Why You Should Start A Business In Recession

One of the advices that seems to come from everywhere with regards to recession is to lower your customer acquisition cost because the lifetime value of the customer is going to be lower than before. Of course this makes sense. There will be behavioral changes in the purchasing patterns as well as cut in spending. This will make your customers less valuable for you than before.

However, when the customers are spending less, and the businesses are paying less to acquire them, it makes customer acquisition cheaper for all businesses. Sure, they are cheaper to acquire because they are less valuable, but you are being given a one off opportunity when it’s over-all cheaper to start your business.

The cost to start a new business is significantly lower during a recession.

If you’re not VC funded but bootstrapped like me, this means a great deal. We’re already planning some e-commerce stores and hoping to schedule the launch right when the markets are in deep turmoil.

Finding Opportunities in a Recession

As an entrepreneur, it’s very important to stay calm even when the world is breaking apart. Most of the time, when there is a world changing event like COVID-19, people’s consumption behavior change. They buy different things compared with their previous spending habits.

While doing product research for our E-Commerce holding company, I got to know that Hair Clippers was one of the best selling products while China was on lockdown because of COVID-19. Who would’ve thought that people would buy Hair Clippers when hundreds are dying because of an extremely deadly virus.

But when barbershops are closed, you still gotta cut yours and your children’s hair. 3 of the fastest growing Chinese companies from January to March are companies which are either manufacturing Hair Clippers or are leading retailers.

Another great example of this trend is blankets, hand warmers and mini electric heaters. Due to control measures of COVID-19, apartment buildings turn off heating and you have to open windows for fresh air. However, temperature in many parts of the world is still too cold. China’s leading e-commerce marketplace Pinduoduo reported that sales of blankets and hard warmers saw 165% increase during the lockdown.

When you find calm in chaos, you can find opportunities like these and benefit from them. Insights like these coupled with lethal digital marketing can create new companies which capitalize on new purchasing behaviors.

This is a guest post by Socialoholic’s co-founder @SaadBassi