DILLON LOUW, Digital Content Creator at Digital Content Lab reviews what Netflix, Microsoft and Disney have in common and if its advisable to start a business in a recession.
Netflix, Microsoft and Disney and other highly successful brands were all founded in poor economic times. This goes to show that even though we find ourselves in a shrinking economy, there are feasible business opportunities for savvy entrepreneurs.
Need more evidence? The Fortune 500 is an annual list compiled and published by Fortune magazine that ranks 500 of the largest United States corporations by total revenue for their respective fiscal years. More than 50% of all companies on the Fortune 500 list right now were founded during a recession, or under poor economic conditions.
A closer look at great businesses born during recessions
Garrett Camp and Travis Kalanick originally founded the ride-hailing company as Ubercab in March 2009. The idea itself came after they could not find a taxi ride one night in Paris.
Fast forward a few years and in December 2015, Uber had reached its 1 billionth trip and by June 2018 its 10 billionth trip.
Аѕ of Јаnuаrу 2021, the аррrохіmаtе еѕtіmаtіоn of Ubеr’ѕ net worth іѕ $100 bіllіоn. Furthermore, one of Ubеr’ѕ іnvеѕtоrѕ, Веnсhmаrk, ѕауѕ thе firm іѕ соnfіdеnt аbоut Ubеr’ѕ орtіmіѕtіс future.
Airbnb is a community that was born in 2008 when two hosts welcomed three guests to their San Francisco home. The idea was initially conceptualised during the Industrial Design Conference, where the founders initially focused on providing short-term living quarters, breakfast, and business networking opportunities to persons who were unable to find a hotel during the conference.
Airbnb has since grown to 4 million hosts who have welcomed over 800 million guest arrivals to about 100,000 cities in almost every country and region across the globe.
Former Yahoo! employees Jan Koum and Brian Acton created the encrypted messaging platform WhatsApp in 2009 as a means for people around the world to message each other quickly. The platform rapidly gained traction in regions that do not have access to the same network capabilities as the U.S.A. because of its ability to operate via Wi-Fi.
In 2014 Facebook purchased the app, which now has more than 2 billion users globally, for a staggering $19 billion.
Legend has it that Netflix founder Reed Hastings was motivated to start an online DVD rental by mail service after incurring a $40 fine from Blockbuster for a DVD that was returned late. Ironically, the new-born company nearly crumbled when Blockbuster made the fatal mistake of refusing to buy it out during the dot-com bubble burst of the early 2000s.
Netflix weathered the storm caused by the dot-com bubble by means of its incredible innovative spirit to spearhead the streaming on-demand video service we know today, leaving Blockbuster permanently in the dust. Today, Netflix is worth nearly $34 billion and growing, thanks to the current demand for home-based entertainment.
Three recession-proof sectors
There are three business sectors that appear to be ‘recession-proof’. While the first may seem a little morbid, especially given current times, they all make sense and are worth noting. A start-up supplying innovative solutions to these types of businesses in a recession are likely to succeed as they will benefit from derived demand in these industries. These include:
Businesses offering services related to death, including funerals, cremation, burial, and memorials, tend to be some of the most recession-proof operations. The reason for this is that death-care services will always have a steady stream of business regardless of economic conditions. According to Business Insider, South Africa’s funeral industry is estimated to be valued between R7.5 billion and R10 billion.
South Africa’s education system is under massive pressure to upskill individuals and get them ready for the job market. South Africa is experiencing a skills shortage in several of its business sectors which emphasises the need for service providers that offer efficient, affordable and accessible adult education. The education industry has faced massive challenges as a result of COVID-19 lockdown and has had to adapt processes in order to survive. Industry Leaders like the IMM Graduate School where students have experienced no disruption to their academic year and have seen increasing interest in South Africa and the rest of the African continent for their online distance learning education offering.
Despite poor economic conditions, the private security sector has also been booming of late. Private security is an estimated R45 billion industry showing a growth rate of 15% per year. There has been an alarming increase in the crime rate over the years and private security firms are taking advantage of this to expand their operations.
Services industry in the spotlight
What appears to be clear from the above examples of recession proof businesses is that each of these fulfil a basic need; the need to bury our dead, the need for education to increase our earning potential and the need to keep ourselves safe. All of these as well as the many businesses that were founded in a recession appear to have one other thing in common – they are all services businesses. And furthermore, those least impacted by COVID-19 are delivering an online service; Netflix offering low-cost entertainment from the safety of your home and WhatsApp offering low-cost communication via their platform no matter where you are.
It could therefore be concluded that businesses that start up in this current economic climate must consider offering a low cost, online service that is easy and safe to access while fulfilling one or more basic needs. If you can figure that out, perhaps you will be the next big brand that started up in the 2021 recession.
In the meantime, prepare yourself and sign up for one of IMM’s programmes in Marketing, Business or Supply Chain. Start topping up on your knowledge and skills so that when that big idea comes along, you are ready to act.
If you would like more information on what the IMM Graduate School has to offer you, follow the link to our website https://imm.ac.za/.