The economic woes we’re facing right now feel awfully familiar.
See, Emira and I started our business in February 2000; by the end of that summer, our industry (and in fact all things web-related) had experienced the first big dot-com crash. Our friends and family wondered at times if we’d hitched our horses to the wrong wagon. But the fact is, we’d made a very wise decision in striking out on our own earlier that year.
Why? A few reasons:
- We were no longer dependent on salaries from the larger firm where we’d worked. (A lot of the big firms went under that year, and many of our colleagues found themselves out of work.)
- We were piloting a small, nimble, service-based firm that had enough flexibility to weather economic storms.
- We were carrying no debt, and low overhead.
- With no investors or bankers breathing down our necks, we could afford to build our business slowly and steadily.
The bootstrap approach to starting a business has always appealed to me, with the major caveat that I am not a fan of putting things like your family home or other key assets on the line for the sake of an entrepreneurial venture. I’m sure there are occasions when that’s a worthwhile risk to take, but I prefer to keep the financial gambles to a minimum even if it results in slower growth. What I like about bootstrapping is the DIY approach to entrepreneurship — I’ve never been big on owing other people money, so investors and big bank loans make me a little nervous.
In my opinion, although today might not be the ideal time to start some businesses, many ventures started during an economic downturn will put down roots that will stand them in very good stead in the future. Certainly, those started with an eye to frugality and a cautious approach to risk stand a very good chance of not only making it through rough patches like this one, but also thriving in sunnier times.
Financially, you’ve got a few advantages when you start your business during a downturn:
- Interest rates are low. So if you do take out a loan, you benefit from reasonable rates.
- It’s a buyer’s market. If you are renting or leasing equipment, it’s a good time to negotiate on price & payment terms.
- Restrictions can force you to think creatively. When you have fewer options, sometimes you come up with brilliant solutions you wouldn’t have thought of otherwise. I’ve learned this lesson as a designer, and it has held true as a business owner as well.
And more than once lately I’ve heard about new entrepreneurs who were laid off from salaried jobs and decided this was their chance to try their hand at running their own business, so that’s another way of turning the current economic troubles into an opportunity.
In the bigger picture, I feel like the various unsustainable realities we’re living with today (mounting personal & national debt, low personal savings rates, the world’s aging population, peak oil, and climate change, just to name a few) all point to smaller, lower-risk, slow-growth business models as the way of the future. I think we could all stand to rethink our cultural predisposition towards the quick buck and rapid growth, and look for inspiration from the “slow” movements, such as slow food. I’m not sure I can wholeheartedly embrace slowness as an umbrella concept — I do work in high-tech, after all, and I like things to move at a brisk pace — but as far as my workplace and my bank balance are concerned, I favour stability and gradual evolution over roller-coaster rides.
When you start your business with an eye to mitigating the inevitable ups and downs of the marketplace by regulating your spending and debt, you create a solid foundation for future years — so whereas some people might look at starting a new business during a downturn as a risky venture, I feel that when it comes to the kinds of businesses we wrote about in The Boss of You, today could be just the moment you’ve been waiting for.