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The Boss of You

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Starting a Business on a Shoestring: Why Starting Small Makes Sense During Tough Economic Times

June 12th, 2009 by Lauren · 9 Comments

Photo: pair of Chuck Taylor sneakers

Photo: dancing shoes, by streetpreacher83

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.

Tags: Boss Ladies We Love · Business Advice · Entrepreneurial Inspiration · Events · Our Story · Thoughts · Uncategorized

9 responses so far ↓

  • 1 Laura. // Jun 12, 2009 at 11:02 am

    thanks for the words of encouragement, as always! i need to remember to be patient and take calculated risks. deep breath.
    say, do you ladies know amanda steinberg from dailyworth.com? if you don’t already, you would probably really love her and what she does: gives financial advice to women in strong, daily doses.

  • 2 Jessi // Jun 12, 2009 at 12:36 pm

    I just discovered your blog and I luv, love, LOVE you gals!! In fact, I just reserved a copy of your book at my university’s library… can’t wait to read it! I’m always entertaining thoughts of running my own business, so any kind of encouragement, tips, etc., are warmly welcome!
    J

  • 3 Ann // Jun 13, 2009 at 9:02 am

    Thank you for writing about this. I just had a horrible experience with the local SBA office. It seems they can’t understand the fact that not everyone wants/needs to take out a $150,000 loan to start a business. It was the most uninspiring meeting I’ve had in my life, but I’m glad to hear other (more inspiring) thoughts on this subject. I definitely have to check out the book.

  • 4 Carol // Jun 13, 2009 at 9:06 am

    Hey hang on – mind what you say about us oldies! Aging population indeed! I’m 54 and just started up March 2009 and doing OK. I sell books, classical music, fabrics, vintage stuff. I’ve no personal debt, paid my mortgage, own my car, still run a home and kids etc – including growing my own veg, keep pigs, chickens, sheep turkeys, care for my elderly Mum. I’ve tons more experience than younger entrepreneurs, masses more patience, have skills that you’d never even heard of…I intend on growing at a rate of 25 per cent per month – I’m doing it right now and will, until my turnover is just under 80K euros pa and then I’ll slow down a bit so I don’t go into the next tax structure. Try running a business in France and you’ll know what I mean – it’s hard but do-able. As long as you don’t advertise in a foreign language – it’s illegal…

  • 5 Lauren // Jun 15, 2009 at 9:05 am

    Thanks, everyone, for your comments!

    Laura: We don’t know Amanda but will check her out.

    Ann: I’ve heard lots of stories like yours. It’s often hard for government agency staff to wrap their heads around “alternative” business models (although of course people have been starting businesses this way forever). Hope you’re able to find some kindred spirits nearby who can lend you some moral support while you’re starting up!

    Carol: My comment about the aging population was in no way a critique of older entrepreneurs, but rather a reference to the declining population growth levels in Canada and elsewhere, due to higher life expectancy and lower birth rates. This trend is cause for concern for some of us who worry that we will soon be facing unsustainable increases in public spending on healthcare and social security, the costs of which which may have to be carried by a shrinking number of younger taxpayers.

    I’m a big fan of socialized medicine and our country’s various safety nets; I’m just also conscious that we may soon be struggling with how to take good care of our elders while holding the financial well-being of the rest of the population in the balance as well. Hope that clarifies things a bit.

  • 6 Full speed ahead! (Are you ready?) // Jun 19, 2009 at 8:18 am

    […] reads on this topic: Why Starting Small Makes Sense, on Lauren & Emira’s blog (authors of “The Boss of You”).  The book is […]

  • 7 ElizabethMD // Jan 14, 2010 at 6:11 pm

    I found your site yesterday and have been going through it finding much acceptance and understanding. As a new entrepreneur I’m not 100% sure what I am doing on the business end of things. I keep getting told this is a bad time (due to recession) I don’t have any startup money so it will never fly etc. I find the strongest people come from hard and difficult backgrounds and or situations. So it is nice to see a website and ppl who do agree with my thoughts as well.

  • 8 Tracy Matthewman // Jun 8, 2010 at 10:24 am

    Hi! I commend you for being a woman who is willing to take risks in order to prove herself to the world. Being an entrepreneur is already a challenging task, but being a woman entrepreneur makes it even harder knowing that there is really still a bit of underestimation of the girl power today. Personally, I think that the key for us women to be always ahead of our games is to have a very effective time management. With that being said, i want to share this link to all of you where you can learn a lot about effective time management and making the most out of your limited time. I really hope you could drop by and let me know what you think. Here’s the link: performtoprofit.com

    Best regards!

  • 9 Lisa Princic // Aug 3, 2010 at 7:23 pm

    Great article! I think starting a business in tough times is a good idea because you learn to prioritize on what really works rather than develop unhealthy financial management that will creep up and get you in harder times.

    In addition, when people aren’t spending money on anything and everything you’ll know that your service is really of value if they decide to work with you. When you become a necessity instead of a luxury item, you know you will last!

    Great stuff here Lauren!