Last week at OCRI’s Entrepreneur’s Edge (e2) program, I had the pleasure of lecturing on how to perform market assessments for new products or businesses. The e2 program is a full week of half day sessions covering all aspects of starting a new venture such as strategy, governance, R&D, marketing, sales and funding.
At the beginning of the week, the e2 attendees and faculty members get together over dinner to network, talk business and learn more about each other as we get ready for the e2 week ahead. The dinner evening usually includes a guest speaker to share their particular entrepreneur / startup experiences and last week’s guest speaker was Allan Isfan, CEO of FaveQuest. Allan’s talk focused on his experience working in and running various companies and he closed his talk with his top 10 reasons for launching a startup now. He also blogged about speaking to the e2 crowd here. I’ve used Allan’s top ten reasons as a starting point and added some of my own thoughts as well…
10 – Opportunity to demonstrate your skill and tenacity
- most people don’t have the courage to bootstrap a company in this climate
- your offering needs to be compelling to get partners and paying customers in a down turn. If you do, it says something significant about you, your team and your company.
9 – Tighter teams
- if your team sticks together in the tough times, you’ll emerge extremely tight – nothing builds closer teams like overcoming adversity
8 – Focus, Focus, Focus
- you don’t have the luxury of goofing around and building “wouldn’t it be cool if” type concepts
- you’ll need to focus on true customer value to make sure you get traction
7 – Talented people available
- the reality is, in this climate, there are plenty of talented resources out there
6 – Market uncertainty
- the market is experiencing a major disruption which creates opportunity. Everyone is looking for a new edge, the next big thing. Why shouldn’t that be you?
5 – Less competition
- many startups will drop off, especially if they don’t know how to be frugal
- large companies are reeling as they see their sales and profits erode. They end up being internally focused on cutting costs just to stay alive and as a result they stop innovating.
4 – Be Frugal or Die
- when times are tough, you’re forced to be extremely frugal or you won’t survive. This is a great skill to develop and is just good business practice even for when the market rebounds.
3- Lower Costs
- you can get equipment for pennies on the dollar, rent office space for much less than you would in boom times and salaries can be lower too
2 – Forced to test the market
- if you are relying on revenues for operations or you’re living off limited funding, you have to sell early and close deals quickly which means you stay very close to the market
- don’t be afraid to ask for an order early on in your customer engagements – asking them to part with money is the ultimate test of how much they value your offering
1 – You fill this one in…
- What do you think the # 1 reason is for why your company would have a better chance of succeeding because you started it in a down market?
Please post your comments and share you thoughts.
Happy Startup!
Rick
Rick. That is a great post. Must read for most startups especially now… gives that inspirational edge some people need. I am a firm believer that you have power to will each days outcome… reading business success stories, or how to’s early in the day can give you that boost.
Rick – great post. I recently opened a new business – in recruitment! In this market!! Some people think I am crazy! But those that know me know what a good move it was – make it through the hard times and reap the rewards later! Despite the media it isn’t all doom and gloom out there!
Thanks Matt. Glad you found it inspirational. If you come across other good business reads, let me know.
Congrats to you Dawn. Agreed its not doom and gloom out there at all. If I can help you in any way, just let me know.
This is very good article. The ultimate is Point-1
Very well thought of
This is the time for start-ups to slog and the price paid now will return in multitudes
Good article, giving hope to start-up chaps, esp. the first timers
best wishes
Sasi Sekar K
Hi Rick, Nice post. The number one reason to start something a down market is that by the time the market recovers, you would be poised for growth. You want to be developing products at a time when the industry is down, and then launch new products just as the industry is beginning to pick up again. On the contrary, if you were to develop products during a market growth phase, you may end up coming out with products just as the industry is about to enter a downturn. It’s obviously hard to get the timing right, and it’s unclear how long any particular downturn will last, but the best strategy, if it can be timed, is to invest and develop when things are down, and sell when things are up. It’s interesting that several companies such as Intel have been quoted saying that an economic downturn is in fact a time to increase investment (Intel has announced new plants in Arizona, Oregon, and New Mexico.
Our top 40 co recipient AndyNulman has just released a book ( speaking of a startup ) on the Power of Surprise in marketing. Launching a business in difficult times will certainly get you a lot of unpaid publicity!
http://www.amazon.ca/Pow-Right-Between-Eyes-Profiting/dp/0470405503/ref=sr_1_1?ie=UTF8&s=books&qid=1235752371&sr=1-1
Rick:
Awesome insights! I have been in the business for 15 years and even I learned something new. There is business out there for everyone and operating smart and lean during times of change is always best. Make a plan, follow the course and be flexible to changes in the marketplace, because it might just be a bumpy ride but worth the trip!
Nancy Romanovitch
Graphic Designer
Really enjoed the post and thread. I can say as a vet of the dot com wars that developing new services in a down economy is even more challenging then in a up economy, however u really can make a huge difference by customizing your services to meet your clients specific needs. Try not to walk away from any revenue opps.
Great post Rick and great comments! To me, the number one reason to start your business in a downturn is the same as it is when times are good – there’s no more rewarding and liberating experience than creating something from nothing and making your idea reality. It’s only more rewarding if you can accomplish it when times are tough. Keep the posts coming!
Hi Rick,
We are glad that we are not trying to start a company now. Having stated that, we have discovered that a few trends appear to be emerging. Mission critical work that might have once been outsourced offshore is now being outsourced locally. Time to market, quality of design, proximity and actual cost have become important again.
Locality to the customer allows immediate support by phone, email, or on-site. There are no “night-and-day” time zone or communication barriers.
It pleases me a great deal to see that you have found your niche. Albeit, I recall that you have always been able to aim ahead of the duck!
Thanks for the feedback Mike. Indeed, in these times more than ever, staying close to the market and your customers is critical. If you drift away, even for a short time, you’ll pay dearly for it. Focus, focus, focus and never shy away from asking for that initial P.O. early and often. That is the ultimate test to discover how much your customers value your product. No lame ducks allowed!
[...] Startup in a downturn? Are you crazy? [...]
Good post Rick , interesting discussion …..
Downturn markets force the cream of the crop to the top…It forces you to look at your product offering and really fine tune what those are. It forces you to find new ways to shorten sales cycles and new and creative ways to reach out to your target markets.
I agree with almost everything here… it is definitely an ideal time to startup, especially if your startup is one that provides a paid service (unlike a twitter/fb). In fact, joining a startup right now, during it nascent stage, could be extremely wise as well – the founders might just be more flexible and willing to accommodate you and your ideas much better.
Good post Rick, though this is my first read here, but i’ll sure keep coming back for more.
Perhaps a contrary point of view for most that are out there, but definitely one that seems to be shared on this forum !! I believe that this type of market and economic environment is a very exciting time to bet on entrepreneurs, and will eventually be quite beneficial to their businesses. Gone are the days, especially in the B2B environment, when customers can afford to ignore a “better mousetrap” (especially where they drive in-year cost reductions or productivity improvements), or make “safe” decisions to choose inferior offerings just because they come from bigger brands where one is protected in the event of failure — there is NO room for failure now. Yes it is a tough environment in which to acquire new customers, service products, meet commitments and to raise financing. On the other hand, entrepreneurs and business builders are uniquely positioned to use the harsh environment to succeed — we’ve always had to bring adaptability, innovation and hunger every day, even in the good times to build our businesses. Now, those same qualities should result in a lot more airtime with our stakeholders, while multinational competitors are busy internally focused on retrenching, cutting overhead, reducing trade credit from 60 days to 15 days, etc. etc. Long live the entrepreneur, and Never Fu@#ing Quit !!!