Starting a business website in an Economic Downturn

/ Business / By Admin

It’s a difficult moment for existing business owners right now.

The Federal Reserve raised rates in November to a new target range of 3.75 to 4.00%. Mortgage rates hit seven percent in October. Although the October CPI report showed a slight slowdown at 7.7%, the September CPI report showed inflation has persisted longer than anyone expected, in food, energy, and retail prices. Large companies such as Meta, laid off 11,000 employees. Microsoft and Citibank also confirmed layoffs. The Federal Reserve plans to raise rates again in December. Everything points to a recession ahead, if we are not in one already.

So, why is now a good time to start a new business? Although counter-intiutive at first, the fact is, recessions offer business opportunities not found under normal circumstances.

Competition goes down during a recession

In a recession, existing businesses are playing defense. Businesses are struggling to stay afloat to keep sales going, to keep employees, and “pivot” to adjust to an environment with less demand. No one has the time to focus on a competitor that has just started. Yet, this is exactly why a new business can succeed during this period – other competitors are worried about going out of business. When the economy recovers, your business will have been established for a period of time, with a steady stream of customers. Other competitors who have gone out of business, their customers will also come to your business.

Business Costs goes down during a Recession

Normally, costs go down during a recession as everything becomes cheaper. Now, this recession is very different in the sense that raw materials and resources have become more expensive due to inflation. However, as other companies are laying off employees, this means the pool of candidates will increase, and hiring costs, one of the largest expenses for a small business, will go down. Many advertising companies have cut back spending on advertising. As a result, advertising fees will also come down. There are still cost savings to take advantage of, despite persistent inflation.

Consumers Become Cost Sensitive during a Recession

When the economy is doing well, consumers have set patterns for where they spend their money. Consumers will shop at the same stores and websites. This changes when the economy goes into a recession. Now, consumers look for ways to lower their costs. They become cost sensitive and leave larger stores and websites to a competitor that can offer less for similar quality/service. This allows a new business to grab new market share whereas previously they could not.

In fact, after COVID-19 occurred in March 2020, consumers have shifted to online websites to make their purchases. Websites excel at attracting consumers who are seeking convenience and lower costs, both are offered by online websites.

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