Have a great idea? Thinking about starting a business in this down economy? It’s been proven that great companies can start in a down economy. Just consider Microsoft, Apple, Google and Johnson & Johnson — these businesses, and many others, were born during tough economic times. Yes, access to capital is more difficult. Consumers are more cautious about spending. The IPO market is essentially closed for the foreseeable future. Mergers and acquisitions are suffering from a crisis of liquidity. Nevertheless, entrepreneurs have built and still can build successful companies during economically challenging times by working smartly. You can too.
Successful entrepreneurs and business leaders excel in both prosperous and challenging economic times. They are resilient and competitive; they see the glass half full, embrace challenges, and can readily adapt to unexpected changes. These unique characteristics give entrepreneurs an edge that helps them thrive in times of uncertainty, when difficult conditions require quick adjustments and tough decisions. In these economic times, those who truly have the unique skills of entrepreneurship will distinguish themselves from the pack and lead their companies to success.
Companies don’t run themselves. People run companies. Building a strong team from the start is always key to the future success of a business. Consequently, management is always a key consideration in any investment decision. In a down economy, the pool of talent from which to choose may be much larger, as businesses in all sectors (engineering, marketing, finance and others) are forced to shed qualified workers and many of those workers are willing to move into exciting, riskier positions with start-up companies for less pay than they might expect in an up market. The expanded talent pool presents an excellent opportunity for entrepreneurs to build and enhance a firstclass team.
New business ideas may find a less crowded environment in a down economy, thus less competition. While companies are running out of cash and going out of business and other people are afraid to jump into the market, smart entrepreneurs can use that void to push their business ideas. By the time those others decide to pursue the same product or service, the “first to market” competitive advantage achieved by the risktaker becomes a high obstacle to them, and the entrepreneur can recoup the market benefits as the economy turns around.
In tough economic times, strict discipline is required to manage capital prudently and match realistic revenue targets to expenses. Successful businesses manage their capital cautiously at all times. Successful entrepreneurs, who often sacrifice their personal savings and worry about every dollar when starting a business, are well advised to carry this discipline into good economic times. Business managers who can demonstrate to investors that they can make every dollar count are often more successful at obtaining needed capital and positioning their companies to grow, and are better situated to deal with economic crunches and come out of them ready to capitalize on improved market conditions. Venture capital firms have communicated frequently with their portfolio companies recently, emphasizing the need to be prudent and to recalculate capital needs to meet a realistic time horizon for an exit scenario. Virtues that are sometimes learned in tough times are good lessons at any time. Entrepreneurs are also likely to find that their capital sources may have more realistic revenue expectations during these times.
In a down economy, the costs for starting a business are reduced in certain markets. Advances in technology, negotiating with landlords who need to rent vacant properties, negotiating better marketing deals and reduced advertising costs, working with service providers that the new business may need, and lowering expectations of high employee salaries can all help entrepreneurs who want to start a business in a down economy.
It is important to realize that it is not unusual for a start-up company to go through various economic cycles. Successful entrepreneurs do not become rich on day one. They buy their initial equity stake through hard work and find creative ways to raise funds, manage them, and build their company and customer base over time. They earn their sweat equity and only later, when others perceive it to be a good time to enter or open the market, do they recoup their equity in the business.
Entrepreneurs can launch successful companies under any economic conditions. If you have the skills and find the business idea you believe in, don’t wait because times are difficult. Embrace the challenge and launch your business.