Why not launch a new business in a recession?

Starting a business during a recession can be nerve-wracking, but some of the most famous brands were launched during the economic crisis. started trading in Burger King opened its doors in his 1953, when the United States was in recession. Hewlett-Packard, on the other hand, was founded in 1939 in Palo He Alto’s garage during the Great Depression. With the R word threatening to rear its head again, why is the key question?

Associate Professor of Management Practice at the London Business School,Break the rules!His 6 Unconventional Mindsets of an Entrepreneur Who Can Change the World‘, there are three main reasons.

he said: Second, many of the resources, people, real estate, etc. that startups need become more plentiful and cheaper. Third, entrepreneurs who have a great business idea are more likely to think, why not try that great idea? ”

This was the reason behind entrepreneur David Davies’ decision to launch Sovereign Beverage Company in the midst of the global recession in 2008. He discovered the gap in the market when visiting breweries as part of his full-time job a little over a year ago, and that many breweries have untapped sales channels in the form of global exports. I noticed

he said: My first thought is why? I believe that if I can run a successful business, it will be strong and sustainable, and 15 years later, it’s proven. ”

The venture struggled with cash flow and lack of resources, but eventually developed a permanent business model. “We don’t hold inventory, we sell before we buy, we pay before we get paid,” he says. “We also chose to work with a supplier of products from several different breweries so that we could offer a wide range of products to our customers around the world while keeping the logistics to his one supplier. became.”

Their timing had an advantage. The brewery I worked with was struggling and looking for new ways to increase sales. The Sovereign Beverage Company provided them with a new, risk-free source of sales income. From there, the company focused on finding customers in markets less affected by the financial crisis.

“The recession forced us to develop very sophisticated and efficient operations, and that continues today,” says Davis. “So we would definitely do it again. There were questions about our decision to start trading during the downturn, but in my view it was the perfect time to start.”

2008 was also the year Konrad Bergström founded Swedish tech giant Zound Industries. Zound has turned the famous Jim Marshall rock and roll amp used by Jimi Hendrix at Woodstock into a range of home speakers and headphones sold in 130 countries.

Prior to that, he founded the lifestyle distribution business Megascene Agency and successfully launched international brands such as Quiksilver and Burton in the Nordics. However, in 2004 Bergström had to file for bankruptcy. Despite the huge amount of debt, business people turned against him and he had to sleep in his car with his dog, but he believed better things were in store. , did not undermine his belief in Zound and its potential to disrupt the market.

“When the economy plummets, it’s easy to think of ruin and darkness,” he says. “What I saw was a huge opportunity to build a lean, finely tuned business and position it for long-term success.”

The lack of external funding in the form of investments, bank loans and government start-up funds has been a major challenge. “We found a solution by adapting payment terms, earning distribution rights and making a profit, and getting family and friends to invest,” he says. “It was also important to survive and establish distribution through companies that were still aggressive, but it required a lot more planning because the market wasn’t so tolerant.”

With a recession more likely, Bergström’s advice to other entrepreneurs considering starting a business is to maintain a positive mental attitude and focus on working with the facts. “So many people think of the recession as a hellish landscape,” he says. “This is an opportunity and you have to really believe in it to succeed.”

John Mullins believes such a mindset is essential to increasing an entrepreneur’s chances of success in a startup’s downside, and that it breaks many of the traditional rules of running an established business. and to encourage focus on narrow target markets with problems that must be solved.

he said: Instead of investing their own money, entrepreneurs “borrow” underutilized assets owned by others, at least until there is proof of market demand. Use it as business growth capital and pay your suppliers long after the product is manufactured and delivered. ”

Finally, right-minded entrepreneurs don’t ask for permission. Even when faced with legal or other ambiguity, they think they will move on and ask for forgiveness later if necessary. “If the founder of Uber had sought permission from the San Francisco taxi regulator, Uber and other gigs in his economy might not exist today,” he adds Mullins.