Is Now a Good Time to Start a Business?
Times Are Tough – Or Are They?
The Dow is down, unemployment is up, the dollar remains weak against various foreign currencies, exports have declined, and the value of your 401(k) has dropped so precipitously that you don’t even bother to open your bank statement when it comes in the mail. Meanwhile, experts argue continuously as to whether we are in a recession or a full-blown depression. What can we do? I know – let’s start a business. While this might sound like the ravings of a lunatic, some of the nation’s most profitable and longest-lasting corporations got their start during tough times. This includes Disney and Proctor & Gamble during the Great Depression, and Supercuts and Microsoft at the very end of the Vietnam era, with the country struggling to survive an oil boycott and a quadrupling of the price of gasoline.
Where’s the Cash?
One of the major drawbacks to starting a business involves the aspect of credit. Very few people, in good times or bad, have enough ready cash to strike out on their own. Even with the recent bank bailout, few institutions are loaning money – and those that do charge high interest rates and examine credit scores with a microscope. But except for the Internet boom, where venture capitalists appeared to throw money at anyone with a pulse and a dot-com in their company’s name, banks have always been tight lenders. If you have solid credit, a sensible business plan, and a successful track record as a past business owner or manager, the money is there.
Exploit Market Weaknesses
Take a look at companies that will serve as your competition, once your own business is up and running. Most likely they are scaling back, cutting costs, laying off employees, and possibly even raising prices to improve their bottom line. So what are their customers doing? They’re looking for alternatives – and you could be in the perfect spot to give them the change they need. When times are great, people are happy with the status quo. They are much less likely to make a move, simply for the sake of doing so. But there are a whole lot of motivated buyers out there, and what motivates them are two primary aspects of business – lower prices and better service. Offer them at least one, and you’re in good shape. Provide both, and the sky’s the limit!
It’s All About Marketing
With the decline in newspaper advertising – and ad placements in general – it is clearly the right time to take advantage of the situation. Here you can expect to win for two reasons. Ad rates have dropped as newspapers and online portals struggle to fill up space and keep the money flowing in – almost at any cost. Also, with fewer companies placing ads, the ones you run will be even more prominent and likely have greater impact. Other marketing elements also work in your favor in a down economy. People tend to use coupons a whole lot more, so even a savings of 10 to 20 percent will have a positive effect on your retail traffic without doing much damage to the bottom line on a per-item basis. And it’s fact that customers rarely stop in to purchase just the on-sale item.
Help Available at a Discount
The layoffs and general downsizing experienced by Americans over the past several years has created an entire layer of highly skilled unemployed and underemployed workers. Does your new business require an IT expert? You can probably hire a former IBM executive at a very attractive rate and still pay him or her a decent wage. What about salespeople, warehouse personnel, administrative assistants, bookkeepers, or landscape architects? Many people are willing to accept a pay cut if there are other benefits to doing so. Perhaps your new business is closer to where they live, or the job they will do is more interesting to them. It is currently a buyer’s market in the field of employment, so take advantage of it.
Drawbacks – There Are a Few
Investment capital is a finite resource, and your cash reserves must be sufficient to meet what is likely to be a much longer sales cycle. The number of customers has declined, and those who remain buy less and expect deep discounts when they do make a purchase. If yours is a service-oriented business, you may find your competition willing to do work at or below cost, simply to keep the doors open. Employees you hire at a lower wage may depart as soon as something else comes along that either pays a bit more or is closer to their area of expertise. But the true entrepreneur takes the 100-yard view, not the five-yard one. Start with a great idea, create a solid business plan, dig up the necessary funding, and ride out the storm until the economy improves. Once people have money to spend again – and they will, as they always do – you will be in a terrific position to capitalize on the good times while your less competent rivals have disappeared from the scene.
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