Start Your Business Now

April 01, 2008

As the economic outlook continues to look grim, and large firms across the country trim or slash their payrolls, an interesting effect is beginning to unfold. Startups, once thought to be much more risky when compared to a steady day job, are beginning to take off. The theory goes that, if the job market is as uncertain as a startup, it makes sense to do something you love, and also to put as much control of your success or failure as you can in your own hands.

As the economic outlook continues to look grim, and large firms across the country trim or slash their payrolls, an interesting effect is beginning to unfold. Startups, once thought to be much more risky when compared to a steady day job, are beginning to take off. The theory goes that, if the job market is as uncertain as a startup, it makes sense to do something you love, and also to put as much control of your success or failure as you can in your own hands.

Start Your Business Now

As the economic outlook continues to look grim, and large firms across the country trim or slash their payrolls, an interesting effect is beginning to unfold. Startups, once thought to be much more risky when compared to a steady day job, are beginning to take off. The theory goes that, if the job market is as uncertain as a startup, it makes sense to do something you love, and also to put as much control of your success or failure as you can in your own hands. If our current economic struggles have taught us anything, it’s that the highly paid Masters of the Universe executives that we are to entrust with the well being of our families may really not know any more than us.

This current growth of entrepreneurism is coming in two waves. Both waves are driven by options in business financing. If you think back to your business school classes, the most common reason for a business to fail is undercapitalization. The business just flat out runs out of money before it is able to survive on the cash that it generates.

How does this impact the waves of entrepreneurism? In states with both an installed manufacturing base and high unemployment, like Michigan, entrepreneurs are coming out of the engineering and middle management ranks to apply their expertise in the development of new technologies and manufacturing processes. A great example of this is in clean energy and transportation, where automotive expertise is being redirected into batteries and storage. From the perspective of a new business, though, these are expensive propositions. It takes a lot of capital to develop a new technology, secure its intellectual property, and build it out to a commercially viable product. These types of new businesses often most closely emulate the companies, and bureaucracies, that their founders come from. They are also most likely funded by venture investment.

The second wave of entrepreneurism has more of the flavor of the two guys or gals in the garage. It’s a more gritty, one or two or three person business. Capitalization is usually done when the principals make business loans to the company to get it off the ground. While these companies can develop intellectual property that turns into some manufacturing juggernaut, more often than not these companies are being built to generate cash in a hurry. When you have your day job, you can toil away on your intellectual property in the evening. When you’ve lost your day job, and you have to make the house payment, the issue is much more immediate.

The continued growth of the Internet and eCommerce has made this second wave of entrepreneurism much easier than it has ever been. In the past, small business finance could have been a barrier to entry that would prevent businesses from ever starting up. Now, with domain names, hosting services, and even free eCommerce software, it is possible for entrepreneurs to start their eCommerce empire with little more than a personal business loan.

Guerilla marketing tactics such as word of mouth marketing and viral marketing can be employed on publicly available social networking sites. Entrepreneurs can read a For Dummies book on Search Engine Optimization and Search Engine Marketing, and use them as a launch point into an entire range of techniques that will, very inexpensively, allow them to identify and market to their target audiences. As their traffic, relevancy, and search engine rankings all rise, sales or commission revenue will follow. This generates cash that can pay the mortgage.

Particularly in the case of eCommerce, these startup businesses can grow and become dominant market leaders in their chosen niches very quickly. If you start an eCommerce business selling something you make yourself, surprisingly enough this can be the slower path to growth. It may become very difficult for you to source your raw materials in ever growing volumes. If you sell already finished goods manufactured elsewhere, your profit margins may not be as good, but your ability to secure those goods may allow you to continue to grow. In addition, once you have established a track record, your business may then qualify for merchant loans, allowing you to transfer some of your expenses away from your business and onto someone else’s.

Sure, listening to layoff numbers and stock market drops can be unnerving, but for many people who have been recently laid off the myth of job security through a large, established company was just that-a myth. These people are taking advantage of their newfound situation to take control of their financial lives and build their dreams. Some of them will be the new Fords, Macy’s, and Rockefellers. And, you can join them too. You do not have to wait for a layoff or downsizing to build your American dream. In fact, starting your own business may just be your patriotic duty.