These times were made for new business start-ups.
To borrow from Nancy Sinatra (of “These boots were made for walking” fame), “These times were made for new business startups!” It’s absolutely true: Ironically, times of economic slowdown are some of the best times for starting up a new business. I know it sounds counter-intuitive, but let me make my case with the following “big-picture” points:
- 1. Competitors are generally weakened
- 2. Employee supply pool is large (and scared)
- 3. Vendor payment terms are much more flexible
- 4. Office lease/rental costs far lower than average
- 5. Many initial startup expenses can be had on the cheap
If we accept the premise that business and economies have predictable cycles, then the above should be “obvious”. Right now, our economy and businesses in general are in “contraction mode” and we are struggling through a very difficult time of burning off the excesses that were “built up” over the last 6-7 years. Despite what you hear in the media, it’s not only normal, but a good thing for us all. This process thins out weakened competitors and strengthens those companies that are and have been managed well. It positions our economy for the next cycle of expansion, which brings us the goods and services we want and need at competitive price points.
Which brings me to point number one above. New businesses can take advantage of weaker competitors and those that are ill positioned for growth going forward in the near-term. They do not suffer from excess “weight”, baggage or balance sheet deterioration. They are nimble and can act fast and react smartly to the current economic reality. They do not fear losing market share.
Point number two: Wow, are people scared about their future, their jobs, etc. I think it would be more fascinating to explore what people *weren’t* afraid of! This mindset can be advantageously by the new business owner. Those owners that can foster a sense of security for their employees will have fruits of their efforts returned several fold over time. Right now, not only is talent easier to find, but it costs less. A win/win for the business owner.
Point number three: Vendors of all types (all other businesses that are not your direct competitors) are weakened by a one-two punch of loss of quality business and bad debt write-downs. Those new businesses that can establish a good working relationship with their vendors quickly will reap the rewards long term. Remember, good “terms” from your vendors are not necessarily just financial, they can (and should) be on the service side as well. A vendor may well pay better attention to a new business relationship where future growth potential lies than a long-standing one that is stagnant.
Point number four: Office space is *cheap* and a properly constructed lease can be written to provide the new business with not only a very low initial rental cost (relative to a few years ago), but can (and should) take into consideration at least a five year rental plan. I personally prefer a one year lease with 4 successive one-year renewal options, for a total of 5 years. This way you are locking in a lease cost lower than market average rates, but not locking yourself into the space should it no longer meet your needs. Oh, and one more thing: no personal guarantees! If the landlord insists on a personal guarantee, find other space.
Point number five: I love a good bargain. I can’t remember a time when so much technology can be purchased for so few dollars. Whether it’s computer equipment, office equipment, office tables, chairs, cabinets, etc., deals can be found as companies liquidate to generate cash. Setting up the infrastructure for your new business will cost you far less today than it would’ve just 2 years ago.
So, anyone got any good ideas on our next new business?