Now may not be the best time to start a business. There. We said it.
It's not un-American to point out the special challenges that people face in starting a business today.
I love doing talk radio. It's better than television by far. You get to speak in paragraphs and, with a decent host, have what could actually pass for an intelligent conversation. Best of all are the calls from listeners. I love the immediacy of the live questions, the sheer unpredictability of what someone will ask.
Once in a while, you get blindsided. There was the time, for example, when the host of an early-morning drive-time show in Houston confused me with another guest and launched into a series of questions about the primal sources of male sexual cravings. After much arm waving on my part, the host realized his mistake and regained his composure. Which is more than you could say for me.
Recently, another radio host and I had a run-in, this one rated G. We were doing a show on starting a business in the current economic climate, and I opened by explaining why I thought that now might not be the best time to take the leap. At the first commercial break the host turned on me. Her listeners needed to hear some good news, damn it, and I was there to bring it to them. "It's your patriotic duty to encourage people to start their own businesses. You're the editor of !" she fumed.
In the past, I've written that an economic downturn can be a terrific time to launch a new venture. Many well-known entrepreneurial successes, Dell Computer included, trace their roots back to a recession. But at the risk of sounding treasonous, I think there are reasons to believe that the current environment isn't as propitious for start-ups as the latter stages of business downturns have traditionally been. Most of the arguments in favor of starting now revolve around the cheapness of such things as office space and talent. What the optimists miss is the most crucial factor in a new business: the customer.
Keep in mind that most small, young companies sell to other businesses. Even companies that make consumer products sell to other companies -- distributors, retailers, and so on. So it's crucial to take into account the psychology of the corporate decision makers.
Often we delude ourselves into thinking we do that when we put together a business plan. We spend a lot of time evaluating and taking the measure of markets. But in the process we forget that markets don't buy things -- people do. And although markets may be rational, people aren't. They make their buying decisions based as much on what they're feeling as on what they know to be true.
Right now what people in companies large and small are feeling is nervous -- very nervous. That's what happens when you eliminate a couple million jobs. People start to wonder whether they're next, and their paranoia makes them highly risk averse, which means they aren't inclined to try new things, even when those new things might be good for the business. There's always a chance, after all, that someone higher up will second-guess the purchasers. So they tend to take the safe route and go with established products and services and proven vendors.
Don't get me wrong. I'm not saying that people shouldn't start businesses. But anybody who is launching one today needs to take into account the mind-set of the decision makers and understand that their attitude will change only after -- perhaps months after -- any upturn in the economy.
So how can you deal with that psychological obstacle? I met one guy recently who has stopped asking prospects to give him their entire account; instead he makes a pitch for only a small piece of the business, which gives him a chance to prove that he and his young company are for real. Another first-time entrepreneur I know targets clients that have a reputation for being very conservative. Although the accounts aren't large ones, they give his fledgling business what he refers to as an "aura of solidity."
If all else fails, there's always humor. I talked to a young woman in San Francisco who incorporated her business in December 2000. When she finally grew tired of the relentless questions about whether she could last, she decided to add a new line under her logo: "An American Tradition for Two Centuries."