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Silver Lining For MBAs Aiming to Start Business During Economic Recession
While the everlasting debate on the importance of an MBA for an entrepreneur continues, there are MBAs aspiring to become an entrepreneur. However, given the economic downturn due to COVID-19, it makes one think about the timing of starting a business during an economic recession.
Undeniably, an economic recession is not something an entrepreneur wants when starting a business. However, if it wasn’t for a recession, the world wouldn’t have seen the globalization of companies that are products of recession(s) but are ruling the world today:
- Google, one of the Big Four technology companies, started before the 1998 recession
- AirBnB started during the great recession of 2008
- IBM faced the panic of 1910-1911successfully
Clearly, economic crises can lead to the onset of startups.
Successful businesses that floated during a recession
While the GDP was decreasing to an end of 3.4% and the unemployment rate increased by 9% due to the oil embargo recession, 1993 – 1975, Microsoft was being found. The 16-month recession surely couldn’t stop childhood friends: Bill Gates and Paul Allen, to find Microsoft amidst it. The easy-to-use computer software company now values more than $1 trillion.
IBM, Now nicknamed “Big Blue,” did not only rose to the occasion in 1911’s recession but also survived the Great Depression and world war II.
Founded by Charles Flint on 16th June 1911 in the U.S., the CTR (Computing Tabulating Recording Company) is now one of the most valuable companies in the world. The company achieved its position by starting with the help of several firms combined, aimed to automate routine business transactions. One of those companies introduced the punched card system to the world, to smooth the whole data recording eco-system.
Read more: IBM’s founding, history, and products
General Motors- 1908
One of the largest car and truck manufacturing company founded by William Durant and Charles Stewart Mott is currently worth more than $38 billion. However, the company was not founded in such a run-on-the-mill manner.
During the panic of 1907, that lasted for 13 months, around 30% of businesses faced a harsh decline due to the recession. In 2008, during the Great Recession, there was an obvious and huge decline in automotive sales. The company faced numerous rejections for the loans required to survive in the market. However, things took off as Alfred P. Sloane took over the company in 1923.
Vishal Mega Mart- 1986
It is one of the leading companies in the hypermarket industry with stores in 129 cities all over India. Founder, Ram Chandra Agarwal, from a poor family and polio survivor, started the journey in 1986 from a 100 square feet shop in Kolkata. In 2009, the company faced a recession followed by a huge debt of Rs, 730 crores. However, the company got supported by TPG Capital and Shriram Group. Thus began the other brands like Vishal Retail and Vishal Fashion Mart under its umbrella.
Read more: Vishal Mega Mart’s comeback
During the recession of 1937- 1938, when unemployment increased by almost 6% within a year, a new electronics company was being planned. Hewlett Packard, or as we know it, HP, was founded on 1st January 1939. Even though the hard times were fading off, the company started amid a pinch of the financial crisis.
The multinational information technology company started in a one-car garage, is now one of the leading hardware and software providers. It is safe to say that Bill Hewlett and David Packard knew very well how to sail through tough tides and succeed.
Maruti Suzuki- 1981
Formerly known as Maruti Udyog Limited, Maruti Suzuki is one of the leading passenger vehicle manufacturers in India. This company did not start during a recession but has faced 2 (and currently 3rd) major recessions during the course. During the 2020 recession due to a pandemic, Maruti has a reserve of more than Rs. 34,000 crore. Also, while facing the previous recessions, the company believed to address the demands of the customers and manufactured low-budget cars like hatchbacks. With this, it increased its total income by 14.3% amidst the 2009 recession.
The company bringing smiles and spreading peals of laughter did not have a happy beginning itself. The Walt Disney Company, founded by brothers Walt and Roy Disney, started with the name of Disney Brothers Cartoon Studio.
The company found its trump card while recovering from losses due to Oswald the Lucky Rabbit. Trump card? None other than Mickey Mouse. The most loved fictional character came out to spread joy right when people were in grip of the Great Depression. Right after the Great Depression, the brothers worked on Its highest-grossing film of the time, Snow White and the Seven Dwarfs.
Some companies did not have an MBA as a founder. However, companies like Yelp and Warby Parker did grow due to MBA entrepreneurs. While an MBA degree is not necessary to become an entrepreneur, it is safe to say that it can surely work favorably for the company.
Also, prior knowledge and training can work wonder when a company is one-on-one with financial crises.
Running a business during an economic recession
Building up a business is difficult, especially with around 1.35 million tech startups in the world. Above that, an uncalled and upending recession is not necessarily the ideal situation to start a business.
Or… is it?
Most of the leading businesses are in action as a solution to a problem, that is simply how a business thrives. During a recession, especially one due to a COVID-19 pandemic, people are more focused and clearer regarding their needs.
Look around and understand what you need in this catastrophic time? Mainly, understand what do people need and how to convert that into a business idea in accordance with your skills? If you already own a business, make sure you provide easier connections, updated and safer products, and comfort. Economic recession takes a toll at everyone, the last thing your customers want is overall bad user experience.
Easier Investment and Better Funding
At times of crisis, the government is mainly focused and determined to maintain economic stability. Usually, its policies involve an increase in the money supply. Also, the supply-side economists suggest the government to cut taxes in order to increase business capital investment.
