Why Businesses Are Starting Up Now
It’s a recession. Entrepreneurs and small business owners can’t get money. Some can’t even make payroll. So why would starting a business in a recession be a great idea? Here’s why:
Time to practice.
Recessions are the pre-season: Do you think Kobe Bryant starts hitting the gym in October? Business, like basketball, takes preparation, training, and practice.
Method Products, a household products company founded during the dot-com boom of the late nineties, found itself in need of financing right around the time the Silicon Valley bubble burst. Founders Adam Lowry and Eric Ryan perfected sales techniques after being turned down by the same stores over and over again. In November 2001 (right after 9/11), with hundreds of thousands of dollars in debt and an economy where no one seemed to be buying anything, their last hope was a dinner meeting to secure venture capital funding. When they tried to pay, both of their credit cards were declined. But the sales pitch was so good- because they had so much practice- that they got the funding anyway.
Gary Erickson also made a household brand during a recession when he developed the Clif Bar in 1990-1991.
Starting your business during a recession forces you to practice sales pitches (because no one is buying anything), venture capital requests (because no one has tons of spare money to give you), and hone your skills in a way that will pay off once the economy picks up.
Cheaper start-up costs.
Starting a business in a booming economy is a little like trying to order a dozen roses on Mother’s Day, where a rising demand tends to raise all prices. In a recession, businesses cut prices, offer specials, and craft deals to lure new customers. Services that might have been out of your price range a few years ago, like professional web design or online marketing services, can now be had at a cost more in line with a start-up’s lean budget.
In the early 1920’s, two young artists in Kansas City produced short cartoon movies using borrowed equipment, and talked the owner of a successful local theater into showing them. During better economictimes, Walt Disney might not have been able to secure time at such a popular venue. GE got its start in 1873 which was a six-year recession and is now considered the world’s tenth largest company. Microsoft, and Hewlett Packard also got their big breaks during recessions. Taking advantage of cheap services and promotional opportunities is a good way to curb spending from the very beginning and start your business on a solid financial foundation.
Work smarter.
Getting by on meager rations forces a business to be lean, evaluate strategies better, and squeeze the most use out of every dollar. One way to work smarter is to recruit knowledgeable partners and employees. Economic downturns often produce an oversupply of talent, many of whom go on to work for start-up small businesses. Within the eight months after 9/11, 11.4% of jobless managers and executives had started their own companies, according to the outplacement firm Challenger, Gray & Christmas.
Research has also shown that people who work for start-ups, whether as a co-owner, partner, or employee, are motivated more by company mission and passion for the work than by a dollar amount or a big payout later.
Working smarter doesn’t just mean collaborating with the best- it can also mean budgeting better, evaluating expenses more carefully, and cutting extraneous costs. A recession forces you to streamline your business from the very beginning, a trait that will help it survive in slow times and thrive in the future.
No excuses.
Whether you were laid off or your company folded, you’ve probably been harboring that dream of starting your own business for some time now. An economic downturn provides that nudge (or push, or even kick) you’ve been waiting for to strike out on your own. Six million small businesses were launched in 2006. Recent available statistics indicate that of the 2.6 million Americans who lost their jobs in 2008, only a small fraction of those plans to start their own company.
If you’re out of work, maybe you’re dreading the possibility of resume writing, interviews, and training only to go back to doing the same boring thing you did before- and making money for someone else to boot. If you’ve always wanted to open a website for new dads or an online bakery - do it now. Seriously, what are you waiting for?
April 2nd, 2009 at 2:00 am
I like the part about working smart. Working smarter AND harder leads to a leg up on the competition.
In these economic times, you can harness the power of students: go to http://www.groupereye.com for access to top students across the country.
April 2nd, 2009 at 3:58 am
Great insight Betsy, I agree. You can’t reach the fruit on the tree without going out on a limb. There is no time that exists, but right now.
April 2nd, 2009 at 1:30 pm
Chris,
Thanks for the tip. What a great idea!
April 2nd, 2009 at 2:07 pm
Betsy,
I needed a little jolt..This I was layed off right before the holidays this year. My wife and I had the idea for Smartie Pants Apparel and I am prospecting everyday. Yes, I wish I had more oders, but if everything came at once I wouldn’t know what to do.
Ty
April 3rd, 2009 at 10:28 am
Betsy,
I couldn’t agree more. I lost my job last July and am now working on an internet startup called TajTunes.com. We are totally scrappy and lean and as a result very efficient. I am consulting too and loving the challenge all around. The time is now to start something new.
Helen
April 3rd, 2009 at 12:06 pm
@Ty: love your site!
@Helen Hames: Isn’t it amazing how a negative can turn around to a positive. Congrats to you.
April 6th, 2009 at 2:38 am
I’ve been putting a business together over the last six months because employers don’t seem to understand that one can have a physical disability (in my case cerebral pasly) and still have more than enough cognitive ability to run their own business successfully.
