Entries tagged with “recession”.
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For people thinking of starting a business but hesitating because of the recession, you’re out of excuses: a new study by the Kauffman Foundation finds that about half the Fortune 500 and Inc. fastest-growing companies were founded during recessions.
The study has three main findings:
1. Recessions and bear markets, while they bring pain and often lead to short-term declines in business formation, do not appear to have a significantly negative impact on the formation and survival of new businesses.
2. Well over half of the companies on the 2009 Fortune 500 list and just under half of the 2008 Inc. 500 list began during a recession or bear market.
3. Job creation from startups is much less volatile and sensitive to downturns than job creation in the entire economy.
While the Inc. list is dominated by tech-oriented startups, the study notes there will be service innovations in fields as old-school as retail and food service. I can attest to that: read Dane Carlson’s Business Opportunities blog for a mind-bending look at what entrepreneurs are coming up with every day of the week in industries as traditional as house cleaning and deck-building.
Need more inspiration? Read Leah Grant’s blog (The New Business Mentor) and sign up for her newsletter. Check out Pam Slim’s recent book, Escape from Cubicle Nation. And if you’re considering a franchise, there’s a very good new book on that subject here.
Posted by Mitchell York under Small Business Management
I was feeling rather shaggy this morning so I stopped at my local barber shop for a haircut before heading to the office. (Yes, that’s a picture of my haircut. I feel so much lighter!) The barber and I talked over the CNN News and got around to the subject of the economy. Turns out his boss, Mr. Tony, just bought one of the town’s oldest barber shops a few blocks away, on Main Street. They do about 350 haircuts a week there (at around $11 each). He reportedly paid less than six figures for the shop, which has a fabulous lease–the rent is only $900 a month. So the shop does around $200,000 a year in cash sales and rent is around 5% of that.
Mr. Tony also owns two other shops in town–the one I was in this morning and another two blocks away. He owns the land and the buildings they sit on as well. When Dunkin’ Donuts moved in next door they wanted to buy his shop to make room for additional parking, and offered him quite a lot for it. He turned them down. He didn’t need the money. He also owns two more barber shops in the next town over…and has a few rental properties in the area. He keeps a low profile. He’s only 34 years old. He does not invest in the stock market. Why bother? His businesses generate plenty of cash dividends for him.
I think small business entrepreneurship is going to look more and more like Mr. Tony’s model in the coming years. Smart people will find a niche that may not be sexy but has low overhead and is reliable (i.e. recession-resistant). They’ll take advantage of opportunistic moments to buy out competitors, for cash. Then they’ll pick up a real estate investment here or there, just a simple house or two, with reliable tenants and a residual income stream. Mr. Tony could care less about the recession.
Posted by Mitchell York under Small Business Management
Here’s a situation that may sound familiar to many small-business entrepreneurs. A very bright woman, let’s call her Betsy, has a business providing ESL (English as a Second Language) instruction to corporations in a Spanish-speaking country where she lives. She works for some big firms in her market area and has a great reputation. Historically, her students have been engineers and other middle managers, and her client has been the HR department. Now, with the economy in recession, her pipeline is not as full as it once was. Training budgets–at least for middle-level employees, are being slashed. She feels nervous about the future of her business. If this trend continues, she will have difficulty making ends meet.
Here’s what our coaching led her to consider as she navigates the current turbulence with a view toward turning a problem into an opportunity:
- Plan your future market strategy. Are middle-managers your ideal clients? While they have been your bread-and-butter up until now, what about C-level executives? With business becoming increasingly global and more competitive, the advantage of being completely comfortable with English is no small issue to CEOs, COOs and others in the corner office. While Betsy’s business model up until now has been teaching classes of a dozen mid-level people at a time, she could reposition herself as an ESL coach working one-on-one with senior management–and charging a multiple of her current fees.
- When business contracts, go broader and deeper. She has identified a market of 20 companies in her area, mostly Fortune 500 technology firms. That’s a great start, but what about the hundreds of companies just under those big ones? Would their top-level executives perhaps have even a greater need for ESL coaching? And what about other-than-tech sectors–tourism, for example. Wouldn’t an up-and-coming hotel general manager need excellent English to advance in her company?
- Get in the business networking mix. How will Betsy get in front of these new prospects? She hasn’t spent a lot of time thinking about (or engaging in) business networking. But she’s smart, attractive and engaging and should have no trouble building a referral network through attending Chamber of Commerce events, joining a business referral group and making sure everyone she knows is aware of what she does.
- Craft a new message. When Betsy does get in front of these high-level prospects, what will she say? We talked about imagining meeting a potential client at an event. What would you say to introduce yourself? How would you find a way to ask, “Are you less competent in English than you want to be? Is that holding you back? Why do you tolerate it? Do you want to do something about it? What would it be worth to you to leave your insecurity about communicating in English behind you forever?”
Many small-business owners cling to their original business model, whether it was a model they intentionally conceived or one that evolved on its own. Entrepreneurial business has to evolve to survive. Betsy’s business teaches some valuable lessons about identifying new market segments, repositioning existing services (perhaps only slightly) to appeal to new customers, and evaluating pricing structures to be in line with customers’ expectations.
What else would you have advised Betsy to do or think about?
