Nadav Kidron, CEO of Oramed Pharmaceuticals, speaks at Global Entrepreneurship Week event set off by PresenTense and ROI. To view the video of Mr. Kidron's speech please go to www.presentense.org/live and select the video in the On Demand library.
What are opportunities? What are limitations? Is the current economic situation a limitation, or can we reframe it as an opportunity?
It’s important to look at a problem and determine which of the opportunities are real, and which are limiting you. At the same time – which of the limitations are real, and which are actually opportunities? Teena Selig, Stanford Technology Ventures Program The $5 seems like an opportunity, but it actually limits the way the students might look at the problem; similarly, it might seem like a limitation -- only $5! However, the most successful projects didn’t even use the $5.
"Starting a business in a recession is like vacationing in the off-season. It's a little less crowded, and everything starts going on sale." ( http://discussionleader.hbsp.com/gergen-vanourek/2008/08/why-entrepreneurs-love-a-downt.html )
(buying closing businesses, propoerties) Some goods and services become more cost effective. Overall, many products and services become more affordable as the market price waivers and vendors find it necessary to slash profit margins. Prices for office space has dropped around the country. You may be able to buy used office products on the cheap such as office furniture. Vendors may become more willing to negotiate better terms. In fact, some vendors may be willing to barter services or take a percentage of the company in exchange for the providing the products and services you need to get started. This is a strategy I’ve employed starting my own businesses.
outsourcing, job placement)
“ Smooth seas make a poor sailor”
Fewer balls to juggle a. Gary Erickson discovered some real advantages to starting Clif Bar smack in the middle of a recession, like contract manufacturers hungrier for business. As an entrepreneur in start-up mode, Erickson had the luxury of focusing on just a few key things--product development, sales and marketing, packaging, distribution--while his competitors languished in a parade of financial challenges. ( http://discussionleader.hbsp.com/gergen-vanourek/2008/08/why-entrepreneurs-love-a-downt.html )
Customers are more likely to re-evaluate their brand loyalties as they seek less expensive alternatives.
Quality talent becomes more affordable. Not just because people have been laid off but because, in light of large corporation vulnerability, they may be more willing to take a chance on joining a startup. Some small company vendors and freelancers may become more flexible on payment, although the reverse may also be true. Vendors can also become more rigid about payment or require more substantial monies upfront.
The Office
Focus on selling necessity-based products or services. Even in a downmarket, consumers and businesses need staples like computer services, and food and trash collection. Ironically, luxury items like boats and designer shoes can succeed if you can hang on long enough for the business to catch fire. The trick is to avoid the middle market, whether it's a mid-priced restaurant or a picture framing service in a modest neighborhood. If people can opt for a less expensive alternative or delay a purchase while times are tough, that's not the business to be in.
Use guerrilla marketing techniques to get the word out. There are dozens or even hundreds of free or inexpensive ways to promote your business without sinking a fortune into advertising. A new coffee shop, for example, could give away 1,000 coffees for the first five days with relatively little expense to help publicize the business as well as attract people who might become repeat customers. You can also paint a car to advertise a local business, write a column for a local newspaper and so on. Jay Conrad Levinson's guerrilla marketing books and column are filled with other ideas.
Sign a few big customers at a discount. Many kinds of businesses can cover their overhead with one or two big contracts, so it's worth it to give those customers a price break. If you're a one-man PR agency, having one or two major clients can pay the bills. If you're a swimming pool builder, striking a deal with a couple of building contractors might keep you going while you look for more profitable projects.
Hire part-time employees or outsource part of your work to keep your costs in line. Sources like Guru.com can help you find freelancers who can take overflow work or specialty jobs so you don't have to invest resources employing people who will be underutilized. As your business grows, you can add more full-time employees.
There's no reason to buy brand new furniture, for example. Go to an auction to outfit your office; it won't kill you to sit in someone else's chair for a few years. And limit your long-term commitments. You don't need to buy or lease a copier. That's what FedEx and Kinko's are for.
Many businesses that are for sale are perfectly viable, but the owner has run out of time or energy or simply isn't cut out to be an entrepreneur. If you buy the right business (and books like my Billionaire in Training can tell you how), you will already have a foundation and an income stream that can be nurtured rather than having to start from scratch. You may pay a little more to get off the ground, but you'll have money coming in from day one.
