Why 2020 Is A Good Time To Start A Business
According to the World Bank as stated in the Nigeria Development Update (NDU), the collapse in oil prices coupled with the COVID-19 pandemic is expected to plunge the Nigerian economy into a severe economic recession, the worst since the 1980s. Considering this report and all the uncertainty in the world right now, you might think that anyone that wants to start a business right now is crazy. But there are numerous examples of successful businesses that started during a recession, including Microsoft, CNN, Uber, Airbnb and Burger King.
Startup entrepreneurs are mostly bootstrappers and agile thinkers, willing to put in the time and effort to hurdle any problem thrown their way, including a weaker economy. So, with consumers eager to get back to spending perhaps now is the right time for you to consider starting a business. Another bonus: there’s likely to be a little less competition right now.
Here are a few reasons why now is a good time to start a business:
- A good time to innovate and solve problems
Entrepreneurs are also known as problem solvers and innovators, and the need to solve a problem is often the greatest motivation for starting a business. The problems that abound in a recession create an opportunity for new businesses that can provide solutions. Many businesses have during the pandemic suddenly found their old ways of making a profit are no longer viable in a “safer-at-home” economy. Unfamiliar problems have led to innovative business ideas and to survive the changes, businesses have had to think outside the box to meet market needs. Likewise, startups need to pay attention to the challenges consumers and businesses face and then solve those problems.
Innovation is needed for problem solving in these three instances:
- In a time of problem solving when a product or service is too expensive.
- When a product or service doesn’t exist or is too hard to find.
- When solutions are needed for altruistic reasons like making the world a better place.
Along with being innovative, it’s important that potential business owners take out time to vet their new business ideas and conduct some form of market research. I would suggest some bootstrapping ideas such as starting the business while still working at your 9-5 job, buying used equipment, using contractors instead of hiring employees, or running the business from home. These measures are bound to ensure as little money as possible is spent in starting the business thereby reducing the running cost.
- A good time to build a tough long-lasting brand
Both Uber and Airbnb set up business during the global financial crisis of 2007-09, while CNN started its news broadcasts in 1980, when US inflation hit almost 15%.
These examples show that many of the best, and longest-lasting companies were set up during downturns, according to Dane Strangler, a fellow at the Bipartisan Policy Centre, in Washington DC. He says that the difficult economic backdrop makes them both tougher and more nimble for years to come. “There’s this trial by fire idea,” he says. “If you get started in a recession, you really have to scrape and scrimp to make that company successful. “You are trying to make it when you can’t get financing, and trying to get customers when there isn’t any demand. “We are certainly in a downturn again now, as a result of coronavirus and the subsequent lockdowns around the world.
The World Bank predicts that the global economy will shrink by 5.2% in 2020, its worst performance since 1946 and the aftermath of World War Two. The US economy is already in recession, and the Bank of England predicts that the Bank of England is about to see its sharpest downturn since 1706. The above history shows that successful companies can be born in tough times.
- The public is open to new ideas during a downturn
Another thing in favour of starting a business this year is that consumers are open to new ideas, new ways of solving problems and getting things done. They are practically “forced’ into accepting new ways of doing business due to the numerous challenges caused by the COVID-19 Pandemic. Where there was once hesitance to try new things, the pandemic made certain trends necessities. According to Forbes, there are five Covid-19 consumer habits that are here to stay:
- Contactless delivery including pre-payment/drop-offs and self-pickup lockers.
- A cashless society. Mobile payments on the rise.
- Millions of people worldwide tried telemedicine for the first time during the crisis.
- Distance learning as schools turned to online classes.
- E-commerce explosion. Under lockdown, consumers bought things they would not previously have purchased through the internet.
Because consumers have now discovered a new comfort zone which includes e-commerce, remote working and more, business owners have an opportunity to reach a more accepting and adaptable consumer base. In fact, a recent survey from CouponFollow shows 73% of respondents shopped at least one new online retailer since the onset of the coronavirus. Plus, 43% have shopped one to two new online stores, 24% bought from three to four e-tailers and 5% tried five or more new online merchants. Also, in a recession, consumers are usually more open to finding new sources of products and services.
- Availability of surplus talent
According to the National Bureau of Statistics, Nigeria, the unemployment rate in Nigeria averaged 12.84 percent from 2006 until 2020, reaching an all time high of 27.10 percent in the second quarter of 2020 and a record low of 5.10 percent in the fourth quarter of 2010.
With a rise in the unemployment rate in 2020, the one silver lining for startups is the availability of talent to hire. Where normally an employee might be uncertain about working for a startup, the talent most wanted now is mostly suited for them. Startups should keep the needs of the post-COVID employee in mind as they recruit. According to a Robert Half survey, employees will require more telecommuting opportunities, a safe/social distanced work environment, less in-person contact and less business travel.
According to Prof. Fairlie, with the shutdown people have had more time to think, and take time back from busy work schedules, so if there’s a business idea they’ve had during this period, they might think it time to give it a try. However, for anyone thinking of now setting up their own business, Markus Berger-de León a partner at management consultancy McKinsey, says think long and hard before you make the plunge. But if you do jump, then move quickly. Also consider doing a business with as little money as possible, as fast as possible. The start-ups that survive a recession are the ones that learn the fastest.
Team 618 Bees
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