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Rev Up Your Start-Up During the Recession

Photography: Rich Anderson

There’s never a good time to start a new business. Whenever you decide to set up your company, seek funding, and launch your product, you’re going to be battling with competitors, struggling to bring in your first customers, and dealing with all of the setbacks and surprises that come with starting something new. Make the moves during a boom-time, and you’ll find that there are plenty of other firm flush with cash and racing to get their products out ahead of you. Do it when times are hard and you’ll struggle to persuade buyers and investors to put their hands in their pockets. But that’s not a reason not to do it. In fact, a shrinking economy can throw up all sorts of advantages for entrepreneurs looking to turn their business ideas into successful companies.

Perhaps the most important is motivation. Creating a start-up is hard work and initially at least, you’ll be doing most of that work yourself. There will be little, if any, income so you’ll probably have to squeeze the development, marketing and research around your day job. You’ll be putting in long hours, giving up your weekends and free time, and you’ll have no idea whether your plan really is going to play out or whether, like most new companies, it will crash, burn and become just another line on your resume.

When the effort is so real and the benefits so unclear, it’s easy to keep dreaming and stick with what you know does work: the day job that you might not find very satisfying but which you can count on to pay the bills.

The Recession Raises the Risk in Paid Work

During a downtime though, that day job doesn’t look quite so stable. While a start-up always carries risks, a recession brings those risks into salaried positions too, closing the gap between sticking to a job and starting a new business. Being able to control your own future can start to look a lot more attractive when the alternative is waiting for the boss to knock on the office door and call you in for that talk. At the very least, you want to have somewhere to land if the company does gives you the push.

And if you do find that you’re out, you’ll also discover that you have time. While job-searching is often described as a full-time job, in practice, it’s usually possible to send out resumes in the morning and have the afternoon free for building your own job. Even interviews won’t happen every day. Best of all, you won’t be the only one with hours to fill. A recession might mean a shortage of money but it also means that there’s no shortage of talent looking for ways to put their skills to use. When times are good, you’ll struggle to find a programmer, a designer or a copywriter willing to work for a song or a share of the profits. During the downturn, cafes and co-working spaces are filled with “consultants” and “contactors” hoping to stumble into a project that means they’ll be reading resumes instead of writing them. There’s no better time to build a team. Check out the people sitting next to you at Starbucks or work your social networks. At times like these everyone knows someone who’s either lost their job or could be about to. Even if they’re sitting pretty themselves, they’ll be happy to put out the word that there’s an opportunity available if it means they’re helping a friend.

A Downtime Means Being Cash-Poor but Time-Rich

There’s also no better time to find an office. As companies close, office space becomes available and rental prices fall. In 2008, even New York saw falls as high as 5.5 percent while the amount of sub-let space increased by 34 percent. Funding for a new business might be difficult to find in a recession but bargains are available everywhere. And that applies to other assets too. Businesses are much more open to negotiation when the alternative is an empty book. You might be able to push harder for better advertising rates on selected websites, or pick up deals on barely used office furniture and computer equipment.

Of course, that does still leave that problem of funding. But that’s going to be a problem in boom times too. A rising economy will deliver more money and a greater supply of angels and investors, but there are also more start-ups chasing that cash and booking appointments with those investors. The dot-com years, when it was possible to add “dotcom” to the end of a word and pick up a check for million bucks, are unlikely to return. But not all the money in the world has been wiped out and investors are still looking to put their funds behind a good idea. You might need a business plan that’s more persuasive and shows a faster road to profit than usual. And you might need names on the board that investors recognize — or which at least turn up well on Google. But if the idea is sound, and you push hard enough, you should still be able to find at least some of the funding you need.

Or best of all, the squeeze will make you discover that you didn’t actually need as much as you thought you did. Entrepreneur Rich Christiansen started CastleWave, an SEO firm, with a budget of just $5,000. It’s now worth over a million bucks. If he’d taken that to an investment firm, a large chunk of that value would have belonged to the investors.

Recessions are difficult for entrepreneurs because everyone is cash-poor. On the other hand, there are plenty of people who are also time-rich. Make the most of that time, invest it wisely, and you should find that when the economic tide rolls back in again, you’ve already built the kind of foundations that will keep your company afloat in good times and bad.

One Comment

  1. Dennis Says:

    Many thanks for the article ! Just in time :) I am planning my own start-up and your article gave me some support since I've realized that I am not alone thinking this way. Oncea gain, thanks !

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