Small Business Startup Advice
As layoffs mount, the number of small business start-ups is on the rise too. According to research by Rob Fairlie, professor of economics and finance at the University of California at Santa Cruz (on behalf of the Kauffman Foundation), an average of 3.4 million new businesses were launched on average in the U.S. each year between 1996 and 2006. In 2007, that number jumped to 3.9 million. While 2008 figures haven’t been released, even more new entrepreneurs seem to be taking the plunge. “I have absolutely seen an uptick in the number of people who are attempting to start businesses of their own since the start of this recession,” says Janet Siegenthaler, a start-up consultant based in Fairfield, Conn. Before you liquidate your 401(k), check what these 10 recession-born entrepreneurs–many of whom have not yet posted a profit–had to say about starting businesses in the last 18 grueling months.
Sometimes it’s hard to predict where you’ll find your niche, so it’s a good idea to create a small business startup that encompasses a couple of different areas. For example, Dan Wiley, a 48-year-old first time entrepreneur, started a Los Angeles based firm that provides a range of services from public relations and advertising to branding and internet design. “I never expected we would be doing as much website designing as we have been, and that so few customers would be looking for our public relations services,” Wiley admits. His advice to aspiring innovators is to save up a year’s worth of operating capital to cushion the blow, should things not work out as anticipated.
It can be difficult to start a small business during a recession, when consumers are trying to cut corners. In August of 2008, three friends — Jonathan Miller (28), Maria Sutanto (27), and Jonathan Kelley (27) launched “Element Bars,” custom energy bars with just $50,000 in combined savings. “We’re on the wrong side of customers who are trying to trade down,” says Miller. “To combat tightening wallets, we’re trying to do more marketing with coupons.” He advises to start small and test the demand for your product, leaving yourself room to grow, rather than trying to immediately manage a multi-million-dollar headache.
Most small business startup tips seem to center on finances. Taylor Spellman, a 25-year-old who began a NY interior design shop, admitted that his vision was not fortuitously timed. Just as he was pitching to young professionals in the finance industry, “many of them lost their jobs, or never got those bonuses,” Spellman explains. As a result, he had to cut his fees from $100 down to $50. “Be sure to have some money in the bank as a cushion,” he advises. “If you’re not willing to go into debt, this probably isn’t the right time to start your own business.” Perhaps this is the cautionary tale many eager entrepreneurs skip over with their market plans. With 3/5 of small businesses failing within the first few years, the statistics certainly aren’t in your favor; but with enough capital and enough patience, you can still realize your dreams.
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