Down Economy

[llcollins82]

Do you, or think that others, think that starting a business in a down economy is a risky move? Or just the right move to make?

I'm also curious if others are being cautious about starting a business during an election year, because we don't know who's going to be in office, or what the new policies will be.

Thoughts?

[KristineS]

I think starting a business in any type of economy can be risky. It also depends on the type of business. Starting a business that relies on people spending discretionary income, like a restaurant, might be a bit more risky right now than starting a business that people have to use when they need it, like furnace repair.

I'm not sure that the election makes any difference. I think most people know by now that what a lot of politicians say they will do and what they actually do can be two very different things.

[cbscreative]

I think most of the members here share the same perspective that the economy is overrated. The ones who suffer are the ones who listen to the news too much. Think about it, the news media has made it their mission to tell you everything that's wrong, and many people soak it up like a dry sponge.

I think it was Henry Ford who said, "If you think you can, or you think you can't, you're right."

Small busineses have a huge advantage in the market. They have the opportunity to be the most flexible. Think of the difference between a cruise ship and a speed boat. The cruise ship may have a size advantage, but it is not very manueverable. Sometimes, it can't turn fast enough to avoid an iceberg. A speed boat can go places the cruise ship can't. It requires much less resources, and can quickly respond to changes or sharp turns in the river.

One thing that defines modern business is change. Large corporations are often so steeped in outdated practices, they are either having a difficult time adjusting, or even going out of business. The biggest obstacle for small business (as I see it) is lack of marketing savvy. Small businesses struggle or go under for a variety of reasons, but stinkin thinkin tops the list IMO.

The economy? It should be of very little concern if you know how to deal with it. People may watch their spending more closely when they feel less confident, but they do not stop spending. Your job as a business is to persuade them to spend it with you. If you do that, you win. If you lament over the economy and use it as an excuse to fail, you allow failure.

Sure, most of us have failed, I've had my share and then some. But failing is not the same thing as failure. Failure is when you let it defeat you.

I can't help but quote Thomas Edison here. He was questioned when trying to invent the light bulb. He had tried 1000 experiments that brought only disappointment, but refused to quit. Someone said to him, "Tom, you have failed 1000 times now!" Edison answered, "No, I have merely found 1000 ways that don't work." I may not have the quote exactly right, but you get the idea.

[Dan Furman]

What he said.... Don't worry about the economy. Really.

In general terms, a good business is a good business, in good times and bad.

[Steve B]

This year is much slower than last year. It started right around November. It would definitely be tougher to start a business in the current economy.

In my case, I offer a service that can always be put off until later - so that is what many people are doing. It is also affected by fewer housing sales - so that is also having a huge affect. Anyone I've spoken to that has anything to do with products or services for houses are saying the same thing. I take a bit of comfort knowing that my supplier is telling me that last month was their slowest month in several years - so, at least I know it isn't just me.

I hope this isn't all just in my head and I'm just allowing failure! In my case, I don't listen to the news at all. I haven't watched a newscast or read a newspaper in 10 years - no kidding.

[cbscreative]

SteveB, your case is more difficult than many others, especially since it involves a specialized market: pet owners who are also homeowners. There is one possible strategy that comes to mind for your situation. If you could target those selling their home, this could work because it's tough to sell in the current market. I'm thinking postcard so your simple message doesn't have to be opened.

Here's the idea. Create a message that asks the simple question, "Have any pet owners looked at the home you are trying to sell?" Anyone trying to sell needs any advantage they can get in the current market. So while putting off the pet fence seems logical, maybe you can get them thinking that for a small investment, they could offer an advantage that many other homes don't have. I don't know the percentage of people with pets, but I'm sure it's plenty high and could be used as a selling point to those home sellers.

I also had another thought on this. I don't know if your competitors offer or promote a transferable warranty, but that would be an important benefit to promote.

[llcollins82]

Wow, it seems like most of you think the economy has no bearing on a business's success at all. I do agree with Dan, saying a good business is a good business. If you have a great product or service, you will prevail.

