January 16, 2009
Starting a Business in a Recession
Currently Ireland, UK, USA all of Europe and a large part of the world is in a recession. Officially Ireland has been in a recession since last September, when the box was ticked to meet the classic definition of two quarters of negative growth. In reality most SME’s know that the teeth of a recession has been biting for a bit longer. We set up our company SmartCube in a recession and have some tips / advice for individuals who are considering setting up a business or are taking the first few steps in a new venture:
1. Cash is King – If you are in a day job and are trying to set your business up in tandem keep the day job for as long as you possibly can. Work in you free time, weekends, lunch break before work on your new venture. It’s imperative to have as much confidence as possible in future income streams from your new venture before committing to it full time.
2. Prepare a business plan - This can often seem like a waste of time especially when you think you have a great idea, however it will give clarity to the concept. By doing this exercise you will be able to plan and visualise how the next 12 months will pan out, you will have to answer uncomfortable questions. It might seem like a chore but its well worth the effort for these reasons also banks and venture capitalists will most likely look for one.
3. Seek Advice Part 1 – Governments around the world as desperate for entrepreneurs to set up companies and succeed, entrepreneurs are the lifeblood of a healthy economy and are the job creators. Here in Ireland there are a number of bodies that will give you advice:
- County and City Enterprise Boards
- Enterprise Ireland
- M50 Enterprise Program
- Industry Specific Groups e.g. Crafts Council of Ireland, Arts Council of Ireland, Retail groups.
4. Research the Market - Probably the most important thing that needs to be done and can be often overlooked in the excitement of getting things going. Essentially you need to have a forensic knowledge of the market that you are going to tackle:
- What’s the size of this market?
- Who are your customers?
- What are their needs?
- What will they pay?
- Who is in the space already?
- Talk to potential customers – would they be willing to trade with you? If not why not?
If you don’t know the answers to these questions – you can be damm sure your competitors will. These questions should be answered in your business plan.
5. Seek Funding - The best thing is to bootstrap and to steer clear of diluting the equity in your company, but there are sources of funding that you can access which AFAIK wont dilute things:
Enterprise Ireland will generally give you a grant of some sort if your product / service has an overseas or the potential of an overseas customer base.
Seed Capital Scheme: This is a revenue driven scheme that enables you to get as seed capital some of the tax that you have paid in a previous life.
Enterprise Boards offer feasibility grants and employment grants.
First Step Micro Finance are specifically set up for entrepreneurs who need a loan to get things going: http://www.first-step.ie/
6. Take a Course - There are a number of courses, either free or for a small cost: http://www.startingabusinessinireland.com/syobboot090214.htm this is run by Brian O’Kane and gets a big thumbs up on askaboutmoney.com: http://www.askaboutmoney.com/showthread.php?t=170
If you are unsure about what you want to do or want to bounce ideas around some like minded people go along to the Ideas Generation Workshop at the Guinness Enterprise Centre (http://www.guinness-enterprisectr.com/news_upcomingevents.php)
7. Dip your toe into the market - Can you set your business up without leaving your full time job? We specifically made our product so people could dip their toe into the world of online selling at a low cost.
8. Keep the Costs Down - Cash can be gone through very easily, plan for what you need to spend and review it regularly, like anything in life costs can be kept down with a bit of shopping around.
9. Seek Advice Part 2 - Ask friends and family that you know will give not give you the answer that you want to hear. Its important to be able to get feedback that is honest, to the point and is not going to stroke your ego. That said if you are offering a product or service to a niche market many people may not have the knowledge.
10. Network - Get out there and talk to other entrepreneurs. They will often have overcome some the problems you are encountering. You can also get some business contacts and raise your profile.
11. Don’t lose faith! - Nothing comes easy, you need to work hard to be successful.
These are uncertain times, of that there is no doubt, but through planning, forward thinking, being efficient with your time and a thorough analysis of the market you will hopefully help to reduce that uncertainty. Many business have started and flourished in a recession.
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