In this tough economic environment, starting a new business may not seem realistic and may seem downright impossible. Every day, it seems that you are bombarded with news stories about layoffs, bailouts, loss of government services due to shrinking budgets, and more. It is not unreasonable that you would be holding back from starting that dream business. If you are still employed by a company, you are most likely thinking this is not the time to take the risk of starting a new business. If you are unemployed, your focus is most likely, how to make a rainy day fund and/or unemployment checks last until that next job. This means starting a business for the New Year is unlikely. In terms of New Year’s resolutions, saving money and saving your job are now on the list of New Year’s resolutions while starting a new business is not. There are so many reasons why this is not the time to hold back at starting that business but, rather, to move forward. It turns out that the bad economy is actually an entrepreneur’s dream. However, because of some misconceptions, you may be thinking otherwise. Here are three common misconceptions:

1. “If the big companies cannot survive, then, neither can I.”

Wrong. Do not believe that because the large companies are not able to survive or operate on their pre-recession scale that this means that you cannot be profitable in this environment. What should be considered is that large companies are full of internal bureaucracy. In order for them to “right the ship”, it will take them a while to do so. Think of it this way. Let us consider the captain of a cruise ship and the operator of a dingy. If the operator of the dingy needs to turn the dingy around, the operator can do it much quicker than the captain of a cruise ship can turn his/her vessel around. This is because of the size and weight of the cruise ship versus that of the dingy. What you should really be noticing is what the C.E.O.s of many large companies are doing. That is, they are laying off workers and streamlining the company so that they can make their “cruise ship” more like a dingy and turn that business around.

2. ”It’s more important for me to keep my job, thus, I need to work as much overtime and commit myself to my employer so I do not lose my job.”

That is not necessarily true. Everyone in this environment is vulnerable whether you work harder or not. If you work in a commercial entity, a government entity, or a non-profit, your job is not secure. What this means is that you should be preparing as though you will lose your job tomorrow. If you have been planning to start a business this is the best time to start this new venture. Sometimes losing a job makes this easier to do. Do not wait for your employer to give you the push. Start on your own terms, start now, and be prepared.

3. ”This is not the time to start a new business because we are in a recession.”

Again, this is not true. I am sure you have heard “buy low and sell high” by many investment gurus. If this is good enough for investing in someone else’s company, why is this not good for you to invest in your own future company? Many other entrepreneurs did it. Steve Strauss, in 2003 wrote for the USAToday that, 16 of the 30 corporations that make up the Dow Jones industrial average at the time got their starts during recessions. These are 16 of the largest companies listed on the New York Stock Exchange. Three notable companies in this group of 16 are:

• Disney began during the recession of 1923-24.
• Hewlett-Packard begun during the Great Depression (in 1938).
• Microsoft began during the 1975 recession.

Thus, invest in your company now. Everything is on sale and many of the financial experts like Clark Howard agree. Workers, offices space, equipment, vehicles, and gas are cheaper, just to name a few.

Highly skilled workers are being laid off. They cannot find work and they are cheap for you to hire. I recently heard an employment expert say that for every $10,000 an unemployed person hopes to make they should expect to be unemployed for one month. That means if they are looking for a $70,000 job they can expect to be unemployed for about 7 months. In this environment, most laid off workers do not have this kind of time. As a future employer you are in “the driver’s seat”. You can get this highly skilled worker for less than they made with their last employer. The amount of course is dependent on how much money they had in their rainy day fund. Do not go to low however, because they will leave quickly when things get better.

Next, consider this. You know by now that many businesses are closing. The commercial real estate market is hurting. They cannot afford to rent space at the pre-recession square foot prices. You can use this to your advantage if you need commercial space directly from commercial landlords. You may even have an opportunity to negotiate with retailers or companies going out of business to take over their lease at a reduce rate until the end of their lease. Also, since so many businesses are cutting back, there is an excess of supplies and inventory that need to be moved. Those large businesses that are trying to turn the cruise ship around are desperate to sell it to you. Walk into any office supply retail store and you will see there are lots of items that have been marked down. From business cards to computers, they are all cheaper. This is the time to take advantage of this also.

If you will need vehicles, well, you are in luck. Every car manufacturer is seeing lower profits compared to a year ago. Their dealers are having problems moving inventory, and they are dropping prices so they can move this inventory. The situation is so bad in this industry that some dealers are offering a buy one get one free deal to any buyers in the market. Hyundai is offering the “Worry Free Sale” that a consumer can return a car a year from purchase if they lose their job. This is the time to buy that car for your new company if you need it. As a bonus, gas is cheap again.

Now that I have presented points to support starting that new business, the question is what should you do?

First, find a business you enjoy doing that can ride the recession out with and be perfectly positioned to grow with the growing economy. Entreprenuer.com has a list of recession proof businesses that they feel are perfect for this economy. However do not limit yourself to just these businesses. Consider consulting in your own area of expertise. Even if your employer does not need your talent as a full-time employee that does not mean someone is not willing to pay you as a contract worker for your expertise.

Use the current economic conditions to your advantage. Negotiate, and get it cheap. It could be workers, services, inventory, or office space to name a few.
Use technology to your advantage if possible. This can reduce your cost even more by using technology. It is cheaper to use technology than it is to hire an employee. It is cheaper to start a virtual store than to get retail space if you do not need it. It is cheaper to get an office phone system rather than having a receptionist answering phones. There are many other examples.

Be realistic. Just like when you are investing. Slow and steady is the best approach. Success will not happen overnight. This is not for those who seek instant gratification. Entrepreneurship is for those who are patient and determined.

Network. Network. Network. Just as you would network when you are looking for a job, you need to network when you starting your own or running your own business.

For information about how we can help you start your new business at a lower cost and more efficiently contact us at info@calabrix.com.