3 Reasons Why A Recession Is The Best Time To Start A Side Hustle

There is a 68.2% chance of a U.S. recession sometime in the next 12 months, according to the New York Fed probability indicator. Pessimistic entrepreneurs will often point to a recession as a bad time to own a business.

Instead, consider these three reasons to start your side hustle with the recession to your advantage.

Investors Transfer Out Of The Stock Market And Want To Re-Invest In New Business Opportunities

Investors concerned about the potential for a U.S. recession are taking a more defensive approach to investing. They want to increase their financial flexibility by decreasing exposure to stocks and upping their cash savings.

Interest rates will likely stay high for at least the next several months. Investors can already earn 4% or higher in online savings accounts and certificates of deposit.

If your side hustle idea requires some capital to start, investors are looking for other ways to deploy available money. I am in this position as an accredited investor, looking for new and interesting businesses in their early stages to help them grow, as are many of my investor peers.

If you don’t have the your own cash, you can research pitch competitions, accelerator programs, angel investors and venture capital conferences where people are looking for businesses like yours, even if you’re just in the idea stage.

If You Have Cash, You Can Challenge Struggling Incumbents

You may have heard of big name companies that recently went bust like Bed Bath & Beyond, J. Crew and JCPenney. But small businesses also have had to scale back operations, marketing and employees due to the Covid-19 pandemic and rising interest rates on their loans and credit card bills.

The idea that small businesses need a loan to get started is actually a myth. Most small-business owners report using their own savings to start (77%) or expand (50%) their companies. And in 2023, many business ideas don’t need more than $1,000 to start.

But what’s unique about running a business during a recession is that if you have your own cash available, you have the opportunity to enter spaces where your industry competitors with a high dependency on debt might be struggling.

Customers Are Actively Looking For Innovative, Money-Saving Solutions

During a recession, most consumers are trying to solve a similar problem: How do you keep more money and spend less? Certain types of businesses thrive in tough economic times, while others are more prone to decline. A recent Forbes Advisor study showed the top recession-proof businesses for 2023 included bookstores, PR agencies, interior design services, staffing agencies and marketing consulting services.

Even if your side hustle is in an industry that isn’t on this list, if you can help your customers find newer or simpler ways to save money than the existing market, you can convince people that your value proposition is compelling.

Don’t Underestimate The Power Of Speed As A Startup

As a smaller side hustle, you also have the ability to be nimbler in reaching and serving your customers in creative ways that incumbents in your field now may not be able to afford.

I experienced this in my own business since launching in 2020 during the Covid-19 pandemic and going into this year. I scaled my company to $500,000 in net revenue thanks largely in part to competitive prices relative to my financial education services peers, and faster delivery than most people expected because I was still in the early stages.

A recession is a tough time for most consumers, but it’s also a great time to test out new skills as an entrepreneur. If you can make a business successful during a downturn, it’s only uphill once the economic environment turns around.

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