Typically, a shrinking economy means a shrinking marketplace and fewer people spending money, so is now the right time to start a business? Peter Boolkah explains why this might just be the best year ever to do so
2023 could be a great year to start a business. Yes, really. Uber, Burger King and Airbnb all started trading in an economic downturn. A third of people in the UK surveyed by Enterprise Nation, a platform for small businesses, said they are thinking of starting a business or side hustle this year to increase their income.
The global and national challenges we saw in the last quarter of 2022, such as steep inflation and the cost-of-living crisis taking hold, have still not dampened the appetite for entrepreneurship. Some 753,168 new businesses were formed in the financial year 2021/22. The Enterprise Nation survey found the most popular start-up sector was food and drink at 12 per cent, while tech was the next most popular business sector at 11 per cent.
Finding the gaps in the marketplace are imperative for the success of a start-up business idea. Important growth industries currently are affordable sustainability, environmental and social governance (ESG), technology and AI and experience-based businesses. As consumers we understand the importance of sustainability but very often can’t afford to be as sustainable as we would like. That is where a business like Vinted has seen a gap in the market and succeeded in disrupting it.
As per the latest data, the fashion resale platform has more than 45 million active users and $32.5 million in annual revenue. Vinted has set the standard for sustainable fashion businesses, having disrupted the traditional vintage clothing market by introducing an online peer-to-peer platform. With a strong focus on sustainability, Vinted encourages its users to ‘recycle’ their clothing and accessories by buying, selling, and trading pre-owned items. Sustainable fashion is becoming increasingly popular among consumers. If you are considering a sustainable fashion business, it’s wise to focus on creating a unique business model that stands out from the crowd and attracts customers.
ESG isn’t just a buzzword, it is the basis for new regulations coming into force. This kind of start-up provides essential services that are not affected during economic downturns. In fact, ESGs often thrive under recessionary conditions due to their focus on sustainability and resilience. Examples of ESG start-up businesses include renewable energy companies, waste management firms, clean water initiatives, conservationists and other organisations focused on improving the environment.
Additionally, ESG start-ups often support social initiatives such as affordable housing providers and education programmes for underserved communities. They also focus on corporate governance by promoting transparency and accountability in their operations. By investing in ESG start-ups, businesses can generate returns while helping to drive positive change. Moreover, investors benefit from the additional stability that these types of businesses offer.
Overall, ESG start-ups are an ideal choice for investors looking for recession-proof investments. They offer a unique combination of stability and sustainability, making them an attractive option for businesses seeking to make a positive impact.
Technology and AI is another area, with AI copywriting software Jasper seeing a $1.5bn valuation. As businesses become leaner, they rely more heavily on AI and technology to fill the gaps left by physical employees. This can be seen through the success of many AI start-ups, which are actively designing and developing innovative solutions to problems that have been around for decades. Examples of AI start-up businesses include companies such as UiPath, Prowler IO, and Halo. UiPath is an intelligent automation platform that helps organisations reduce costs, improve efficiency and streamline processes.
Prowler IO specialises in artificial intelligence and deep learning applications for the financial industry, while Halo is a start-up that offers AI-powered customer experience solutions. AI start-ups can also be found in other industries, such as healthcare and education. Healthcare organisations are using AI to create personalised treatments for patients and enable better decision making. In the education sector, AI is being used to create smart teaching tools and give students personalised learning experiences. The AI start-up industry is continuing to expand with more companies entering the space every day. This kind of start-up is proving itself to be recession-proof and is likely to remain so as the technology continues to evolve.
Start-ups generally have lower overheads and therefore can often offer lower-cost products. Customers are currently looking for the same services and products as before but for a cheaper price. Ultimately, starting a business in an economic recession can be a great opportunity for entrepreneurs. It is important to consider the current economic conditions, focus on recession-proof business ideas and take a cost-conscious approach to business in order to succeed. With careful consideration and planning, 2023 could be the year that sets an entrepreneur up for future success.
Peter Boolkah is an award-winning business consultant who has advised and scaled companies for over 30 years