Possibly businesses are suffering from this "down economy" because others are listening to the news casts about the bad economic times and not spending money because they are trying to save theirs for a rainy day?

so maybe if we weren't told we were in a down economy, we wouldn't be perpetuating it?

[cbscreative]

so maybe if we weren't told we were in a down economy, we wouldn't be perpetuating it?
There's a lot of truth to that. I've used this quote before, but it's worth repeating. Im not sure exactly how it goes or who said it, but it goes something like this, "The news media has accurately predicted 15 of the last 3 recessions."

[ParisCreative]

I think there are two sides to this economic coin. First you have the hear bad news. They may see the impact hit them like rising fuel costs, which helps solidify the claim of economic bad times, and then they stop spending. They might be economically sound otherwise, but they just feel down about the economy.

The other side is those that feel it. Hell I know I am one of those people. My family dropped down to one income to have kids and our debt has exploded. It can still be managed but when you are carrying big debt, work a day job that you wonder if it will still be around, and scrape money to do simple things like get gas, then economic times are bad for you regardless of anything else.

There is certianly a lot of merit to the "feels bad" economic times, but there are plenty of people that it's directly impacting.

[Steve B]

That's not a bad idea Steve. About 30% of the population has a dog. It's an approach I plan to use with builders to give them one more feature when selling the house. Unfortunately, I don't think the average homeowner would take the chance to spend the money since 70% of the buyer's wouldn't care.

llcollins82 - I wouldn't say that two opinions makes a majority that a down economy doesn't hurt business. I'm certainly not of that opinion.

I think the real question raised by CBScreative is more a question of what came first - the down economy or overstated and premature reports of a down economy - thus causing a reduction in spending. Based on most traditional ways of measuring an economy - we are certainly "down", but perhaps it was caused or accelerated by doom and gloom reports from the media.

[cbscreative]

SteveB, another angle to consider on home sellers is that maybe they wouldn't be motivated by the 30% chance, but you could still take advantage of the fact that this represents about a 1 out of 3 chance that the buyer could be a dog owner. The homeowner could offer the pet fence as an optional part of the deal if needed, then they wouldn't have to have it installed in advance. For the homeowner trying to sell, they could attract more pet owners as potential buyers and the "extra incentive" could help make the house sell. The seller would pay for the pet fence after closing.

I'm not sure of any legalities involved, but I do know that home sellers often provide added incentives at close to help attract buyers in a lean market.

[KristineS]

SteveB, another angle to consider on home sellers is that maybe they wouldn't be motivated by the 30% chance, but you could still take advantage of the fact that this represents about a 1 out of 3 chance that the buyer could be a dog owner. The homeowner could offer the pet fence as an optional part of the deal if needed, then they wouldn't have to have it installed in advance. For the homeowner trying to sell, they could attract more pet owners as potential buyers and the "extra incentive" could help make the house sell. The seller would pay for the pet fence after closing.

I'm not sure of any legalities involved, but I do know that home sellers often provide added incentives at close to help attract buyers in a lean market.

That's really not a bad idea. I know when I bought my new place we put a lot of conditions in. Because the market was so tight, the buyer agreed to almost everything without a murmur. He wanted to sell. A pet fence might be a very attractive benefit to a new owner particularly if it's paid for by the seller. That also opens your market up. You could pitch the deal to any homeowner who is selling their house, not just the ones with pets.

[orion_joel]

I think that the one thing that is a key in a down economy is learning how to operate to take advantage of it. In all seriousness if you can survive in a down economy then in a flourishing economy you should be able to profit to a major degree.

Also as has already been said it is much easier to adjust to the economic conditions for a small business.

[BillR]

Except for times like the Great Recession there really is no such thing as a down economy - it's rather a question of what is doing well at the moment and, more importantly, what has proven consistent over time.

[Steve B]

I've never heard of that Great Recession. When was that? Or, did you mean the Great Depression?

Unfortunately, for me, what is not doing well right now is anything to do with home buying or just about any non-essential item that can be put off until later.

[BillR]

I've never heard of that Great Recession. When was that? Or, did you mean the Great Depression?


Man....yesterday was one of those days :)

[Steve B]

I figured that was what you meant, but I wasn't sure.

