10 Reasons The Best Time To Start A Business Is During A Downturn

Recessions are hard times. People lose their jobs, companies get wound up, and the lucky ones take the losses from their cash reserves. While the U.S. may not technically be in a recession right now, there’s still plenty of uncertainty and talk about dark clouds on the horizon.

1. People want innovation

Recessions create problems. They also slow investment in innovation down. Consumers and businesses are looking for solutions to problems which presents opportunities for startups to solve.

2. People want to save money

As a nimble startup with few expenses, you should be able to undercut your competitors. Their clients will be watching their wallets and looking for cheaper alternatives, so it’s the perfect time to make a sales pitch to win them over. Do a good job, and you’ll keep those clients when the economy recovers.

3. Incumbents are vulnerable

Whether they’re giant corporates looking to scale back and hibernate through the downturn, or smaller companies that might not have the resilience to see out the storm, your competition is in a vulnerable state. Startups are agile and flexible, and as long as you can support yourself with your minimal overheads, it’ll be hard for the economy to chew you up and spit you out.

4. Good people are looking for work

If you’re able to secure funding, or grow your business rapidly, you’ll probably be looking to increase your headcount. But finding the right staff is really, really hard. In a downturn, when layoffs are rife, highly qualified, talented and effective individuals can be found much more easily than during the good times.

5. Things are cheaper

Weak economic growth means ailing businesses are selling off certain assets.  Put more simply, things cost less. Your typical overhead costs such as office space, or one-off purchases such as office furniture, tend to have lower base prices, and vendors are more likely to discount prices to move stock quicker. Even the good people you find in point number three come cheaper, demanding a lower salary and less benefits than they might in a strong economy.

6. Lower interest rates, mean cheaper credit

Not only do things cost less, the central banks of affected countries generally start to drop interest rates to keep consumer spending high. This means that loans and particularly credit cards may make more sense for your business in its early days, compared to the high interest rates used to control inflation when the market is strong. I was able to start DesignCrowd.com off the back of a credit card.

7. You will have less competitors

When the economy is strong, every man and his dog wants to startup. Many of these budding entrepreneurs go straight for funding and eventually squash the bootstrappers. There are less people trying to startup in a downturn because there’s less funding about. This makes it easier for those who are keen bootstrappers — those who want to control ownership in the company, and don’t have to split the pie with bankrollers.

8. Smart investors want to invest

But if you need funding — perhaps there’s plant and equipment costs that can’t be avoided — there’s still plenty of determined investors who are looking for new business opportunities. When the economy falters, angel investors in particular, look to move their money out of the stock market and may be willing to fund you if your prospects are promising.

9. Downturns give startups negotiating power

Traditional vendors have trouble moving product when the economy is weak. If your company depends on products from suppliers, a downturn is a great time to negotiate or renegotiate a deal that will benefit you even after the downturn ends. When the economy is strong, a startup is just another startup, and the vendor sets the rules.

10. You’ll build a lean startup with good habits

A startup built during the tough times is designed from the ground up to be a lean, mean, efficiency machine – whether you’ve bootstrapped or not.  These habits should stay with you when the market recovers, giving you higher profit margins since you’ll be able to lift prices once consumers and clients are spending again.  If you can build and grow a business when consumer confidence is down and businesses are tightening their belts, your business will be bullet-proof when things improve.

Source:http://www.forbes.com/sites/realspin/2013/07/24/10-reasons-the-best-time-to-start-a-business-is-during-a-downturn/

Other sources:

http://www.business.qld.gov.au/business/running/risk-management/surviving-economic-downturn/strengthen-business-economic-downturn

http://toolkit.smallbiz.nsw.gov.au/part/23/121/559

Australian manufacturing is not dead

Here are 3 case studies how some Australian manufacturers are coping with the high Australian dollar and high labour costs on Australia.

08:19:00 21/06/2013

Diversification the key to survival for Australian manufacturers

Is there a place for old-style manufacturing in Australia’s future? Spring-making may seem like old fashioned manufacturing, but like many of the businesses we’ve heard from this week, to survive and be a success the Jubilee Spring company at Ourimbah on the New South Wales Central Coast has had to adapt and innovate. Managing director John Guest’s advice is: diversify. MORE

08:24:00 21/06/2013

Weir Minerals relocates to exploit mining boom

Times are tough for Australian manufacturing even though the Australian dollar has fallen from its recent highs. But while some companies are struggling to survive by going off-shore, a big US company is reversing the trend. Weir Minerals has moved its divisional headquarters to Australia to be closer to the production phase of the mining boom. MORE

08:26:00 21/06/2013

Manufacturing workforce shrinking

The Prime Minister’s taskforce into manufacturing found that 100,000 jobs have been lost since 2008. Those companies that aren’t struggling or have gone under are operating well below capacity. It concludes that Australia is looking down the barrel of imminent danger of large job losses and a loss of capabilities as the workforce shrinks. Shane Infanti is the CEO of the Australian Manufacturing Technology Institute. He’s not sure if Australia is over the worst of it and he says there needs to be more industry-led research. MORE

ABC – AM 21/6/2013

Questions

  1. What are the problems faced by Australian manufacturers.  Make sure you give examples in your answer.
  2. What strategies are being used by successful businesses in these difficult economic conditions?

Union takes youth pay campaign to Canberra

Currently many employees on minimum wages will only receive full pay when they turn 21, something that unions say is unfair.

A young person can start in retail at say 15 years of age. They’re on 45 per cent of the adult rate. Then when they’re 16 they go to 50 per cent and thereafter they go to 60 per cent, 70 per cent, 80 per cent and so on, and at 21 they finally get to the adult rate.

Russell Zimmerman is the executive director at the Australian Retailers Association. He says industry is preparing to lodge its application arguing against pay increases for younger people in the next few weeks.

The claims also comes as the union movement is pushing for $30 a week rises in the minimum wage.

With a federal election in September and the Government doing badly in the polls, Russell Zimmerman says the union is trying to get as many claims through as it can.

1. Who are the stakeholders?

2. What are their claims?

3.  What are impacts the stakeholders if the claim is successful?

 

http://www.abc.net.au/am/content/2013/s3733493.htm