Tuesday, April 16, 2013

Don’t Wait for the Next Bubble to Start a Business

stock-bubbleIf you think "I better not start a startup now, because the economy is still not booming" you will be making a comparable mistake to the people who thought during the dot-com bubble "all I have to do is a startup, and I'll be rich." In reality, what matters more is who you are, not when you do it.

Like Paul Graham, of Y-Combinator fame, said a while back, I see startups succeed or fail every day based on the qualities of the founders. The economy has some effect, certainly, but as a predictor of success it’s a rounding error compared to the founders. If you're worried about threats to the survival of your company, don't look for them in the news. Look in the mirror.

Here are some pragmatic reasons from Paul and others to highlight why you might not want to wait for the next business bubble before taking the leap:

  1. Alternatives are not as tempting. If your alternative is no job security, and low pay, why not work for yourself and build your startup? You'll be investing your time and energy into something with more potential upside in future. If you're talented and have always toyed with the idea of a startup, financially it makes sense to do it now.

  2. More available talent. It's hard to hire good people because they already have a job. But in a lesser economy that's not true -- companies have exploded and laid-off everyone, even the stars. Check your business network for a great co-founder or a great designer.

  3. Low cost infrastructure. Notice all the empty offices that are still there as you drive down the street? Make them an offer. Need less expensive advertising? Ad revenue is down as companies down-size marketing budgets. Negotiate, or use social networks, which are virtually free.

  4. Competitors are vulnerable. They have higher overhead, long-standing bills, yearly advertising contracts and high office leases signed years ago. Their prices are high and hard to lower. They're eating cash. You have none of these pains; you're sipping cash with no overhead and lots of time to devote to coddling new customers.

  5. Technology progresses. So for any given idea, the payoff for acting fast in a struggling economy will be higher than for waiting. Technology trains leave the station at regular intervals. If everyone else is cowering in a corner, you may have a whole car to yourself.

  6. Markets don't "reduce headcount." As a startup, you have more control over your customer base. You’re probably not going to lose your customers all at once, even though they may drop off individually if they can no longer afford you.

  7. Some business opportunities go up when the economy is down. While inventory liquidation is not an especially pleasant business, it's an example of one that generally does well during economic downturns. An aging population whose health is declining is going to purchase healthcare products and services—struggling economy or not.

  8. Investors are still looking for good startups. Everyone knows you're supposed to buy when times are bad and sell when times are good. A few investors actually think that way, so be there. You're an investor too. As a founder, you're buying stock with work.

The way to start in a struggling economy is to do exactly what you should do anyway: manage cash as tightly as possible. If you don’t quit, the most likely cause of death in a startup is running out of money. So the cheaper your company is to operate, the harder it is to kill. And fortunately it has gotten very cheap to run a startup.

The most popular day for starting a new company is the same as starting a new diet: Tomorrow. So take the leap today, not tomorrow. If you don’t get started now, the odds are you'll never start. If you are an entrepreneur at heart, don’t be doomed to a life of trudging through jobs, depending on someone else for salary and bonuses and health care and retirement, a life's work without ownership or upside.

Besides, bubbles are hard to recognize until they burst. We may well be in one right now. So either way, now is the right to pursue your entrepreneurial passion.

Marty Zwilling


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1 comment:

  1. Martin:

    I will follow your advice and start my next start-up venture now, instead of waiting for the bubble to burst! ;)

    Your post made my day! :)

    ReplyDelete