Starting up when things are down

Business Matters’ ‘Get into Business’ series has continued from Edition 17 where we introduced alternative options for the bothered, recession-beaten job seekers who have chosen to explore the possibility of getting into business for themselves through franchising. This edition hosts the second part of the series, which will focus on entrepreneurs and the main challenges that come with building your very own business from the ground up, particularly when everyone else is down.

Apparently, one of the first stops on the entrepreneur-in-training path is to consider a quote made by international author and speaker, Dr Wayne Dyer. He has said “when you change the way you look at things, the things you look at change.” With that in mind, I guess there are two ways to look at the economic condition at present. We can cry. Or, we can sell tissues.

Sunshine Coast Innovation Centre entrepreneur-in-residence Nigel Hall claims that the current economy may just be the perfect time to back yourself in business.

“Economic unrest means that we are in a time of change and change breeds opportunity,” said Nigel. “In many cases the old proverb applies, ‘Necessity is the father of invention’, so in these times of economic uncertainty many people will look to create a business and be successful at it.”

Some of the world’s best companies were born during a recession, primarily due to the fact they addressed a need that continued to be successful even as the economy rebounded. Think about it … if your business can survive in a recession, think about how it may just explode once the economy picks itself up again.

“Successful start-ups needs not re-invent the wheel but maybe just how the wheel is used or the service which accompanies the use of the wheel,” Nigel explained.

Successful entrepreneurs have an ability to identify an opportunity in a niche market, which could simply mean a more specific target audience, upgrades, a product innovation, improved method of service, or more competitive prices.

“Very established industry has room for innovation and start-up companies are the best innovators as they have no established history, hence there is an opportunity to operate within a sector of each market,” said Nigel. “Generally, you cannot compete directly in high capital infrastructure businesses, but can operate within this market by providing alternative service types rather than generic services.”

“A good example of this is Skype, which with little infrastructure, has established itself within the capital intensive telecommunications market by offering voice services over alternative technologies.”

On the flip side, there are businesses that sprout from directly taking advantage of the recession. However, this approach comes at its own risk.

“Start-ups that can tap into a non-price sensitive market may be able to create an initial high growth but will need to ensure they are on the top of their game when the market situation changes,” explained Nigel. “Good examples of this are when a legislative-driven market anomaly exists which then disappears over time, such as solar subsidies, insulation and first home buyer’s grants.”

In addition to the business ideas that are available, there are great value deals in the marketplace where products, services, equipment, outsourcing and commercial office space are all available for better value than during the good times. As well as great resources at affordable rates, there are also a variety of tax benefits that can only be accessed by employees.

There are no guarantees, so these factors alone should not be the sole reason you hurry to launch into business for yourself. However, careful thinking and planning can greatly improve the chances of success.

According to Nigel, the timing of starting up a business should be dictated by the market opportunity and the preparedness of the business founder to achieve the goals of that business.

Therefore, the entrepreneur must undertake a few essential steps before just opening the doors to trade before the markets begin to pick up again.

“They will need to consider how to best apply their skill set to the business as it grows. They may be a great start-up manager, but are they really the best person to manage growth?” said Nigel. “Putting the people and structures in place to manage growth and learning to let go are key skills on the road to success.”

Nigel has suggested the following tips to make the most out of an opportunity, like all great entrepreneurs do. 

Research. Documenting the opportunity is essential before actually founding the business. You must implement basic marketing theory and establish the 4Ps, which are the product, price, promotion and position. You will also need to understand your target market, market share, competition, and your unique-selling proposition.

Plan. Before you get started, you will need to create a written business plan that documents your research in categories that include goals, objectives, target markets and strategies. This includes a SWOT analysis that will cover your business proposal’s strengths, weaknesses, opportunities and threats.

Funds. Ensure there is sufficient funding in place for the initial period until the business is in a position to be cash-flow positive. Coastal Business Brokers principal licensee Brendon Crabtree said that too often, business owners draw on the business’ income before it is making a profit.

“New business owners need to allow for at least one year of cash to survive, so the business can establish itself.” In fact, a lack of working capital is often one of the key reasons why a majority of start-up businesses fail within the fist year. 

"The reason for a high failure rate is often lack of planning (failing to plan is planning to fail), which results in lack of funds for the business,” said Nigel.

“Many start-up businesses fail in the early days and to some extent, this is a natural process as people realise that they are not unique with their idea, or have not been successful targeting their client base,” Nigel said.

Although, “failing early is better than running for three years and then failing as you can learn from your experience get back on the horse and ride again,” he said.

It seems that provided you choose the right type of business and go about it in the right way, there are plenty of opportunities to succeed, even at the moment.

But can anyone really be an entrepreneur, or are entrepreneurs simply a rare breed of people who conjure up successful ideas?

“Any business owner is an entrepreneur, however start-up entrepreneurs differ from normal business owners in that they focus on creating change and innovation with an existing market, whereby the average owner will be focused on maintaining the status quo,” Nigel said.

This Articles Comments

Comment on this article

Name (optional)	Rate this (optional) Bad Good
Email Address (optional	Your Comments
Website (optional)
Captcha