For smart entrepreneurs, an economic downturn creates opportunity

The coronavirus is turning global markets upside down, but recessions are fertile ground for disruption.

6 min read

The opinions expressed by collaborators are personal.

For smart entrepreneurs, an economic downturn creates opportunity
For smart entrepreneurs, an economic downturn creates opportunity

As COVID-19 wreaks havoc globally, market watchers are worried about signs of another recession. So far, big conferences like South by Southwest and Facebook F8 have already been canceled. Airlines are cutting routes and storing planes. Production companies and startups are postponing movies and product launches. Global stock markets have plummeted, evaporating $ 9 trillion and counting .

s ask themselves an imminent question: How can I protect my business during these uncertain times? It is complicated, but I think there are reasons to be optimistic.

Economists have been scared for months by a possible economic downturn stemming from a different threat: a Chinese trade war . But even last fall, small business leaders weren't overly concerned. In September 2019, the U.S. Chamber of Commerce updated its small business index , finding record levels of trust among business owners: Most respondents said that both their business and their local economy were in good health.

More recently, Sentieo, a financial research company, studied in detail the effects of the coronavirus outbreak on the market. Their findings are remarkable . While the value of most companies collapsed, they found that several companies have thrived, including Atlassian file management software, Zoom video conferencing software, remote healthcare company Teladoc, and exercise bike maker Peloton. .

“We realized that this is the 'Work from home' portfolio,” the study authors concluded. “We are witnessing the movement in market prices around the large-scale adoption of these brands due to the coronavirus.”

This is good news, not only for investors, but also for entrepreneurs. And I observe two great learnings from the Sentieo study cited above.

Opportunities abound for companies that enable remote work

First of all, this is the ideal time to invest or create a company that encourages remote work. The Canadian newspaper The Globe and Mail delved into Sentieo's information and in February 2020 found a wave of high-level corporate calls mentioning remote work. There were more than 100 mentions among large corporations, compared to a single-figure monthly average. At the same time, Growrk, a company that helps transform home offices into fit work spaces, just came onto the market six months ago. After COVID-19, they have seen a tenfold increase in customer demand.

This is not new, remote working has been a growing trend for years. But fear of COVID-19 rapidly accelerated its collective appeal. This can be a turning point in the future of work, moving away from the hours of 9 to 6 and towards a more flexible and independent way. For example, COVID-19 sharpened the reality that risk mitigation — with respect to pandemic viruses or natural disasters — is an advantage for remote workforces .

Recessions make way for disruption

The second learning is that recessions can create tremendous opportunities for market disruption. Following the collapse of 2008, two unicorn companies were born: Airbnb and Uber, and both found ways to be disruptive in old business models by empowering people to find new sources of income, offering creative, viable and affordable alternatives to traditional jobs. The economics of additional jobs has always existed, but the Great Recession escalated it to a new level. Suddenly, people found themselves unable to trust institutions, so self-employment was the solution.

This does not apply to all companies, but recessions function as “filters” that leave weak business models behind and force leaders to adapt .

Learn how to be agile with lower costs and a more desirable product

During the Great Recession, I witnessed how the crisis devastated most marketing agencies. Interest on debts soared. Cash flow stopped. Costs were reduced. Thousands of people lost their jobs, with a massive struggle to work in an increasingly narrow creative field. According to various estimates , ad spending in the United States fell 12 percent, and globally, the industry saw a 9 percent drop.

However, my company Cimaglia Productions had an exceptional year. After a few austere months, the brands returned, realizing that they still needed to generate content. Unlike a large advertising agency, I kept our costs low and since I knew a wide network of creatives (many of whom were suddenly out of a job), I managed to position ourselves perfectly to work with both large agencies and multinational brands of directly. Between 2009 and 2019, we doubled our income.

Here is what I learned: Big business suffers from a recession because it is too dependent on strong advances from cost inflation. The same is true for many industries , including media, tourism, finance, and construction.

But falls don't last forever. And when the recession passes, your company may be in a position to take advantage of a new business.

It sounds contradictory to point out that recessions hit small businesses hardest, while also creating fertile ground for startups. But both are true. The crucial difference is the focus of each business. For entrepreneurs who can navigate the storm, global market volatility doesn't have to be a threat, it can be an opportunity.

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