April 7th, 2009 at 5:22 pm
I lost my job last July and am now working on an internet startup.I found an onlie Business Training Program http://www.ilearningglobal.tv/ and start apply to my business and it get me success. Recommend to all.
April 8th, 2009 at 11:40 am
Thank you for the great article. My husband and I are starting a “green” candle business in this economy. We were in business before, however this time we are definitely being more creative and searching for and using many free sources that we never thought about before such as social networking sites, blogging etc. We are ready to go live in about a week and we already have stirred up much interest and have a nice mailing list of people that want to buy our product.
If anyone is thinking about running their own business, just do it!
Best regards,
April 9th, 2009 at 11:21 pm
Thanks for the encouraging words Betsy. I have put my business on hold while I am out of the country raising funds for a large expansion.
I am writting a new business plan and getting all of the financial documents in order.
SCORE has been the best thing that I have found! My SCORE advisor is a wealth of knowledge and advice. And it’s all FREE!! There is no way I could afford to pay for the professional guidance and assistance I have received. I simply can’t recomend this organization highly enough.
April 10th, 2009 at 8:00 am
A young women writes a great column and uses Kobe Bryant (Betsy, do you REMEMBER what he is famous for, beside B-Ball?)as a positive point?
April 11th, 2009 at 3:26 pm
Thanks for your article Betsy. After 5 years of dedication to a multinational company, I was laid off in January…so recession or not, it was time for me to start my own company.
I had been preparing for several months on the side anyway, but the opportunity presented itself in a very real way.
So even though the website and infrastructure are still a work-in-progress (won’t they always be?), I am working on sourcing leads. Hopefully I will get my first customer soon to build the confidence I need to ramp up.
Bootstrapping and working smart have been my priorities!
April 15th, 2009 at 2:45 pm
As someone starting a business of my own in the current economic climate, I found this an excellent article.
Starting a business now is a challenge - but who wants it easy? Easy is lazy, easy takes no passion to perform, easy doesn’t live in your dreams or dominate your waking thoughts - and where’s the sense of fulfillment?
Ok so easy pays well, but it sets you up for a fall when times get tough, and lean mean business machines outperform easy every step of the way.
Give me the challenges today, and the rewards tomorrow. I’ve put together a business with a minimal cost structure and maximum productivity through web apps and information systems, ready to take on the world. Would I have examined everything in as much detail and considered every action as many times if times were easy? I can’t say, but that’s why fat cats need to get scared!
Rob
June 15th, 2009 at 6:45 pm
[...] StartupNation Blog Blog Archive Why Businesses Are Starting Up Now Posted by root 4 minutes ago (http://www.startupnation.com) Apr 1 2009 so why would starting a business in a recession be a great idea seriously what are you waiting for leave a comment subscribe after 5 years of dedication to a multinational company i was laid off in january so recession or not startupnation blog Discuss | Bury | News | StartupNation Blog Blog Archive Why Businesses Are Starting Up Now [...]
June 23rd, 2009 at 8:20 pm
The best way to find growth capital is to apply to a venture summit where you can speed pitch your ideas to several investors face-to-face in a single day. One such example is The Speed Venture Summit, the premier speed-dating-style event for fast-growth businesses and investors in New England. http://www.speedventuresummit.org; and follow the virtual discussion at Twitter #SVSNE
October 28th, 2009 at 10:29 pm
I like the positve nature of your post. Many people have to get tuff and start their own buisness because of layoffs, cutbacks, etc, etc. they are taking matters into their own hands. In a recession smaller companies have an advantage in the ability to cut costs and adjust to the market faster. It also hard to get fired from your own company if you are the boss.
But yes Recession is where the big money is made, those that can survive will be the ones that will win big in the next few years as the markets come back.
I look forward to more from you in the future.
February 24th, 2010 at 5:47 pm
The economy is bad if you’re bad. Just because things aren’t easy doesn’t mean that there is no opportunity.
March 5th, 2010 at 8:36 am
“An economic downturn provides that nudge (or push, or even kick) you’ve been waiting for to strike out on your own.”
Thats whats happening!
April 28th, 2010 at 8:46 am
Our home business was really affected by the Economic recession, we have to cut jobs just to cover up our losses. fortunately, we have already recovered. :
October 7th, 2011 at 2:20 pm
Youre not the common weblog writer, man. You definitely have got some thing potent to increase the internet. Your own style is really robust that one could almost make do with being a bad author, but you are actually awesome with indicating what you have to state. Keep in the good work guy!
August 10th, 2012 at 5:51 pm
Ladar Cleaning Service start up
http://www.indiegogo.com/ladarofmistartup
Ladar Cleaning Service is a woman owned and operated Commercial cleaning services. The purpose of this is to help bring in some capital to buy cleaning equipment