[orion_joel]

BillR, you know the one thing about the Great Depression is that there was still people who made money at that time. It was the few people that adapted that flourished.

It does not matter what the economic condition at all, it is looking at what you have and working with the times. I guess to some extent this does not really apply as a general thing to every business, if you go into a niche then it is hard to adapt because your business is still the business you are in. While in general i gaurentee you there is one industry out there that is profiting like never before. While non essential household products are not doing so well at the moment, i would assume that there are at least some of these non essential items people have been able to make sound more essential through their marketing.

[Business Attorney]

The are always bright spots and dark spots in any economy. With housing starts way off, this would probably not be a great time to launch a new business as a residential real estate developer in most communities (though I am sure there are exceptions). On the other hand, with more people staying in their homes, it might mean opportunities for businesses focused on home improvements. If sit-down restaurants are hurting, maybe there are opportunities for carry-out family dinners. If new car sales are way off, that may mean more demand for auto repair shops.

Looking at "the economy" as a single condition is a big mistake.

[cbscreative]

Great points, both Joel and David. Another interesting thing about the Great Depression is that the US lingered in it longer than other countries. Some have argued that the gov't programs set up actually extended the economic woes. I believe their is a lot of merit to that assessment. Even FDR warned of the dangers these programs could produce, but few these days are aware of those warnings.

Not to get off track with the role our gov't plays in creating recessions (e.g. housing bubble and oil crisis), but the points made above demonstrate that every challenge creates an opportunity. It's the opportunity that a successful business must focus on.

[KristineS]

I think attitude has a lot to do with it too. If you walk around thinking that the economy is bad, then you probably won't be as likely to try something new or to be alert for possible opportunities. If you are more positive about things, you'll be more likely to move when others might not, and so can capitalize on opportunities they may have missed.

[cbscreative]

Kristine, you put it very simply, but that says a lot, and I think you are very accurate.

[orion_joel]

One thing that plays the key in how the economy reacts and operates i think is how the news media reports it. I am sure i have seen a piece in one of the many recent documentary films i have watched maybe Zeitgeist The Movie (http://www.zeitgeistmovie.com) or it may have been Fahrenheit 9/11, though i think they both discussed it at some point, how what the news media broadcast tends to be what happens, especially on bigger national or global controllable events.

[KristineS]

I think the news does influence people's opinion. It's also hard to get the straight, unvarnished facts now days. Everyone puts his or her own spin on events.

[llcollins82]

Agreed, news does influence the public opinion, Kristine, and having a positive attitude when looking at the business or economic challenges can create great opportunities. Like David and Steve shared above, there are opportunities out there based on what the public is doing. I liked David’s analogy of starting a home improvement business if people are staying at home more often, and starting a carry-out or delivery service when restaurant attendance is low. These are all just other examples of taking advantage of the current situation.

Once a business can look at the situation positively, multiple opportunities can appear.

Another great analogy that I think can be applied to the business world is an old Chinese proverb that says the best time to plant a tree is 20 years ago. The second best time is right now. Our blog recently published a post explaining this very thing and how it can apply to **Spam removed**, regardless of the current economic situation. Thoughts?

[blogdog]

I don't think the economy matters. There's always opportunity and you can come up with 10,000 reasons of why something can't be done. When it boils down to it, you have to make it happen. As Wayne Gretzky said, you miss 100% of the shots you don't take.

[myemployee]

I think it's best to start or to continue positioning the business in customers' minds, in economical ways, during tough times. When the economy recovers, you'd be very well positioned to rake in customers while the competition are scrambling after the wait-and see period.

[Cornish Steve]

Do you, or think that others, think that starting a business in a down economy is a risky move? Or just the right move to make?

I'm also curious if others are being cautious about starting a business during an election year, because we don't know who's going to be in office, or what the new policies will be.

Thoughts?
There are opportunities for the entrepreneur in every type of economy. When there's a sharp downturn, for example, there may be opportunities for leasing versus buying or for more basic versions of standard products. In such an economy, people are looking for ways to save money, which is a need that a new product or service can meet.