Why now is a great time to start your business

By Phillip Chichoni

Mary decided to start a business earlier this year. With a capital of $10,000 that she got from her husband she went to China to order her initial stocks, consisting of family clothing, shoes, domestic electrical goods and some cosmetics. She knew these were fast moving products as she had seen her friends selling good quantities daily at the Avondale flea market. If all goes well, she thought, I will double my investment in a couple of months, as Jennifer her closest friend said she had done.

When I met Mary at a business event recently, I asked her about how the business was doing. First she told me her story and the frustrations she has faced so far, especially due to the current liquidity crunch which has hit consumers and is resulting in dramatic dropping in sales. She wanted to know my thoughts about the current recession, if was going to end soon before many small businesses collapsed. Her biggest desire was to find a faster way of making money; some product that she can supply and sell faster than her current slow moving products. She said she was otherwise regretting going into the flooded clothing market.

Mary’s scenario is the moment of truth that many entrepreneurs are facing in this environment, marked by low cash flows and reduced consumer spending. These are typical manifestations of a serious recession. The rest of the world has been experiencing it since the financial markets collapse of 2008. Before that there was one in the early 80s; prior to that there were serious economic slumps in the 1920s to 30s, 1950s and 1970s.

But the history of entrepreneurship around the world is flowered with success stories during serious recessions.

  • Motorola was started in 1928, a year before the great depression began.
  • Disney was founded in 1923
  • Hewlett-Packard started in 1939. One of their first customers was Disney Studios.
  • Xerox began in 1906 during the post World War I recession.
  • Ryder was founded in 1933.
  • Revlon began beautifying women in 1932 with opaque long lasting nail enamel.
  • Converse was founded in 1908 during the Banker’s Crash that started in 1907.
  • Interstate Bakeries (makers of Twinkies) began in 1933.
  • Sports Illustrated began in 1954 at the tail end of a recession.
  • More recent examples include FedEx and Microsoft – both founded during the Stagflation of the 70s.
  • CNN, USA Today, and MTV all started in the economic slump of the early 80’s Wikipedia was born during the post 9/11 recession.
  • Econet was started in Zimbabwe in 1998 in the midst of serious foreign currency shortages and fierce resistance from the authorities.

These notable companies became great successes. But that doesn’t mean there were no failures. There were thousands of companies that were started but failed to make it past the infancy stage or to make a significant impact on the market. The difference between success and failure is not necessarily a matter of timing.

Times of recession are both a renewal and a restructuring of the economy, which present great opportunities for entrepreneurs.

Entrepreneurs see opportunities among problems

Successful entrepreneurs solve problems. What do you do when you face a problem? You look for solutions. When you have a headache you look for painkillers. Successful entrepreneurs create painkillers for other people’s headaches. The bigger the problem you solve, and the more people it affects, the more money you will make.

Mary’s problem, as she admitted, is that she followed what she thought was an opportunity, when in fact the opportunity had already passed. Any market that has many players and has little barriers to entry is not an opportunity; it is a commodity market. Commodity markets are notorious for product flooding, low margins and price cutting as supply is greater than demand and customers easily shift to the lowest price supplier.

To succeed, you have to ask yourself if the business you want to start presents a real and profitable opportunity. What consumer problem does it solve and how many people are affected?

Take time and think. Research the market. Study your competitors. Sometimes great opportunities present themselves without too much thinking. For example one mother in America, Nicolle Donnelly, was having a problem with her daughter’s diapers. The baby was having a recurring rash and it needed fresh air to heal. But she also wanted to keep her baby warm. In a moment of inspiration, she snipped the feet off of a pair of socks and fitted her daughter from hip to ankle with these new “leg warmers.” They not only kept her daughter warm, but also made diaper changing and potty training easier, and protected her soft knees while crawling.

Soon, she was selling them to other mothers out of the back of the diaper bag. Baby Legs was born. By the time baby Sarah started kindergarten, Baby Legs had grown to be a multi-million dollar international business. (Source: http://www.cbsnews.com)

 

The best businesses make a meaningful difference

In good times and in bad, the best companies are those that deliver the best value to their customers. As Peter Drucker in The Effective Executive admonishes, replace the quest for success with the quest for contribution. The critical question, he says, is not, “How can I achieve?” but “What can I contribute?”

Most of us started small businesses to make a living, maybe after losing a job, failing to find employment or not being satisfied with the low salaries being paid by our employers. As a result we were more interested in making a living rather than making a difference. To really succeed in business, we need to shift our way of thinking.

When I started my business consultancy and training service firm, (Admiral Business Systems) I thought business owners would rush to benefit from the knowledge I offered to improve their businesses. After two years I discovered that my approach was not working so I changed it. Instead of telling customers  how good my services were, I began focusing on how I could help them solve serious problems they were facing and contribute to their business growth: like how to get their loan applications to succeed, how to get more customers and how to become tax compliant and get tax clearance. These were tangible benefits, which made meaningful differences to their business. The growing number of new customers proved that this was the better approach. The customer does not care about your skills or qualifications, all he cares about is his urgent problem and how it can be solved.  So focus on making a contribution.

They never play alone

Arsenal former football club player, Dutchman Robin van Persie, is one of the best strikers in world. Last season he scored 30 goals to become the highest scorer in the English Premier League. Not only did he score, but he provided nine assists- direct passes which led to another player scoring- more than any other top ten scorers except Emmanuel Adebayor, who had 17 goals and 11 assists.

A business, like soccer, is a team sport. Even if it doesn’t include employees, it requires other team members such as customers, suppliers, vendors, sales and marketing people, bankers, accountants, lawyers, mentors, advisors, community organizations, etc. These are people who you have to play with in order to win. You will never win if you go it alone. Find people who can help you grow your business and work with them. Bottom line is that winning businesses have winning teams. Success is, in large part, a result of the quality and quantity of relationships.

So, as you get started on your new business, remember these tips.

 

What have you found to be the most important factors to your business success and growth?  Let’s discuss. Post your comment at our website or on the SME BusinessLink page on Facebook, or send me an email: chichonip@smebusinesslink.com. Don’t forget there are always new business resources you can read or download at our website http://smebusinesslink.com.

Don’t forget the Businesslink Networking Breakfast meeting on Friday 24th August and the Inbound and Social Media Marketing Seminar on Thursday 23 August. Details here.

 

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One Response to “Why now is a great time to start your business”

  1. Well done this is a balanced, and researched article. Keep on
    enriching us in the network.

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