Why now is a great time to start a business

Skyrocketing gas prices. An expensive, long war. Steep stock market declines. Decimated consumer confidence. Sound familiar?

The year is 1975—a terrible time to start a business, right? Bill Gates and Paul Allen didn't think so. That year, they founded Microsoft. Many other successful companies started up in that awful economic climate of the early 1970's: Supercuts, Chilis, Cablevision, Industrial Light & Magic, Famous Amos Cookies and Oakley.

Every recession produces similar examples. In 1939, at the height of the Great Depression, Bill Hewlett and Dave Packard launched Hewlett-Packard in a garage in Palo Alto. One of HP's first customers was another company that took flight during the Depression—Disney. In fact, 16 of the 30 companies that make up the Dow Jones Industrial Average were started during a recession or depression. These companies include Proctor & Gamble, Alcoa, IBM, McDonald's, General Electric, and Johnson & Johnson.

Why? What makes it possible for new companies to thrive when times are so bad? Why can it be a good time to start the next Intuit, Whole Foods, J. Crew, Costco, or Odwalla (all launched during recessions)?

Here's what happens in bad times: Disruption. Things change quickly and dramatically. With change come opportunities. And entrepreneurs seize opportunities—that's what makes them entrepreneurs.

Be on the lookout for these opportunities:

• Big corporations cut back. They slash their marketing and reduce their services, especially to "smaller" customers who might be great customers for you.

• Competitors weaken. It's likely that many of your would-be competitors are facing tough times, tightening their belts, perhaps retiring or selling out. Even many of the biggest companies are closing up shop.

• Customers seek cheaper alternatives. When times are good, customers are likely to stick with the suppliers they're used to — even if they're more expensive. Now, however, customers are looking for cheaper alternatives to get the products and services they need.

• Loyalties loosen. As competitors reduce services to customers, and as customers look around for cheaper alternatives, it means they're less likely to be loyal even to longtime suppliers.

• Entrepreneurs have more negotiating power. Bad news for real estate speculators and property managers can be good news for small business owners. If you're looking for office space, you'll find that landlords are more flexible with their lease terms and incentives. The same goes for negotiating with suppliers.

Specifically, what you can do:

• Be the inexpensive alternative. Target customers who use more expensive options now.

• Market aggressively. As loyalties loosen, your competitors' customers are more willing to jump ship.

• Innovate. Come up with new solutions, especially less expensive ones, for customers' problems; they'll be in a more receptive mood.

• Present yourself as an outsource source. For big corporations, you'll be less expensive than the in-house staff they're laying off.

• Hedge. In addition to your offerings, develop products and services that are counter-cyclical.

• Expand. See if you can acquire some of your weakened competitors.

In a world of good times, customers are happy, with the attitude that "if it ain't broke, why fix it?" But suddenly, things are broke — and they need fixing. You can be the fixer.

Even if you don't dream of starting a multi-billion dollar enterprise, history shows that businesses taking off during a challenging economy can prosper, and so can yours.

© 2009 by Rhonda AbramsThe Planning ShopContent and Tools for Entrepreneurswww.planningshop.com

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