How is starting a business now different from starting a business during good economic times?
For anyone thinking about a startup right now, this is an important question to ask. It's said that some of the greatest companies were launched in bleak economies, but how does our current situation affect small startups looking for funding? Should you wait for times to get better to start your business? What are the challenges associated with starting a business in the middle of a recession?
"During an economic downturn, there's a slower pace, it's easier to get good policies in place, there are better people available in the job pool and the employer is in control of salary demand. It is harder to find customers, but easier to please them because they will tell you exactly what they are looking for.
The same principle is in place no matter the economy: good quality work at a fair and consistent price will equal success. In a good economy, you don't have to exceed your customers' expectations; you just have to meet them.
We can't put enough importance on the fact that good policies are set in bad time and bad policies are set in good times. Things are happening so fast in good times that customers get used to just accepting mediocre service. You have to stress to your people consistent service and consistent pricing. When the economy starts to heat up, don't be tempted to raise your prices or take advantage of your customers. Stick to the game plan and stay in it for the long haul. Look at the trend right now, most of the companies that are in trouble in this economy grew too fast through acquisitions and mergers. They didn't build their companies on a strong foundation."
E-Connect Username: tdoneth
CEO, Office Installations, Inc.
"Both the bull and the bear represent market conditions that create opportunities. A bull market is more forgiving than a bear market, but the odds for success are based more upon building a business on the basics than starting up in a booming market. The following are 12 essentials to a successful business regardless of the economy.
- Create a business that integrates with your life plans of personal and economic goals.
- Be passionate about your business and the market that you are servicing.
- Build a business that is an extension of your strengths and experience. Know your weaknesses. Have them covered by others, but manage the results.
- Research your market (overall industry, competitors and customers). Make sure that the market is large enough to meet your financial goals and is not shrinking significantly.
- Have a business plan. Create a plan based upon a unique value proposition for your market at a fair market price.
- Make sure that you are well funded.
- Get involved within your industry. Build a network of mentors, business associates and joint venture partners.
- Know your financial limits. Don't operate beyond your means.
- Take action. Stay involved. Don't let your business coast on autopilot.
- Provide a consistent experience.
- Review your business and market on a regular basis.
- Adapt to the changes in your market.
How many of the 12 essentials listed above seem targeted at a slow market? They are all based solely upon the necessities for a business to survive regardless of the economy. This doesn't mean that I suggest that you turn a blind eye to the affects of the economy on your target customer base. A number of these essential points will have you knowledgeable about the changes within your market and taking appropriate action to modify your business to meet the changes in demand.
Most businesses are mediocre at best -- slaves to market fluctuations. The reason for this is that the unskilled or overly egotistical will only have a grasp of less than half of these steps.
Why? Because most business owners are not entrepreneurs, they are managers at best. Creating a business out of nothing takes a skill set that surpasses that of managing an operation based upon another's idea. And just because you created your business from scratch doesn't mean that you aren't simply a manager. Does your business have a unique value proposition? If not, you probably started your business based upon the egotistical belief that someone else was making money doing something that you could do, too.
Sure there are many businesses that are basically copied from the same concept. But, their chances for survival are only strong when the market is strong, too. These copycat businesses comprise the majority of misguided dreams that result in hard luck stories that fall victim to a bad economy when in reality they were lucky to get off the ground at all.
So instead of focusing on whether you should start your business in a recession or not, concentrate on the 12 essentials listed above. If you do, a bear market will bear better opportunities instead of becoming a bigger risk."
E-Connect Username: thesologuide
Founder, The Solopreneur's Guide
"I see a new trend of people taking longer to decide and make a decision about joining a new business venture. People now seem to be doing their homework and then making a decision."
E-Connect Username: candlelady
"In a down economy, it's much harder to get investments from both bankers and investors. There must be a particularly strict evaluating procedure. What's more, customers will look before they leap in choosing your company. However, there are many more advantages for you to start your company at this period of time: good policies, better employers, low prices, fewer competitors. Just like shuffle, it's a comprehensive new start. If you've got a great idea and a feasible plan, just do it. You will be at the forfront and win the biggest profits.
E-Connect Username: Yolanda
"In a word, credit. Some of the strongest, longest-lived businesses were started under difficult economic conditions. Most of those businesses were started using private financing from credit cards, relatives, inheritances, family trusts or bootstrapped up on the backs of sales.
The fable of writing a business plan, going to visit your friendly banker and walking out with a big fat low-interest loan are not only fantasy, but an obsolete fantasy at that. Banks aren't in a position to take that level of risk right now, and they won't be for a while. If you start a business now, by the time it gets to a level of viability, the economy will be on the upswing, and sales will be more readily found and capitalized upon, and the orders will be larger. Once credit loosens up for your customers, you won't need any.
If all goes well, you will be self-sustaining and have the strategies and processes in place to sustain that level of success, and support that growth and in a cost-efficient manner that precludes the need for credit ever again.
Tough it out now and your success later will be that much sweeter!"
E-Connect Username: dpoulos
Chief Consultant, Granite Partners