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Can Recession Be A Good Thing For Businesses?

“A recession may feel like a storm, but it can also clear the air for growth and renewal.”

Imagine you own a small handicraft business. You were making steady profits, but lately, your profits have been declining. After reviewing your business, you realize that you have been using an outdated & inefficient inventory management system. 

Now imagine, at the same time, the entire world enters a recession. You see a bulk of problems approaching. But there are always two sides to the coin if you have the patience to see. 

Recession in business brings out a darker side that is all about losses and failures. On the other hand is the brighter side, which is all about the insane idea of building a company or starting something new and making it highly successful. 

If you are considering launching a business in a recession, this article is for you. And if you have already started with one, it may urge you to think beyond the box. And if you haven’t yet, who knows, you could create a highly successful company. 

Firstly, let’s understand the term recession- what it means and the effects of the recession on small and large-scale businesses.

What Is A Recession?
 
What Is A Recession?

A recession is a period of economic downturn marked by a fall in GDP, high unemployment, and a decrease in corporate and consumer expenditure. A recession is commonly defined as two consecutive quarters of negative GDP growth. Recessions include trigger points like financial crises, monetary policy errors, external shocks, and natural disasters. These factors influence people, businesses, and many more entities.

How does it affect businesses? Let’s discuss the effects of the recession on businesses in detail. Check out the following paragraph to find out what a company goes through during a recession.

The Impact of Recessions on Businesses

 

The Impact of Recessions on Businesses

The term recession describes a prolonged period of economic decline. And during that time, businesses in a recession may face several challenges, including:

  1. Reduced Profits- During a recession, consumers lose confidence and start buying less, which slows down sales and expenses. When sales become slow, and costs remain the same, profits dry up entirely.
  1. Stricter Credit Conditions- Consumers and businesses aren’t the only ones who become more cautious about spending during a recession. Lenders also tighten their belts, limiting businesses’ access to credit lines. 
  1. Reduced Cash Flow- Cash flow is always an issue for many organizations, but it may become significantly more challenging during a recession. Customers may take longer to pay, and a higher proportion of accounts receivable may become uncollectible. As a result, firms may need more time to pay their employees and suppliers.
  1. Declining Dividends & Stock Prices- Since public corporations rely heavily on capital markets for funding, this is another problem arising from the recession. Dividend distributions may be lower than expected because profits are compressed during a recession. This can harm the company’s & management’s reputation, and drive even lower stock prices. It is a vicious circle. 
  1. Degrading Product Quality- Business executives may opt for cheaper raw materials to decrease costs and enhance profitability in order to cope with dwindling sales.

These effects harm small and large-scale businesses in this economic catastrophe. Small and large companies suffer from more such effects of the recession, which we shall discuss in the next segment. 

Effects of Recessions on Small and Large Businesses
 
Effects of Recessions on Small and Large Businesses

Recessions impact small and large businesses, but small businesses are affected more because their resources are often limited, and they face more financial crunches. Following are some effects of the recession on both large and small businesses.

  1. Decreased Demand for Goods and Services: Both small and large businesses may face a drop in demand for their goods and services as customers cut down on non-essential purchases due to reduced disposable money.
  1. Less Access to Credit: Small and big firms may struggle to receive loans or other types of credit from banks and other financial institutions, making it challenging to support day-to-day operations or expand the business.
  1. Decreased Profitability: Reduced demand combined with increasing competition can lead to reduced business profits and sales.
  1. Layoffs and Other Cost-Cutting Measures: Small firms may find it difficult to maintain their present employees, resulting in layoffs. On the other hand, large firms may lay off employees or apply cost-cutting measures such as lowering compensation, benefits, or working hours.

We have seen that a recession is not easy for both small and large businesses, but some adapt and operate effectively. Your operations & strategies could significantly bring a turning point for your business in a recession. 

So, in the next section, let us look at the benefits of starting a business during a recession and the brighter side that the recession has to offer. 

Benefits of Starting a Business During the Recession 

 

Benefits of Starting a Business During the Recession 

Although it may be difficult to imagine, there are also silver linings in a recession. Have a look at the following benefits:

  1. Cheaper Loan Repayments: Despite the fall in inflation rates, borrowing rates remain low. If you can overcome the challenges of getting finance, you will be able to profit from cheaper loan repayments. 
  1. Reinventing & Restructuring: Firms can reinvent themselves by looking for new methods to minimize expenses. 
  1. Lower Inflation Rates: Sellers raise their prices when demand is high. Inflation often falls during a recession because demand decreases, and sellers are more inclined to cut their costs to shift inventory.  
  1. Low Borrowing Rates: When there are initial signs of a downturn, the Federal Open Market Committee (FOMC), which sets central bank policies & interest rates in the United States, lowers its rates in an attempt to decrease the speed of the approaching recession. As a result, lenders’ interest rates on commercial loans, lines of credit, and consumer lending such as auto loans, mortgages, and credit cards get reduced.

