Now Is A Good Time To Do Your Startup

I’ve been guilty of a lot of negative blogging recently, so let’s try and bring in some balance.

It may seem counter productive, but I have built many companies in the face of recessions (actually, not directly, but riding the recovery wave is often a great place to be as a start up - note the two year after a crash gap in my startup history - in 1991, 1997, 2002, 2010).

These can be good times for a number of reasons:
  • There are a lot of able people available cheaply
  • Everyone is looking for ideas to take them out of recession and are willing to engage with new ideas and suppliers
  • Capital tends to be cheap
  • Investors like investing at the bottom of an economic cycle
  • There is less competition
  • There are often incentives and schemes available to help you set up from both corporates and government
Of course, leaving the security of a corporate job may seem foolish at this time, and that’s probably correct. However, that doesn’t stop you from planning. The reality is that the economy and business suffer from a lag. 

If you’re laid off then this option obviously becomes more attractive.

But before you take the jump, ask yourself some simple question:
  • Why am I doing this ?
  • Do I have the bandwidth ?
  • Is my big idea wishful thinking ? 
  • Where is my market, how big is it and how do I reach it ?
  • What resources (people, money, equipment) do I need ?
These seem like utter common sense, but fully three quarters of new businesses fail for one of the above reasons. The best thing to do it a very detailed model and business plan.

What I mean by this is first of all look at your core model, eg I buy bandwidth at 1p, add a service and sell it at 2p.

Then take this model into a BP - my overheads are £5k a month, so I need to sell 50,000 units to break even. Detail your customers in your BP - who is going to buy 50k units from you, how are you going to sell to them, how long will your sales cycle be ?

When I go through this exercise with entrepreneurs six times out of ten it’s clear that there’s no business opportunity, a further three times it’s clear that the opportunity is marginal or lifestyle (or below) and only in one out of ten does a business model shine out.

Even then, obviously, it’s all about execution, execution, execution.

Another crucial question to ask is: are you looking for a lifestyle business to make a living, or to build the next Amazon ? It’s rare that you can achieve both and the approach in terms of investment and development tend to be fundamentally different.

Am I getting negative again ? Ooops... Still, there is nothing more rewarding than walking into your own business when it’s buzzing, or cashing in your buyout cheque or seeing your company’s ticker on a hoarding in Times Square.

So, plan, strap yourself in and 2022 here you come !