I was speaking to a group of entrepreneurs a few weeks ago when somebody asked me: “But what about this economy, these times . . . does it make sense to start a business now? Shouldn’t we all wait for things to clear up a bit?”
Ah yes, the voice of doom. It does us good to be reminded. And don’t think I’m making fun of the VOD, in any way . . . a business ought to be able to answer this kind of question at all times. Asking the question is a good thing.
I said that it depends. Startups usually develop around microeconomics, specific offerings to solve specific needs or wants. Usually they’re very much about you, your market, and your plans. Is it right for you? And have you done a good job looking at the market; have you done your basic numbers? Will they work for you?
This economic downturn is also a great argument for the simple essential of planning: planning where you’re going, if your business already exists; and planning what you’re going to start, if you’re starting one. Your planning should include the basic numbers, such as a sales forecast and expense budget, and those basic numbers should incorporate the impact of troubled times. Be very conservative.
What brings this up for me today is Economy to Entrepreneurs–Turn Back in The New York Times over the weekend. Reporter Julie Bick tells a good story about a woman who closed her business and took a job. She adds:
Amid the current economic turmoil, many entrepreneurs and small-business owners like Ms. Reed are debating whether it makes sense to seek safety in the corporate life–and deciding that it does.
Research has consistently shown that the share of employment and sales accounted for by small businesses tends to be more cyclical than for large ones, says David B. Audretsch, a professor at Indiana University and the director of the Max Planck Institute of Economics in Jena, Germany. When the economy expands, small businesses gain more than large companies. In an economic downturn, small businesses tend to be hit harder.
The pessimists, or skeptics, do us all a service. Think about these things: not just to worry, but rather to absorb the increased uncertainty into your planning and move forward, if at all, slowly and carefully.
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
