It has been said, “necessity is the mother of all invention.”
Likewise, a recession and layoffs can prompt many people to consider the path of entrepreneurship. A recent report by the Kauffman Foundation, a leading entrepreneurial think tank, validates this trend. The report showed that approximately 530,000 businesses per month were created last year compared to approximately 519,000 per month in 2007. Notably, the formation of high potential income new businesses was down compared to low and middle-income potential businesses which were up. This trend indicates that many of the new businesses were probably formed out of necessity.
There is a myth that entrepreneurship is only for those with a high tolerance for risk.
The truth is that successful startups are founded by people from all ages and backgrounds with a passion to bring their goods and/or service to the market and who effectively manage risk in changing environments.
Whether you are exploring a career shift to being an entrepreneur or your business is trying to consider how to weather this storm, I have listed below some of the ways savvy individuals and companies are capitalizing on the state of the current economy:
- Offer More for Less. Most businesses are trying to stay competitive in a difficult economy utilizing less. Often with fewer people and less budget, managers are being challenged to squeeze increased productivity out of their limited resources. If your value proposition allows your target customer to do more with less, then you will always have a market.
- Find Your Treasure in Another Person’s Trash. Many businesses are buying up fixtures and supplies at a fraction of the cost from companies that are downsizing or closing their doors. Similarly, proactive entrepreneurs are buying up distressed real estate, businesses, bank loans, and even whole banks at incredible bargains. These are people who don’t adopt a doom and gloom mentality but think clearly in times of difficulty and make sound long term investments.
- Go on the Offense When Your Competition is on the Defense. As companies are pulling back their spending and hunkering down, customer service, marketing, and product development often suffers. This is a golden opportunity to go on the offense to grow your market-share. As big companies have frozen their R&D budgets, now is the time to bring your innovations to market. Also, many companies are re-evaluating their supplier relationships to find cost savings. Again, this allows you to step in and offer “more for less”. As one entrepreneur stated “the hungriest wolves hunt best.” This is the time to be on the hunt, not playing defense.
- Go Fishing for Talent. Whether you are looking for full time employees or part time contractors, now is the time to find talent at reasonable rates. Big companies are not just laying off their poor performers, many are laying off some of their best and brightest people as whole divisions are being forced to close. This is a great time to strengthen your organization by attracting top talent to join your team. Don’t get caught up trying to make everyone a fulltime employee. Skillful entrepreneurs know the value in “renting” mind share from the best and brightest people.
- Show Me the Money. Even though bank financing is still a scarcity, you may discover that finding investors is an available option for your business. Since most real estate and stocks are not attractive alternatives right now, there is a tremendous amount of cash waiting to be deployed. I am finding that the right deals are still being funded by those wanting to deploy cash in “real” businesses.
I don’t discount at all the pain and hardship that many people are enduring as a result of an economic meltdown. However, I want to encourage those who seek to find opportunity out of difficult circumstances. Those with a “glass half full” mindset may find that even career and business decisions driven out of necessity may turn out to be tremendous blessings in the long run if strategic thought and action is properly applied.