Reasons to start your startup in a bad economy
I have recently had a discussion with a friend who wants to start a technology startup and was absolutely overcome with fear on how a bad economy will affect her and her business. We talked about all of the issues that she would have to face…the biggest one of them was financing.
After reading Paul Graham’s blog post & watching Kevin Rose’s video today, our discussion was confirmed….technology companies with a sound idea and quality founders really make startups recession proof and in fact, a recession may actually be a good time to start your startup.
Here are some points to take away from Paul post:
- Technology progresses more or less independently of the stock market. So for any given idea, the payoff for acting fast in a bad economy will be higher than for waiting.
- Startups often make things cheaper, so in that respect they’re better positioned to prosper in a recession than big companies.  The cheaper your company is to operate, the harder it is to kill. Fortunately it has gotten very cheap to run a startup, and a recession will if anything make it cheaper still.
- Another advantage of bad times is that there’s less competition.
- As a founder, you’re an investor….you’re buying stock with work..and like any investor you should buy when times are bad.
You should also watch Kevin Rose’s video where he explains how he used these points four years ago when starting up Digg.com
Like I told my friend don’t fear, be smart, build a business model that is sound, and leverage the opportunity!
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Recession Proofing
Scaling back?
Canceling projects?
Losing budgeted money?
How do you decide what to keep and what to cut to survive potentially another 12-18 months of rockiness?
- Stay Invested In Your Strengths and Niches
Be it looking at yourself or your team, keep the strengths and niches you own in tune and ahead of the pack. - Buy Low, Sell High
Have cash lying around you know you need to use by fiscal year end? Nows the time to put your negotiation hat on to get what you’ve been needing to either exploit a niche or retool. - Where to Cut, Where to Grow
Don’t know what your core competencies, or bread and butter work, is? Or, not sure where you are overspending? Better yet, when was the last time you looked at a business dashboard or report that told you where your revenue and costs were coming from?Often times, while we are searching for ways to cut corners by going to open source or hosted technology, we forget about finding ways to generate more revenue. What if you start adding ads to your website? Or tackling a new industry with the same resources you have? Don’t let cost cutting take control of your business development needs.
Remember, it’s key to look at historical information before making decisions on you and your business. Don’t let emotion get in the way of your business nor your career. While you may not need that employee you’ve invested in for the last 10 years in the next 2 months, it will take a year’s worth of salary to hire and train a new employee when you need them in say 6 months.
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