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Right now, the global economy is on the brink of its biggest recession since the financial crisis of 2008. Conventional wisdom holds that recessions aren’t the best time for entrepreneurs to launch new ventures, and there’s some solid logic behind that notion.
After all, rising interest rates are going to make funding a business more of a challenge, and potential customers won’t be as eager to part with their cash for anything but the most essential products. And neither of those conditions bode well for most types of businesses. But that doesn’t mean that entrepreneurs are going to have to sit on the sidelines and wait for the recession to run its course.
Instead, they’ll need to be a little more careful in the kinds of ventures they choose to pursue. For those willing to have some flexibility in their plans, some sectors should provide fertile ground for startups during the coming recession. Here’s a look at four of them and why they’re where entrepreneurs should begin to turn their attention.
1. Technology reconditioning
One of the easiest ways for an entrepreneur to find a worthwhile recession-proof business idea is to look for a sector where consumers spend heavily in good times and create a way to satisfy the same need at a lower cost. It’s the same approach that causes dollar stores and other discount retailers to do so well when consumer budgets tighten.
But this isn’t a new idea, so it’s getting harder and harder to find niches that work in the same way. Harder, but not impossible. One sector where entrepreneurs can still apply this idea is consumer electronics. Today, people have gotten used to a smartphone replacement cycle of between two and three years. But with those devices retailing for upward of $1,000 when new, a recession will encourage more people to seek cheaper alternatives.
By offering consumers reconditioned versions of things like cell phones, tablets, laptops and other expensive consumer electronics, technology reconditioning businesses meet consumer needs at lower than retail prices. This is also applicable in the B2B space, where it is costly to replace old equipment. They help reduce expenses and lead times for brand-new equipment so companies can focus on productivity. And as the recession begins to bite into new electronics sales, smart entrepreneurs would do well to be there to scoop up some market share.
Related: The Rise Of Recommerce: How The Secondhand Electronics Market Is Growing In The GCC And Beyond
2. Healthcare innovation
Another sector that always thrives in recessions is the healthcare sector. The reason is obvious — people will continue to get sick no matter how the economy is doing. And that means healthcare represents nondiscretionary spending that won’t drop off much as other types of spending when a recession sets in. But that doesn’t mean that healthcare consumers won’t go looking for ways to save money.
In fact, during the Great Recession between 2008 and 2012, healthcare spending growth hovered at around 4.2% annually. By comparison, spending growth before the recession regularly reached double that figure. So it’s clear that people will still try to protect their wallets even where their health’s concerned.
But all of that means startups pushing innovative health solutions have a better opportunity to compete for consumer spending during a recession. These solutions include next-generation sequencing, immunotherapy, 3D printed devices, point-of-care diagnostics and artificial intelligence (AI).
By innovating in healthcare delivery through telehealth and other digital options, startups can lower costs and attract budget-conscious consumers. The same could be true for startups focusing on at-home diagnostic technology, which can now capitalize on the public’s recent experience with self-administered Covid-19 tests.
Related: What Is Next for Telehealth?
3. Platforms that enable remote work
According to the projections made by career site Ladders’ data scientists, 25% of all North American professional jobs will be remote by the end of 2022.
There are several advantages of remote work. Aside from promoting efficiency and reducing costs, allowing your employees to work from home means reduced stress and better time management. It also gives them more chances to travel for leisure because they have more free time.
These advantages are made possible by modern applications and solutions that enable remote work. Some examples are project management solutions and knowledge-sharing platforms that improve productivity and autonomy.
When businesses adopt digital platforms for collaboration, it gives their employees time to focus on higher-value activities and businesses to retain their key employees. With a recession looming, work from home is projected to continue, with businesses expanding technology supporting remote work to keep employees happy and cut costs. With the globalization of the workforce and remote work becoming standard, entrepreneurs might want to consider investments in tech-driven solutions for global teams.
4. Luxury items and services
Believe it or not, there’s a certain segment of the population for whom a recession has no real meaning. I’m talking, of course, about people in the highest income brackets. At last count, around 20% of American consumers fell within that category, and it’s a group that will continue to spend money regardless of the overall economic picture. And that makes this group the perfect target demographic during a recession.
An excellent way for entrepreneurs to tap into that target market is by founding businesses that offer luxury items or services. And the latest economic data bears that out, with luxury brands continuing to thrive despite inflation and economic turbulence. But it’s certainly not the only way to reach the consumers still willing to spend.
Entrepreneurs might also consider things like personal services businesses. Like luxury goods, they’re targeted at consumers for whom money isn’t an object. And the same thing goes for businesses aimed at providing unique ways for the wealthy to spend their disposable income. A luxury concierge service is a good example of this type of business. Luxury concierge companies offer personal or corporate concierge services, which include making dining reservations or arranging family vacations for the ultra-rich.
The options are quite literally endless. All that’s needed is a novel idea you can market as an exclusive product or service and to finance your concept — and you’re ready to thrive.
Related: How to Launch a High-End Small Business
Recessions aren’t an entrepreneurial stop sign
The bottom line here is that a looming recession doesn’t have to force entrepreneurs onto the sidelines. Many sectors can support new businesses, even when the broader economy isn’t doing so well. Between them, they provide ample opportunity for entrepreneurs to scratch their startup itch. All it takes to capitalize on them is a willingness to think outside the box and bring an innovative spirit to the table — two things that any entrepreneur should excel at, no matter the economic climate.
