Today on Techmeme there are a bunch of stories encouraging entrepreneurs to startup companies right now. Here’s a couple that caught my eye.
Paul Graham talks about why to start a startup up in a bad economy.
OK, rah, rah, rah, we all know some startups will take off in the recession. Microsoft and Google both either got started in, or accelerated through downturns early in their lives.
But I think some of the advice I’ve been seeing out there it a little too optimistic.
Last night on Donny Deutsch’s show an entrepreneur called up and was crying. He had started a business that was selling promotional cookies and swag to corporations and his business has dried up. Clearly not EVERY startup will do well. Why? People change their behavior in recessions, but that behavior does NOT change equally. In this case companies had stopped buying non-essential items, which means that promotional items get cut first.
So, the question to me is “how do you recession proof your startup?”
That’s the conversation I’m hoping to see happen. Already VentureBeat is putting together an event to discuss how to manage through a downturn. I’m attending that and will bring any good idea I hear.
Some ideas I’ve already heard though:
1. Make sure your startup is aimed at a real pain point of other companies. I was speaking at Cisco a week ago and saw that lots of people really are struggling with email, for instance.
2. Have a startup who’s customers and users are recession proof. For instance, education is probably not going to cut back a lot, so if your customers are teachers and educational IT people, you’re probably a lot safer than if you sell to small businesses like restaurants like my brother has.
3. Have a business that helps people or companies save money. Both Dodge and Graham pointed this out. I’m starting to use services like Mint, for instance, which look at my behavior and try to find me ways to save.
4. Look for upturns due to change in behaviors. For instance, if you can’t afford to go on long trips anymore, you’re more likely to stay home. That might mean more people will work on home projects or try things like crafts or games. Make Magazine might be well positioned here.
5. Diversify your customer base. Are you only reaching customers in USA? What about going international? Often times, one country’s economy will do better than another, or might be more open to new approaches.
6. Have enough cash on hand to last at least a year without any revenues. Who told us to do that? Microsoft’s Bill Gates.
7. Look for new opportunities that happen because of the downturn. Banks might start paying money to maintain houses that have been foreclosed on, for instance.
8. Look for new distribution channels. TurnHere, for instance, told me about landing YellowPages.com and that’s meant that their business is taking off. If yours can land similar distribution deals that might really help you accelerate through the downturn.
9. Be innovative with marketing and advertising your startup. For instance, if you do a Google Search for “Recession Proof Business” and you’ll find an ad that says “start your own economy.” That took me to CircleDog, which is a customer relationship management software package. Hey, if the economy is falling apart, I want to start my own! Not to mention it caught my eye among the ads because it was different. Now, let’s say you’re going to CES or SXSW or the Web 2.0 Summit next week. How can you find new customers without spending much money?
How about you? What are you doing to recession-proof your business? Would love to see some ideas.