These are some of the benefits of starting a business in a recession. Let’s now look at the success tales of some companies founded during the recession & how they became the best of all time.

Success Stories of Businesses that Stemmed from Previous Recessions
 
Success Stories of Businesses that Stemmed from Previous Recessions

The global recession is causing havoc for all firms. Everyone is terrified of what may happen during and after the financial slump. 

But what if you find out that many of these iconic unicorns were born during The Great Recession? It’s hard to imagine, but here is a list of some companies that were founded during the great recession & became highly successful. 

WhatsApp (2009)

WhatsApp, a multimedia messaging program with built-in end-to-end encryption, was established in 2009 by two ex-Yahoo workers. In 2010, five of their former colleagues contributed $250,000 to the startup. Four years later, WhatsApp was bought by Facebook (now Meta) in a record-breaking $19 billion deal. WhatsApp now has about 2 billion active users, making it the most popular mobile messaging service globally.

Uber (2009)

It is challenging to recall life before Uber. However, the ride-sharing startup encountered rejection after rejection from investors, including Mark Cuban, who allegedly turned down the offer to purchase a 5% interest in the company for under $200,000 back in 2010. That 5% would be worth $2.25 billion today, an 11,250X increase.

Instagram (2010)

The world’s most popular photo-sharing app debuted in 2010 after the Great Recession. The app had one million users three months later, an incredible milestone that catapulted Instagram to popularity almost overnight. The company received $78 million—a 312X return in only two years.

Pinterest (2010)

Pinterest is a virtual pinboard where users can share and discover everything from photographs to recipes to goods. Its seed round in December 2010 valued the firm at just $5.8 million, but by the time it went public in 2019, it was already worth $10 billion (a 1,724X gain).

Each of these companies grew significantly during challenging economic times. Although it may sound impossible, recessions may help some firms thrive. Starting a business in a recession offers several advantages and less competition, as everyone is scared of losing.

So, these were some businesses that prospered during a recession. In the final section, let us look at a company in the hedge fund industry that is also growing by leaps & bounds during the ongoing recessionary period and has left everyone behind, even in these times. 

The Bottom Line

Returning to the prior question, can a recession be a good thing for businesses?

The answer is yes. This may be the greatest time to start your own business or reconsider the ideas that were only a dream until now. We’ve spoken about recession and its barriers now, let’s try to see beyond these limits too. Recession is no longer a barrier for those who want to create history. It might be the end of a fantastic economic period, but it could be the start of a brand new chapter too. 

Secvolt, a recession-fighting firm, is here to assist you in this new phase (www.secvolt.com). It is a hedge fund that has outperformed even the most notable participants in the sector and has shown to be a cure to the recession. Secvolt mitigates your risks and provides excellent outcomes with a brilliant blend of AI and IQ. This hedge fund thrives because of its advanced quant models and risk management methods. 

Another company that proves that recession can be a good thing for businesses and is no longer a barrier for them.

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Ashish Verma

Ashish Verma is the founder and CTO of Secvolt, with close to 10 years of experience in the IT industry. He has been the technical backbone of the company and has worked tirelessly to make the technical infrastructure robust. He is a passionate entrepreneur who generates solutions that have the potential to bring change.

In order to ease the client’s interaction with Secvolt, he has strived to develop the business’s technological foundation and establish a user-friendly platform. Ashish has also contributed substantially to smoothening the company’s administration and ensuring that there are no lacunae in the broad structure of the organization. 

Early Years

Coming from a middle-class family, he was aware of the problems that people faced while using technology. He sought to create something that was simple to use yet had a powerful effect. As he studied computer science, he became eager to offer a solution to real issues. He began his professional career at Amdocs, where he gained expertise in client management while catering to more than 20 clients. Later, he moved to Citicorp, where he had exposure to the investment industry. His time at Amdocs and Citi enabled him to produce high-standard, efficient, and scalable technical infrastructure.

He left corporate jobs for his startup because he was passionate about working on the concept of a smart city platform. He expanded the concept internationally and even collaborated with Global Dignity-Kuwait. Things didn’t work out for him the first time. He states, “My failures didn’t stop me from experimenting and trying new things.” He rose from the ashes like a phoenix and founded FewerClicks, an End to End IT solution company.

He worked on the creation of Solster Finance, a decentralized financial platform based on the Solana blockchain. He created this platform single-handedly which has helped the team raise a $1M investment and a revenue of more than $5M within 6 months of launching. 

