If hard times are the handmaiden to invention, 2008 will spawn many start-ups. Third-quarter data reveal why: Real inflation is above 5 percent, and unemployment is at recession level. Housing and credit markets are at 70-year nadirs. Job growth since 2001 is the worst since the 1940s.
Now is the optimal time to start a business: “Boldness has genius, power and magic in it.” (Goethe)
Being one’s own boss is part of the American Dream. For underemployed minorities, entrepreneurship has been more about survival than choice. But today’s young opt for enterprise, aware that success mutes prejudice, subtle or overt.
Entrepreneurs are self-confident risk takers. When money is easy, the less capable find funding. But in recessions, only the most competent will attract talent and capital, no matter the concept. Those able to start in lean times gain major competitive advantage.
The skills learned, of conserving capital and operating on thin margins, are invaluable when economies rebound.
Working for someone never made anyone rich. A job provides money, but creates no capital (wealth). Wages are stagnant, up only 2 percent for college grads since 2000. Investor Warren Buffet noted that, for two decades, the average American has gone nowhere on the economic scale.
“He’s been on a treadmill while the superrich have been on a spaceship,” Buffet said.
But what of the dependable paycheck? Job security is fantasy. In “at will” states such as Florida, employees can be fired without notice or cause, unless prohibited by contract (ask an attorney).
One economist describes today’s workforce as the “YOYO” (You’re On Your Own) paradigm. If a worker can be ditched at whim, what job has status?
Big corporations shed workers. Entrepreneurs create jobs. Every start-up fuels the nation’s GDP (gross domestic product). Every business builds capital for its owners and shareholders. A business owner, at retirement, can cash out by selling or transferring equity. A retiring job holder has no end-of-career dividend but Social Security and, it is hoped, personal savings.
The economy will recover, and investors will seek out ideas with profit potential. A business plan is a first step. Submit it to independent business critics, not to family members, attorneys or accountants.
Use online sites such as (www.) legalzoom.com, myflorida.com, and guru.com. Investigate ASP (application service providers) that offer on-demand software for sales and financial management, customer service, marketing and purchasing. Today, a small company can begin operations and present itself professionally at minimal cost.
Utilize the perks of downturns. Grab talent freed up by layoffs and bankruptcies. Learn the language of finance. Develop investor contacts. Seek out vendors offering new-customer discounts. Cultivate industry experts.
Afraid of failure? Consider that, in the past two years, high-IQ corporate America, with unlimited resources, has sustained losses (in banking alone) of nearly $1 trillion through hubris, poor judgment and entrenched mentality. Their business models failed. Your start-up can do no worse. You are smarter than you think, unlikely to lose billions of dollars of other people’s money, and less likely to ask for a government bailout.
Allow your business dream to flourish.
J.R. Rosskamp is an investor, entrepreneur and managing director of Veritas Partners, Inc., a business consulting firm. She can be reached at firstname.lastname@example.org.