The Entrepreneurial Spirit and the Economic Crunch
Are you thinking about starting your own business but concerned about the economy? Feeling the pull of being your own boss but wondering if that could possibly be a good decision under the current circumstances? Then you'll be relieved to find out that 92% of existing entrepreneurs say they'd have started their business regardless of the economic climate, or so say Ernst & Young's Entrepreneur of the Year finalists and winners.
But how do you do it? What do you need to do to make a new business work during an economic crunch? I talked to some people who've started businesses within the last year, and this is what they have to say.
Look On the Bright Side
Sometimes, it's better to be on your own when the economy's down than it is to be part of a company. Len Porcano, of Novisi, remembered the last time the economy had a downturn and his company cut 2/3 of their workforce. This time, slowing economic conditions actually motivated him to go out on his own because he felt like he had a better chance of maintaining income if he "could respond [himself] more quickly to where opportunities developed in a weakened economic landscape."
Being an entrepreneur can also allow you more room to learn from your mistakes. As long as you have some income to count on, you can try new things and "see very little whiplash from mistakes," says Philip Tepfer, whose sailing-and-regatta clothing company, Sail(Proud), has found success in the current market. He sees the ability to make mistakes on the small scale and learn from them as a luxury, and one that larger companies don't have.
Know Your Strengths
Knowing where you're strong is the first step toward knowing how to position yourself when the economy tanks. Philip realized that Sail(Proud) is at an advantage because they're "a small, agile entrepreneurial company. We don't have high payroll expenses, HR costs, enormous marketing fees, and the like." Their size and agility allows them to dodge 'n roll in situations where larger corporations would have to take the hit.
Jesse Levin and Danielle Caro found that integral parts of their original business plans gave them a leg up in the current climate. Jesse designed The Archer Group to specifically "cater to clients looking to invest in the emerging markets." This gives him an advantage in the current economic climate, when traditional markets are struggling. Danielle, who founded the marketing and design firm Fox & Gazelle, intentionally designed her business processes to be efficient and streamlined. This keeps her overhead low even when the economy is strong and becomes a huge asset when it's weak.
Leverage Your Strength
If you know your strengths, you can figure out how to use them to your advantage. While streamlining processes "was a core aspect of our business plan from the start," Danielle says, it "is only made more relevant by this environment." The pared-down processes are not only an advantage she can offer clients, but they also allow her to invest much of her profit back into the business.
Sometimes, it's possible to structure your company so it will not only survive but will also thrive in adverse economic conditions. Len realized that, as companies were downsizing and not rehiring for other positions, they needed a less expensive way to fill those gaps and get those jobs done. He positioned his company to step in and handle that "extra" work, and thus made his business particularly viable during a recession.
When Philip saw that he wasn't going to be able to rely on retail sales like he'd hoped, he immediately came up with other markets for his merchandise. Knowing that even the giants of retail are suffering right now, he sought out other markets. "We still do retail sales," he says, "but now we're seeing much more positive results from our yacht club, regatta, event, boat show, and corporate sales." While his ultimate goal is still the retail market, he's ok taking it slow for now.
Regrouping doesn't always mean selling your product in different place or to different people. Christopher Jacobs points out that strategically adding services can make a huge difference when you're starting out during an economic slump. His company, Emergent Energy Group, found that many municipalities needed their cheaper, cleaner energy solutions even more as finances became tighter, but often didn't have the resources for an intitial investment in doing energy differently. They changed their approach, he says, "in that we offered a service to write grant applications."
Remember Your Motivation
Starting a business is often hard, and requires even more of a committment when the economy is rough. When you can remember why you wanted to work on your own in the first place, though, all that hard work is worth it. Several of the entrepreneurs I spoke with don't want to work in a traditional office environment. Others relished the challenge of starting a business when times are rough. Still others saw an opportunity and decided to take it, wanting to get in before anyone else did even if it meant extra hours and some lean times. Whatever your motivation, keeping your reasons before you, even writing them out and putting them where you'll look at them often, will help you when you wonder if you were suffering from temporary insanity when you gave in to the entrepreneurial bug.
Whether you start your business soon or wait for an economic upswing is up to you. Knowing that others are making it, though, can make all the difference in the world. If you're starting a business, thinking of starting a business, or waiting until things change, leave a comment. I'd love to hear your story and the thoughts behind your decision!