Should I start up my business now?
Bank of America says the recession already here – CNBC.com
Global recession is here, according to S&P – CNN – CNN.com
Today given the current situation we are waking up to such news daily. Jobs are getting destroyed, firms announcing salary cuts. Rating firms are downgrading projected growth rates.
Have we seen such a situation before?
The answer is yes. It was in the year 2008.
I was a young professional then, working for a fortune 500 at the time when Lehmann Brothers rocked the financial world. Being of a relatively young age, I wasn’t too sure how it was going to impact me at an individual level.
My domain was real estate, a sector that bears the maximum burnt of any global financial uncertainty. People were concerned about the fall-out and started fearing about their future. ‘I have EMI’s to pay’, ‘my kids’ study in an expensive school’, ‘My parents’ run up a huge medical bill’, were the daily conversations one could hear on the office floor. It was a dark phase, where-in we heard of pink slips issued to people across industries. What’s next was a common question.
It was during these times our city head mooted the idea of starting up in a domain similar to the one we were serving. I still think of him as a visionary and an exceptional marketeer. He understood that a downturn is the best time for new entrants to enter the market and rightly so. You may be surprised to hear this; however, there is logic.
In a robust economic environment, a start up will find it difficult to establish, because of the following reasons;
- Setting up a workplace is expensive.
- Attracting high-quality human resources is difficult.
- The wage bill is high.
- Marketing costs prohibitive.
- Client Acquisition is challenging.
Point numbers 2,3&4 are chiefly due to higher budgets that existing players can spend on these activities.
However, in an adverse economic scenario, larger organisations rush to cut down these spends, lifting the entry barrier for a start up. As a result;
- Acquiring office space becomes cheaper.
- A high-Quality workforce becomes recruitable.
- The wage bill is manageable.
- Marketing spends fit into the budget.
- Clients look for quality service delivery at a lower cost. Hence opportunities open up.
I want to elaborate on point number 5 here. During downturns, I have personally experienced, potential clients turn incredibly cost-conscious. They are willing to allow a trustworthy new entrant an opportunity if they can provide value at reasonable costs.
However, there are challenges that start ups face during such situations. Primarily, funding becomes a significant issue. Investors may back-out citing difficult economic scenario. What is the answer to this? Start as a bootstrapped company. I started my first company as a bootstrap; the most significant advantage in such a set-up is survival instincts guiding you. Learning how to survive is the most crucial attribute of a successful business which will help you see through several ups and downs in future.
It’s been eight years since I had started my firm with a childhood friend and currently, we have offices in two cities. We faced several highs and lows during this course of time. Where-in many a times we thought of being out of the woods, and a hurdle popped up. On the other hand, there were instances of fortune favouring us too. However, not for one moment did I ever regret starting up. This blog is my attempt at chronicling our journey through those times, which will serve as a guide for aspiring startups. In future articles, I will share further steps on how to make a business plan for a start up to choose co-founders, type of firm to be established (Partnership, Limited Liability Partnership, Private Limited). Will also share tips on how to pitch for early-stage funding, shortlisting the types of investors to be onboarded and their entry and exit plans. One will be pleasantly surprised to know that the Indian Government has many schemes that support startups, and I will be covering those too.
Reality check, in our company, we availed two rounds of fundings from HNI sources, and after that, we expanded on our own. So will be stressing more on HNI funding sources.
I want to conclude that given the current economic scenario, thanks to the global pandemic, it is the best time to start up, there lies the answer to the question in the heading. The world is never short of needs, and here lies the opportunity. We need to identify what we are good at, and if we can package and sell it as a service or a product? Is the demand genuine? How will it be different from existing offerings in the market? What is the potential price customers would be willing to pay? Once we have the answers to these queries, the business model automatically firms up. Next step is taking it to the market, and as mentioned above, I will cover these aspects in upcoming blogs.
I, hope you enjoyed reading this first blog. Do let me know your views and what you liked or didn’t like. Please feel free to drop in a comment below or write to me at firstname.lastname@example.org. Thank you for reading!