Existing businesses will be looking for ways to put their excess capacity to use and may be willing to work with you. Online bartering exchanges, such as BizXchange ( bizx.com ), have listings for services like IT help and logo design. ( http://w ww.inc.com/magazine/20080501/starting-up-in-a-down-economy_pagen_3.html )
Downturns are actually a great time to sign up new accounts . That's because companies are examining every expense for ways to save. If you can offer a better price than their current vendor, you will have a decent chance of winning their business. ( http://www.inc.com/magazine/20080501/starting-up-in-a-down-economy_pagen_2.html )
Offer a discount to customers who pay up front. They save money, while you get what every start-up needs, which is cash flow. (You may want to cut a deal with only one or two customers, however, to avoid being tagged as a discounter forever.)
If you can afford it, offer customers generous terms . If they are used to paying their vendors in 30 days, offer 60-day terms. Their current suppliers are unlikely to be as flexible, which means you will be offering the client something unique.
I f a local company has layoffs, call its HR department . You may be able to work with the company or with its outplacement agency to identify seasoned workers who would be interested in joining your start-up or working for you on a contract basis. ( http://www.inc.com/magazine/20080501/starting-up-in-a-down-economy_pagen_3.html )
Businesses starting in a recession need more cash reserves than in other times, and he stresses the importance of being flexible."Don't commit to a five-year lease on an office -- there's plenty of very short term office space around. Rather than taking on a lot of employed staff, work with consultants and freelancers," he said.
Growth can mask problems . Are you on top of purchasing? Shopping around aggressively? Adopting new technologies that can help your business run more efficiently? Spending your marketing dollars wisely?
Don't be tempted to gut your advertising . Companies that continue to advertise come out ahead after a recession, according to studies by McGraw-Hill Research. And that makes sense: If your competitors are in retreat, you can build your market presence.
The Office – Altoids Pavlov Experiment
Some businesses actually do well during recessions; they're "countercyclical."
Money = As both business and consumer debt mounts in a recession and companies need to collect every possible dollar they're owed, debt collection agencies, companies that specialize in repossessing items and bankruptcy attorneys are at their busiest. If you're good on the telephone, probably the most feasible of this type of business is a collection agency. The American Collectors Association offers a CD-ROM that will provide you with some training, and you can either buy or lease collection-specific software from a number of companies. Pills = During hard times, stress is higher, and therefore people's health suffers, causing a greater need for health care. Traditionally, health care was considered recession-proof; however, during the '80s, health-care providers took their hits, too. Still, health-care-related businesses like medical coding and medical transcription can do well. But these do require training that takes time and money. Swiss Army Knife = Repair services, when it's less costly to repair something like a computer than buy a new one Letter = Résumé writing, because lots of people are seeking work, and the better their resume, the better their chances of getting an interview Secretary = Secretarial services and bookkeeping for small businesses for which outsourcing their work is less expensive than having an employee do it Ice Cream = Another avenue to explore when considering what products or services to offer in a recession, is the concept of the affordable treat. “When times are hard you have to satisfy people’s emotional needs beyond just value,” said Surguy. “ In the last recession in the early 1990s one of the things that was successful was Häagen-Dazs ice cream. It was luxurious in its sector, but it wasn’t hugely expensive and so was an affordable treat.” http://business.timesonline.co. uk/tol/business/entrepreneur/article3821727.ece?token=null&offset=12&page=2 Old Couple = He thinks one fer tile area for would-be entrepreneurs to target is the over-fifties market — consumers who are relatively recession-resistant. “ In an uncertain economic climate, the one section of the community that is still growing is the over-fifty marketplace. They have equity in their property, they have savings and they earn a bit more as interest rates rise. “ They are continuing to spend on holidays, on hobbies, on sports and keeping fit, on interests, on lifestyle, on health and diet. So anything in those directions is a very big market.” ( http://business.timesonline.co.uk/tol/business/entrepreneur/article3821727.ece?token=null&offset=12&page=2 )
The Office – Future Dwight
Some businesses actually do well during recessions; they're "countercyclical."
South Park
South Park (if there’s time, a fun way to end the show) Morale: The economy is fickle - it goes up and down; whenever we’re in recession we forget that it won’t always be that way.