He has previously worked on many blockchain technologies and cryptocurrency ventures, which include Decentralized Finance Applications (Defi), Decentralized Applications (Dapps), File Contracts (SIA, record-keeper), Smart Contracts (rust, solidity), and NFT Development. His experience and effective communication have helped many team members understand Secvolt effectively and the underlying technology it is powered by.

He possesses the ideal combination of strategic thinking and excellent business insight. He is responsible for formulating technical aspects of the company’s strategy to guarantee alignment with business objectives. With his drive to experiment with new technologies, he has helped Secvolt achieve a competitive edge. Being in charge, Ashish never holds back in encouraging the different departments to make profitable use of technology, helping to grow as an unstoppable team at Secvolt!

Hanif Shaikh

Hanif Shaikh is the founder and CMO of Secvolt, with over 8 years of experience in the industry. He plays a crucial role when it comes to the growth of Secvolt. Since the beginning, he has acted as a mentor for each and every employee of the company, and he makes an effort to be accessible to his staff anytime they need him. 

Hanif first entered the Blockchain and Crypto world in 2016, and nothing has stopped him since. He views blockchain as a transparent platform that provides authority and accountability back to the people. He consistently believes that “overcommunication is better than miscommunication.” He has lived by this motto with his staff, clients, and networks.

Early Years

Hailing from Gujrat, a state in India, he is following his dream to contribute to making this world a better place. In the process, he has struggled, made some mistakes, and learned lessons from those mistakes to achieve success in life. His entrepreneurial attitude dates back to his childhood when he learned from his father’s business and aspired to have it all. He came from a humble background and had ambitions to succeed in life.

He has developed two successful businesses from scratch, and in the process, he has inspired young people to start their own businesses. He was an integral part of the Quora Mumbai Meetups and helped it become a great success in a short period of time. Later, he began organizing meetups to raise awareness about blockchain, cryptocurrencies, and their applications. He also shared his knowledge of ICOs, highlighted reputable ICOs, and established a small cryptocurrency community on WhatsApp groups.

He chose to go on a Blockchain Tour in India in 2019 and met some fascinating people. Throughout his journey, he has been able to build an extensive and robust network that has aided Secvolt’s growth. Because of his expertise and understanding of the Crypto Industry, he has been featured on several news channels and has advised the youth on the subject.

He is in charge of the company’s marketing operations and is responsible for developing its marketing strategy and vision. He oversees a group of passionate marketing professionals and plans promotional strategies with the goal of making  Secvolt a global brand. 

He is a perfect blend of a practical attitude and innovative business acumen. He believes in the ability of individuals to perform exceptionally well when given an environment to experiment and explore their passions; a culture that he has built at Secvolt.

Divakar Choudhary

Divakar Choudhary is the founder and CEO of Secvolt who has been trading for more than six years now. He started the business in 2018 with the conviction that if anybody could dominate the market, it was him. He poured all of himself into the business and turned Secvolt into a market-beating machine.

Divakar developed the fundamental quant models that perform risk management and capture alpha using his skills from the previous organization and his time spent in the market. In order to make the system effective, he backtested risk mitigation algorithms and worked on them for more than 4 years to produce results.

Early Years

He began his crypto journey in 2013 after getting his first gaming Laptop and melded in with the Blockchain community like sunbeams on the ocean. He created many YouTube channels at the age of 15 and businesses by the time he was 17. Technology has always piqued Divakar’s interest. He endeavored and succeeded at freelancing in his effort to achieve financial independence. However, he soon realized that freelancing would always keep him in the rat race, and the only way out would be to build a machine yielding generational wealth.

Soon, he started trading using his own capital but suffered a loss in the market. He says, “95% of people lose money & the rest 5% make money from the loss of those 95%.” He then began working on an effective technique to be included in this 5% after losing part of his own assets during the early stages of trading. He began evaluating quant strategies using statistical models.

With his methodology, he once produced a 20% ROI in a single month. With the zeal of creating something exceptional, he borrowed money from friends and family and generated decent returns for them using primitive quant models. Month after month, the system’s efficiency and the competence of the man behind it allowed for excellent market returns.

In the beginning, Divakar worked on his laptop for over 18 hours. It took every ounce of his energy as he executed about 530+ deals daily for 4 years to create this company from the ground up. In 2021, he increased his volume by 827%, trading a total of $52 million and hitting a single account.

In his words-

“What does becoming “THAT” GUY mean to you? Who did you need when you were young? Be that person!”

He is a perfect example of someone who followed his passion and made a fortune from it! He dreamt of creating generational wealth as a youngster, envisioned it as an adult, and is now making it a reality with Secvolt!