Marc Cuniberti: Entrepreneurial opportunity in the midst of crisis
Despite the unprecedented economic damage brought about by the COVID-19 shutdowns, there are opportunities for the nimble entrepreneur.
The capitalistic term “creative destruction” is perfectly illustrated in the current environment. The shutdowns have caused an untold number of businesses to close their doors. This analyst estimates 25% of small business will not return. The crux of the fallout will be concentrated in restaurants, various areas of retail and hospitality and other smaller mom and pop type stores.
Small business makes up a majority of overall business in the U.S. which means as businesses go under due to COVID-19, a gap will be left where there once was a glut.
At any given time, new businesses continually open up in the ebb and flow of the normal business cycle, so with many businesses going belly up, the reopening period after COVID-19 could be an ideal time to start up a new endeavor in the areas that have been hit the hardest.
Consider in the past when new businesses open up, their new customers actually come from someone else’s old customers. Simply put, a new business must steal customers from existing businesses to survive. This reality is because new customers do not magically appear on the planet when a new business forms. New businesses instead are for the most part, drawing off an existing customer base. This could be better illustrated by saying new businesses must steal someone else’s customers.
Since humans are creatures of habit, which include their shopping habits, they are reluctant to change where they shop unless for good reason. This fact is one in a long list of stark realities that cause nine out of ten businesses to fail before reaching their second year of operation.
Although it is unfortunate that the COVID-19 shutdowns have caused many businesses to shutter their establishments, this is the “destructive” part of the term “creative destruction” that the capitalistic vocabulary refers to. The creative part is the opportunity that the closing down of these businesses brings about to new business owners that have the resources to start up in the environment. This new environment will have many “holes” brought about by the COVID-19 closures. New businesses will not have to steal customers from existing businesses, or at least not as many. With so many of the would-be competitors now out of business, new business endeavors will just fill the gaps left by the dissolutions of the stores shuttered because of COVID-19.
The opportunity brought about by the destruction of so many businesses could be argued to be a once-in-a-lifetime opportunity to the nimble entrepreneur. Opening a new business now, in a sector that has been decimated by the shutdowns, could be just the opportunity potential startup owners are looking for.
Another consideration is that store front real estate should be plenty, meaning one would be in a position for hardline negotiations for lease/rental rates due to the glut of available storefronts brought about by the same reason. Potential businesses should have the pick of litter when it comes to prime retail space AND the ability to negotiate a very competitive lease. Landlords will be eager to fill storefronts vacated by bankrupt businesses.
The same opportunities will exist for the businesses that were strong enough to survive. They too will benefit greatly from far fewer competitors and a more competitive environment. They will be able to negotiate current lease rates downward, or move altogether to a better location or cheaper location.
In conclusion, it is said only the strong survive, and in a capitalistic system, it can mean tremendous opportunity for some in the face of a stark reality for others.
For a list of the services offered by Mr. Marc Cuniberti, call 530-559-1214. California Insurance License #0L34249 and Medicare Agent. Insurance services offered independently through Marc Cuniberti and not affiliated with any RIA firm or entity. Email: email@example.com.
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User Legend: Moderator Trusted User
No doubt with the COVID-19 shutdowns, the economic damage to many Americans has been devastating. Oddly enough, some artisans and vendors are barely effected by the shutdowns and others are telling me they are busier…