- Frustrated with the news about the economy?
- Should I quit my dream and get a safe job at a big company?
- Is it possible for a startup company to succeed in the current situation?
Entrepreneurs can succeed even during rough economic times.
I started my day today by reading the local business newspaper Dagens Næringsliv. I ended up in the user forum section where I saw the following post:
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Norsk pop duo søker investor
Dagens Næringsliv Forum 22.09.2008
Hansen/Randow - søker investor ! De hadde tdligere i år en hit med låten "stay",som ble produsert av stjerneprodusenten Tommy Denander (jobbet med Eric Clapton Toto ,Westlife o.l) -og de vil nå starte et eget selskap som tar seg av alle hansen/randow`s aktiviteter (cd utgivelser .konserter o.l). De holder på med cd innspilling i Stockholm om dagen med Tommy Denander ,og deres neste singel "frustrated" ble utgitt idag .Video til denne låten ble spilt inn på Svalbard . Duoen jobber også medd mulighet for utgivelse utenfor Norge .www.myspace.com/hansenrandow
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For those of you who do not read Norwegian, it is titled “Norwegian pop music duo seeks investors” and goes on to tell that 2 young pop artists are looking for investors for their new company that will manage their future concerts and CDs. It was also reported that their new single, which will be released today is titled “Frustrated”. OK, I could not help but laugh, and I am not surprised they are frustrated. Many young entrepreneurs are frusrated and also scared due to the recent economic turn of events.
Entrepreneurs are not just frustrated, they are scared
Raising capital will not get any easier during the next year. As Investors batten down the hatches and hunker down for the storm, they will have less liquid capital and be less willing to take on new high-risk projects. This is not great news for small startup entrepreneurs in early stage companies, but economic slow-downs do not have to be impentrable barriers for new enterprises. Nonetheless, anytime is the right time to launch a venture if the opportunity is right and the entrepreneur has assessed the situation correctly. If an entrepreneur is going to launch a company based on solving a customer need that is vague or not clearly defined, then it is always risky, regardless of the state of the economy.
Starting a new business always involves risk, and as we all know roughly 50% of all startups fail within the first 5 years. A tough economy can make a launch even more difficult as loan standards will be tougher and consumer spending weaker. But depending on the nature of your business and location, you might find cost reductions. For example, your suppliers may offer you better deals, rents may be lower, and workers may be more willing to work less. When times are rough, people don't hold out for higher salaries. You can probably hire better people more cheaply now than when the economy is cooking.
Actually benefiting from a bad economy?
You have to balance all the factors to evaluate whether the current business environment will support your new venture. It may even work in your favor. First you have to ask yourself if you have the stomach for high risk and the commitment that you will need as an entrepreneur, then put your good business skills to work. Make sure to shape your opportunity to have a strong business model and a rapid revenue model that accurately assesses costs and the price the market is willing to bear. Focus on a carefully selected, small and manageable niche market. Communicate a solid and unique value proposition that is completely focused on solving specific problems.
During periods of economic downturn, it's not necessarily safer to be with the big companies, but that's the perception. By being small and agile the company is in some respects even safer. The big companies suddenly don't take any risks and retrench and bunker down, whereas the small start-ups are out reinventing new models.
Crisis brings opportunity
During periods of economic downturn, consumers change their habits and strategies. For example, consumers use more time and effor to search for better pricing or higher value. Can you offer a product or service that tailors to this need? In tough times, companies will often postpone the purchase of new IT systems and rather invest money in re-vamping the older systems they have. Can your startup take advantage of this? Try to think clearly about the consequences of the economy and how it will affect your customers. If you are clever enough to have an open mind and to keep looking, you may be surprised with what you uncover. In a crisis things change rapidly, and this presents huge opportunities for creative entrepreneurs.
If you have the idea and you have a vision for it, don't wait for the conditions to be perfect or you'll probably end up waiting forever. There is business out there; it's just a question of who's going to get it.
Free webinar for Startup companies
You are invited to a free, online webinar (telephone & web) on October 15th at 10:00 where a number of startup entrepreneurs (primarily from Norway) will discuss this and other issues. Join us to share your ideas and to learn from what others are doing. You can find more information about this at www.xelerator.com. Sign up today. Space is limited.
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