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Think the best time to start a business is in a booming economy? Maybe. But some of the biggest business success stories in recent decades actually came from a good idea hatched during a recession.
Consider these names: CNN, Uber, Airbnb and Square. There are many more.
The effects of the COVID-19 pandemic are forcing existing businesses to reinvent themselves, and some of today's most significant business obstacles will spark new startups offering innovative solutions.
With the pandemic quickly shifting consumer behavior, more than $3 trillion is expected to be lost or moved to the businesses best prepared to exploit the possibilities, according to a November 2020 Accenture analysis.
Here are ways to formulate and recognize business opportunities during tough times.
1. Adapt rapidly to a changing market
During the Great Recession in 2008, Jonathan Slain was an owner of personal training and fitness studios. That's a personal expense many people will eliminate when money is tight.
"So I spent several months of the recession huddled under my desk, trying to figure out what to do," Slain says. He needed money for operations and payroll and eventually borrowed money from his mother-in-law to keep his business afloat.
Every two weeks, he had to go back to her to cover payroll; there were "10 excruciating phone calls," he says, and he ultimately borrowed a total of $250,000. Eventually, he was able to pay her back.
Now a business consultant in Ohio, Slain co-wrote the book "Rock the Recession: How Successful Leaders Prepare for, Thrive During, and Create Wealth After Downturns." He says the lessons he learned from failure, combined with insight gained from his friend and co-author, Paul Belair, guide a profitable recession strategy.
As he says in the book, "Learn from my mistakes. Don't be like me. Be like Paul."
Belair owned a heating and air conditioning company during the same recession.
Knowing that customers would buy fewer new units but opt for service instead, Belair and his management team flipped the company's focus from 80% sales to 80% service.
The nimble pivot allowed Belair and his investors to sell the business about five years later for over 80 times their original investment, Slain says.
The lesson: Rapidly adapt to a changing market, rather than banking on a relative.
2. Try to fix something that bothers you
Whether the result of inspiration or desperation, many successful businesses are created by someone trying to fix something that bothers them, says serial entrepreneur Trevor Blake.
"They found something that kept bugging them, realized there was no fix for it and set about fixing it themselves. By default, they became entrepreneurs," Blake says.
"When something gets under my skin enough that I want to fix it, I suddenly have a winning idea. Of course, at the time, I have no clue how I am going to fix it, but that is half the fun. We can all figure solutions out eventually," Blake adds.
Blake offers two high-profile examples: Sara Blakely cut her pantyhose to create a smooth look under her white pants. She later launched Spanx as a new wardrobe garment. Richard Branson was in desperate need to get to his girlfriend on time, who was waiting in the British Virgin Islands. He chartered his first plane as a solution and from there, Virgin Atlantic Airways was born. That's successful problem-solving, Blake says.
3. Look for a 5-degree difference
Rather than looking for the next big idea, Slain says a small adjustment to an existing business idea may be all it takes.
"I don't think it's sitting in your room thinking really hard, trying to invent the next Facebook. But [it’s] taking the thing that you know really well and starting to think through where the future's going to be and how you can start to close the gap to get there."
Maybe you've worked for someone else and see a small tweak that could be made to the existing business model. Not a 90- or 180-degree shift but perhaps a five- to 10-degree improvement.
Slain notes the Airbnb founders didn't start out thinking they would revolutionize the hotel industry. They just began putting an air mattress in a spare bedroom to make a little extra money.
4. Employees may be optional
And starting a business doesn't necessarily mean hiring a lot of people right out of the gate. Blake has never hired an employee and is on company No. 6, after cashing out previous ventures to the tune of some $300 million.
"When most people buy a house, they don't hire a full-time handyman to live in a spare room just in case something goes wrong. They hire contractors if and when they need them," Blake says.
Starting up with no employees can be a smart move, he says — and will take less cash. He recommends hiring problem solvers when you need them on a contract-only basis. Make sure you understand the tax implications of contractors and employees.
This article was written by NerdWallet and was originally published by The Associated Press.