- During the Great Recession, i.e. the recession faced in the late 2000s, the U.S. Federal government spent $787 billion to save help float its economic conditions.
- To fight the recession faced due to COVID-19, the Indian government announced its Vocal for Local program to help Indian Startups. Under which, there was a supply of Rs. 20 lakh crores, setting aside 3 lakh crores for MSMEs.
Certainly, every financial crisis forces the governments to turn to Fiscal policy. Being an entrepreneur, this helps with the investment and funding problems (enhanced during a recession) to run a business during an economic recession.
While running a business, some entrepreneurs understand how to succeed despite a crisis, and some don’t. However, some erstwhile teachings can prove as an aid. Perhaps, an MBA.
How an MBA can help you start a business amid an economic recession?
A study shows, 97% of self-employed people would not prefer to revert to traditional employment.
During a recession, MBA students aspiring to become entrepreneurs, with entrepreneurial skills, certainly know how to turn the table. Knowledge and training provided by B-schools can undoubtedly provide an enormous amount of benefits when starting a business.
One of the advantages an MBA entrepreneur has over other entrepreneurs is- 2 years invested thinking about business development. Spending these years with some of the most ambitious and intellectual have tremendous benefits: they question you, provide positive criticism, and root for your success. Therefore, such surroundings stimulate your business idea and refine steps to take further.
Read more: How to generate business ideas
Application of Theoretical Business Knowledge
There are times when we assume knowing something equals the ability to apply it. At other times, we overlook the importance of theoretical knowledge and rely entirely upon hard work.
However, when it comes to maintaining business during an economic recession, you need both and at their best. During the course of the MBA, many business schools teach about management and business theories. This provides knowledge and an understanding straight from the world’s top business gurus and experts. Above that, there are programs to teach the practical application of the same. With the increase of the use of experiential learning in b-schools, MBA entrepreneurs have an upper hand in this section.
Meaningful Connections and Network
Not only a degree but a great boon that MBA entrepreneurs have is their professional network that is held strong long before the business commences. Studying with some of the brightest minds who bring cultural diversity to the table, serves life long. The faculties become great mentors and your peers become trusted advisors, customers, employees, and investors.
Now that you know how an MBA can help, let’s look at another side of this valuable coin.
Job v/s entrepreneurship: What to do with your MBA degree?
The heading seems a bit loud, but it matches the lack of awareness regarding the topic. Most of us blindly walk towards the traditional path after getting a degree. However, when that degree is an MBA, you might want to think harder and diversify your spectrum of options.
Another concern for MBAs is- the flooded market with skilled and trained millennials. Be it due to technological advancement, understanding of the importance of self-growth, or simply generation gap, millennials have outgrown the boomers. However, job prospects? Not so much. According to a study, in New York City, the previous generation earned 20% more than millennials do today.
Here are some aspects to consider before deciding to get a job or become an entrepreneur:
Your Working Style
There is no right or wrong when it comes to working style and preferences. Some like to lead and have a feeling of creating something that is their own, like a company. On the other hand, some prefer to work under directions, and within a certain, pre-defined, and structured frame. If required, take the time to understand what you like better. With a job, yes, there is less responsibility (mostly) and fixed pay. However, if you are someone who thrives on the ability to earn and/or create, you might want to quit your 9 to 5 job. Moreover, an MBA mitigates the transformation from student or employee to entrepreneur.
Okay, this needs to be in open and out: self-discipline is one of the crucial and rarest quality an adult needs to have. And boy, does it take its sweet time to develop!
I personally could not save a penny during childhood, it was only after years that I understood its importance. In a job, your tasks and performance are authorized and guided by the employer or co-workers. However, entrepreneurship needs you to be an expert in managing time and motivating yourself. There will be days when you won’t “feel like it,” and a job allows you to call in sick, but your own company will require your constant presence of mind and body. Well, at least unless you grow it big enough to let others manage it.
Also, if we look at the monetary facet, there is a huge difference in the requirement of self-discipline. or an employee, all the financial risks are mostly taken by the company they are working in. But an entrepreneur needs to be very, very careful with their finances, and on their own.
This is the most important yet underrated concern whilst deciding a career path. This may seem less important than a fancy office or big bucks. Be that as it may, quality of life should be your topmost priority while choosing what to do with an MBA. After all, what are the efforts, time, and earnings for?
If you believe, to have a better life, you would require less workload from the beginning, a job with paid holidays, and fixed pays and timing is a way to go. Howbeit, if you are willing to push your limits and then have a steady pace, entrepreneurship is surely well-fitting
Read more: 9 signs you need to start your own business
Having said that, there is no correct answer that applies to everyone. Your career path is entirely based upon your preference and mindset. To guide you regarding that…
Knowing your career path is important. Preparing with a degree to back you up is important. Trying to succeed is important. We all understand or can be guided to understand these. What most of us fail to acknowledge and use is the courage to apply during tough times, mostly when starting a new business during an economic recession.
I’ll leave you with what Michelle Obama once said, “You should never view your challenges as a disadvantage. Instead, it’s important for you to understand that your experience facing and overcoming adversity is actually one of your biggest advantages.”