Entrepreneurship

"I am an optimist. It doesn't seem too much use being anything else." - Winston Churchill

Despite all the doom and gloom that is out there in the global economy I always try to find a glimmer of hope.  Having traded stocks since 1984 I have been through my fair share of adversity but one thing I have learned is that there is always someone making money.  Regardless of how poor the economy is some people are prospering.  Money does not evaporate it just moves from one sector or country to another.

Back in the late 70's and early 80's South Africa was mired in a political struggle with apartheid.  The rest of the world imposed crippling sanctions on the country and multi-national companies were forced to withdraw.  Through this doom scenario a few very brave entrepreneurs took over the operations of a number of these companies and profited immensely from the vacuum created by this withdrawal.  Wealth did not evaporate it transferred!

During previous recessions many great companies have been formed - AT&T, Disney and General Motors to name a few.  So is it a good time to start a company?  Certainly there are numerous pitfalls when starting a company during a recession.  It is hard to get financing and customers are hard to attract and keep.  Getting paid can be a problem and working capital can cripple the start-up before it gains traction.  Competition from others can crowd your market quickly and desperate competitors can undercut your prices destroying temporarily the market for everyone.  While most of these problems are around during good and bad business cycles they are magnified during slow economy times.  So why start a business?

For one many people cannot find work so more and more of them turn to starting their own business out of desperation.  This is not a benefit at all as a lot will fail however what a poor economy can do is create holes due to company cut backs.  These holes can be filled by entrepreneurs that have the ability to fill the gap.  Furthermore a laid off worker can use the skills that they acquired to compete and improve on an old business idea.  Think about how many times you tell everyone how poor a job your boss is doing! With low overheads it is possible to gain traction and then grow.  Furthermore a study suggests that entrepreneurs that begin their business during a down cycle do not make the same mistakes as their brethren who start out in a good economy with loose credit access.  This conservatism protects them in the poor times and allows them to grow at their overly leveraged competitors expense.

Personally I believe that a business that has merit can be started in any economic environment.  I have put my money where my mouth is by starting three companies in the last three years and I expect to start some more in the future.  As an aside, all three are performing extremely well in the current market malaise.  In addition, a company that can gain traction during these times is well positioned to benefit greatly when the economy expands as consumers typically reward those that have positioned themselves well during the difficult times over a newbie.  Think about it, if you are hiring people in your local community when everyone else is laying them off who is going to be remembered more favorably?

Keys to success are numerous but a few things that you may want to consider are: can I personally finance the company or do I need outside capital, if you need outside capital how will you attract it, does the business just prosper in a bad economy or can it work in good and bad economies, can I start the business with a skeleton staff and work my way up or do I need to plow a ton of capital into office space or research and development, do my clients have the ability to pay me, is the hole in the market one that will be filled quickly by competitors or can I rely on some pricing power for the near future, do I have the expertise to run all functions of the company or do I need to outsource or hire some help. how quickly from inception to cash flow, do I love this business or am I just doing it to make ends meet?  These are just some things to consider for starters but there is plenty more to think about.  Make sure that you are able to adapt as time moves on and are not stuck in the past and enjoy your work and I believe that the rest will take care of itself.

Good luck, I know we all need a lot of it especially for those of you launching your own business this year!