Newsflash for the 8.4 million people who have lost jobs since December 2007: This could be a great time to start a business.
It might sound crazy, but recessions are powerful catalysts for would be entrepreneurs. It's a classic case of Schumpeter's creative destruction. As jobs are destroyed, tremendous amounts of talent and experience are released from their corporate moorings and creativity explodes. As people begin looking for new ways to ply their trades, the loss of employment becomes a springboard for a surge of business creation. I speak from personal experience because this is exactly what led me to start Willow Ridge Capital Advisors.
Speaking from experience
In early 2000 I left my position as a vice president and senior portfolio manager at American Express to be the Chief Financial Officer for Specialized Bikes, a dynamic small company with a powerful brand in a really fun industry. A year later, Specialized and I parted ways. By that time the tech market had crashed, a recession was in full swing, and I had five kids to feed. I was faced with a monumental decision: should I try to find another corporate job, or should I use the opportunity to start my own business? After carefully considering all the factors involved, I chose to start my own business.
I'm not saying that starting a business is easy. In fact, starting Willow Ridge was one of the most challenging adventures I have ever had. But it has also been one of the most satisfying. In a very real sense, starting Willow Ridge Capital Advisors has been like carving out my own little acre on the frontier. I'm sure, in a very small way, this is how my great grandparents must have felt when they came west to homestead the frontier in the 1850's.
Seven Practical Tips
If you're thinking about starting a business, here are seven practical tips to consider.
1. Find a business idea that really matters to you. If you are trying to find an idea that matters, ask yourself some questions:
- Is there a problem that really bugs me?
- How much would I pay if someone could solve that problem for me?
- Do other people feel the same way?
- Is there somebody already trying to solve this problem?
- What are they doing well?
- How can I improve on what they are doing?
Start answering these questions and pretty soon you have a business that matters.
2. Take the time to write a thorough business plan. Your business plan should provide realistic answers to some very important questions, including:
- What products and services you will offer?
- What makes you passionate about it?
- Are you willing to sacrifice your life for it?
- Who is your competition?
- How you will differentiate yourself?
- How long will it take to get up and running?
- How much much money it will take to launch successfully?
- Where is the money going to come from?
- Do you have enough reserves to tide you over if startup takes longer?
3. Set high goals for your performance and hold yourself accountable. Sometimes I hear people say they want to start a business so they can be their own boss. When I hear that I wonder what it is they don't like about working for their boss. If they say their boss is too demanding, they definitely should NOT work for themselves. The entrepreneur who doesn't work for a demanding boss is usually out of business.
4. Learn from your mistakes, because you are going to make plenty of them. It's just part of the startup process.
6. Learn from others. There are some really excellent books out there. Here are a four that I think every budding entrepreneur should read:
- Purple Cow, by Seth Godin
- The Seven Habits of Highly Effective People, by Stephen Covey
5. Don't waste money. Unless you're personally swimming in dough, the main limiting factor for your business is going to be capital. Most businesses fail not because the idea is bad, but because the owner burns through capital too fast.So take good care of your capital and don't spend it on things that don't count.
6. Embrace uncertainty. You are going to have plenty of it as you start your new business, so learn how to deal with it constructively. If you can get yourself to see that uncertainty is really just another face of opportunity, you will be miles ahead.
7. Hang in there. If you have a business idea that matters to you and your business plan is sound, don't let set backs put you off. If the other six factors are in place, your persistence and patience and drive will see you through.
Starting a business isn't for everyone, but if you decide to do it, make it count. I mentioned my great grandparents settling the West. They were willing to put their very lives on the line for the life they were trying to live. Are you? If so, you may find that this is a great time to start a business.