According to the New York Fed Probability indicator, there is a 68.2% likelihood of a US recession occurring within the 12 next months. While pessimistic entrepreneurs often view recessions as unfavorable for business ownership, it is worth considering these three compelling reasons to embark on a side hustle during such times.
Let’s explore this perspective with a hypothetical scenario.
Imagine you are a passionate baker known for your delicious homemade pastries. As the economy enters a period of uncertainty and a potential recession looms, Sarah contemplates starting her own bakery business as a side hustle. Despite the prevailing pessimism, she recognizes several advantages to seize this opportunity:
Investors who are worried about the possibility of a US recession are adopting a more cautious investment strategy. They aim to enhance their financial flexibility by reducing their involvement in stocks and increasing their cash reserves.
It is expected that interest rates will remain elevated for the next few months. Investors, therefore, have the opportunity to earn a minimum of 4% or even higher returns through online saving accounts and certificates of deposit.
If your side hustle concept necessitates some initial capital, investors are exploring alternative avenues to invest their available funds. As an accredited investor, I find myself in this position, actively seeking out new and captivating businesses in their early stages to support their growth, just like many of my followers.
If you lack personal funds, there are various avenues to explore, such as researching pitch competitions, accelerator programs, angel investors, and venture capital conferences. These platforms attract individuals who are actively seeking businesses like yours, even if you are only at the idea stage.
While you may be familiar with prominent companies like Bed Bath & Beyond, J. Crew, and JCPenney that have recently faced financial difficulties, it is important to note that small businesses have also been significantly impacted by the Covid-19 pandemic – and the increasing interest rates on their loans and credit card bills.
As a result, these small businesses have been compelled to reduce their operations, marketing efforts, and workforce.
Contrary to popular belief, the notion that small businesses rely on loans to commence their operations is actually a misconception.
77% of small-business owners reveal that they utilize their personal savings to initiate their ventures, and a significant portion of 50% rely on their savings to fuel expansion. Moreover, in 2023, numerous business ideas can be actualized with a budget of no more than $1,000.
One unique aspect of running a business during a recession is that having your own available cash provides you with the opportunity to enter sectors where your industry competitors, who heavily rely on debt, may be facing challenges.
In times of economic recession, the majority of consumers share a common objective – finding solutions to save more money and spend less. During such challenging periods, specific types of businesses tend to flourish, while others are more susceptible to decline.
According to a recent study conducted by a reliable news source, the top recession-proof businesses for 2023 include bookstores, PR agencies, interior design services, staffing agencies, and marketing consulting services.
Even if your side hustle doesn’t operate in the industry mentioned above, there is still potential for success.
By assisting your customers in discovering innovative or streamlined approaches to saving money, which surpasses the offerings of the current market, you can effectively convince individuals that your value proposition is both appealing and valuable.
Being a smaller side hustle grants you the advantage of agility, enabling you to reach and serve your customers in creative ways that larger, established players in your industry may not currently have the resources to afford.
This nimbleness allows you to adapt swiftly to changing market dynamics and customer demands, giving you a competitive edge in providing innovative solutions and personalized experiences.
I personally encountered this advantage in my own business when I launched it in 2023 amidst the Covid-19 pandemic and throughout this year.
By offering competitive prices compared to my peers in the financial education services sector and exceeding customer expectations with faster delivery, I managed to scale my company to net revenue of $500,000.
This success was largely attributed to my business being in its early stages, enabling me to be nimble and responsive to customer needs.
While a recession poses challenges for most consumers, it also presents an opportune moment to explore new entrepreneurial skills. Successfully establishing and growing a business during an economic downturn sets a strong foundation for future success.
As the economic environment improves, the journey ahead becomes even more promising and rewarding.
All in all, navigating as an entrepreneur requires a strategic and adaptable approach, be it in a pandemic or not. While the economic climate may be tough for customers, it also presents unique opportunities for innovative and resilient businesses.
By leveraging your personal savings, focusing on recession-proof industries, and delivering compelling value propositions, small businesses can thrive even in challenging times.
The agility and nimbleness of side hustles allow for creative customer engagement and a competitive edge over larger incumbents. Moreover, testing and honing entrepreneurial skills during a downturn sets the stage for future success when the economic tide turns.
So, seize the moment, embrace the challenges, and embark on the journey of entrepreneurship, knowing that with the right strategies and perseverance, success awaits on the horizon.
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