Ready to Rumble?
Looking Up?
Nevertheless, the Commerce Department's GDP and consumer
spending figures indicate the economy is growing, if less robustly
than in the third quarter of 2003. Powered in part by consumer
spending, the U.S. economy grew by 8 percent during the third
quarter of 2003 and by 4 percent in the fourth quarter, some of the
highest growth rates in five years. Consumer spending in the third
quarter of 2003 rose 6.9 percent over the previous
quarter—buoyed by a boom in mortgage refinancing and by tax
rebates—and by 2.6 percent in the fourth quarter. According
to a University of Michigan survey, however, consumer confidence is
wavering, having fallen in February 2004. Despite this, entrepreneurs in the retail sector have been able
to slash inventories—in January 2004, orders for goods other
than transportation rose, and retail sales overall jumped 0.6
percent—and find the capital needed to hire new workers and
expand. Says Satagaj, "Retailers are feeling the
best." And as the government has increased funding for defense and
other federal spending, small businesses have been able to take
advantage, since the administration has opened more federal
contracts to smaller companies. Sequoia Ramsey, president and
founder of Realistic Computing Inc., a Baltimore-based computer
support firm founded in 2001, has been able to grow her company by
relying on government contracts. Content Continues Below
Similarly, small businesses have capitalized on the market for
homeland security-related products. New Technology Management, a
Reston, Virginia-based company with 150 employees, has become a
major contractor for the Department of Homeland Security,
installing the agency's systems for border surveillance at
seaports and land crossings. Youths are increasingly interested in entrepreneurship.
According to the Bureau of Labor Statistics, the number of
self-employed Americans between the ages of 20 and 24 is rising,
and a recent survey by Junior Achievement Inc., which educates K-12
students about business, shows a plurality of Americans between the
ages of 13 and 18 believe owning your own business is more stable
than working for a company. Meanwhile, the number of universities
offering entrepreneurship classes has risen tenfold in the past two
decades. The 2003 "GEM" shows the number of adults considering
starting a company rose year-on-year. In a study of executives of
midsize companies released in January by business advisory firm
Grant Thornton, more than 80 percent expected the economy to
improve in 2004, and more than 90 percent were optimistic about
their companies' prospects. Even manufacturing, which
entrepreneurs felt could be in terminal decline, seems to be
rebounding. In January, the National Association of Manufacturers
reported that factories would add nearly 250,000 jobs in 2004. A Fighting Chance Whether in a bad or a boom economy, there are lessons both
budding and established entrepreneurs must learn. Michael Zey, a
professor of management at Montclair State University in Montclair,
New Jersey, offers these tips:
- Explore Internet
businesses. "The Internet is still expanding, [but]
people are scared" about starting Internet businesses, Zey
says. He believes two areas where there's still considerable
room to grow and interest among investors are broadband-related
services and wireless Internet-related services, such as games on
demand.
- Become more
malleable. "In a down economy, customers are more
demanding," Zey says. In a strong economy, small businesses
can get away with less regular contact with their customers and
suppliers. But in a down economy, small businesses need to be
prepared to customize orders and handle more special requests.
- Don't assume
you can't get a loan or a grant. Though some sources of
capital, like VCs, dried up in the down economy, Zey says, there
are other places to look; savvy entrepreneurs can pit potential
creditors against each other. "Play off e-banks, commercial
banks and others. Get out of the mind-set of just going to your
local bank."
And don't be afraid to use your credit cards, since interest
rates are low. "A lot of what you need at the smallest level
is self-financing—you may max out the credit cards,"
says John Satagaj, president of the Small Business Legislative
Council. - Focus on higher-end
services. "Landscapers were having no problems
whatsoever" in the down economy, Zey says. "Entrepreneurs
could provide higher-end services" and tailor their ideas to
wealthier clients, who weren't hurt as badly.
- Research
demographic trends. "We have an aging population about
to retire en masse," says Zey. "[They're] going to be
looking for things to do"—and to buy.
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