dresses and accessories for special occasions. Today, Rent the Runway has become a popular choice for women looking for sustainable fashion options.
- Uber: Uber was founded in 2009 by Travis Kalanick and Garrett Camp during the Great Recession. The founders launched the company to provide a more convenient and affordable alternative to traditional taxi services. Today, Uber operates in more than 10,000 cities worldwide and has become a household name in transportation.
- WhatsApp: WhatsApp was founded in 2009 by Jan Koum and Brian Acton during the Great Recession. The founders launched the company as a free messaging service, which quickly gained popularity around the world. Today, WhatsApp has over 2 billion users and has become a key communication tool for many people globally.
Starting a business with little or no money requires creativity, resourcefulness, and a willingness to take calculated risks. It’s important to be realistic about the challenges you may face and to seek advice and support from other entrepreneurs, mentors, or business advisors. With a strong work ethic and a clear vision for your business, you can start and grow a successful business even with limited financial resources.
If you were to ask experienced business owners what the recession-proof industries are they will probably mention industries that offer essential services, like health care, education, senior services, grocery stores, and maintenance, such as plumbing and electrical. I agree to a certain extent. Yes, essential services are strong business models that are more likely to survive a depression – some might even thrive during this time. However, I think with a good strategy in place any business has the ability to make it through.
Let’s think about the consumer for a second. The financial crisis will affect people in different ways, but the air of uncertainty will likely veer people in the same direction. Where they might focus on limiting their spending, downsizing, forming a tight budget, building an emergency fund, and eliminating high-interest debts. So, let’s focus on the downsizing and budgeting for a second.
Let’s think about this scenario from the consumer’s side, if you spent all your life earning a decent wage, were very conscientious with your spending and have achieved, what society labels ‘middle-class’ status, would you be willing to give up your lifestyle so easily? No. You would try to find creative ways where you could still hold on to some of your luxuries. This is where businesses need to focus their energies and think of creative ways how to provide consumers with their accustomed luxuries while keeping in mind everyone’s very tight budget.
I know what you might be thinking… but dear-don I have a clothing store, I am already stressed and the recession hasn’t hit yet! shipping costs have gone considerably up in the last couple of months, besides competing with the local market I am finding myself also competing with the online market that offers ridiculously cheap stock that I am unable to vie with. I can’t even begin to imagine what will happen when the financial crisis hits. What are you proposing? I give discounts? I am barely breaking even as is.
What I am proposing is to shift the mindset of how the product is sold. Instead of focusing on individual sales look at your sales collectively. Ask yourself the following question… How can I as a business owner create an alternate means of payment where the customer can benefit from this scenario as much as my business by purchasing my product?
Keeping to the theme of fashion, if we look at the above-mentioned business model Rent the Runway, they managed to create a solid plan that is conscientious of their customer’s needs and also their own. By renting out their stock they managed to find ways in which they can monetize from their product multiple times. They also offer their customer base a yearly subscription fee which guarantees return customers.
This is a business model that is beneficial to both the customer and the business owners. Granted that it does have some cons too, for instance, the business might suffer damages to the product where it would need to be replaced. However, overall there are many great advantages that can be considered from this model.
We hope you found this article useful and that you were able to gain a new perspective on the different ways in which you can prepare your business for the financial crisis. Write to us and let us know your thoughts. We would love to hear from you.
