“As soon as I get enough experience, I will start my own business,” is a common refrain of many prospective, usually young, entrepreneurs. “I need to understand how the value chain in retail works,” or “I will work in a small/large firm to learn this, that or the other,” are all reasons that I hear soon-to-be entrepreneurs give to put off getting started. I would assert that there is never going to be a better time to start your business than now, particularly with the current financial troubles that are roiling global markets and making everyone in business antsy. Even if it gets worse before it gets better, a downturn such as this is the best time to start a business.
The reason a downturn is a good time to start a business is three-fold in my view. First, prospective customers, though not always willing to part with money, will be prepared to give their time. Their time, which would be hard to come by in good times, will help you build meaningful relationships for the future. Even more importantly, it will help you comprehend what issues your customers truly care about and fold that into your product or service offerings. Finally, bad times are good times to learn how to make your dollar, pound or rupee go much further. Once you have learnt this lesson, it will serve you well through the rest of your business life. That being said, you don’t have to wait for a downturn to start your business. The sooner you get started, the sooner you will realise that you know even less than you thought you did and the sooner you will begin learning what you need to, and you will be far too busy to wonder if you have timed it right!
Lest I have not said it enough, businesses are about relationships. And relationships take time; often much longer than your business can afford and far more time than your customers can afford to give you. In that regard, the sooner you begin building relationships, the better off you are. Ideally you’d have embarked on this way before you started your enterprise. It’s worth pausing for a second here to comprehend what ‘building a relationship’ constitutes. Most of us intuitively understand the word relationship in the context of families, even though we may grimace or smile at the thought; friends; and social acquaintances, folks we know such as neighbours, friends of friends and relatives of friends. So what does it mean in the context of a business?
In my view, simply put, a relationship in a business context, much like in the rest of our life can range from casual acquaintances all the way to life-long friends or occasionally a spouse. A relationship moves from being one of merely dealing with one another (cold calling in sales or collecting a purchase order or payment from finance) to a more meaningful one, when both parties are prepared to share and give of their knowledge, time and energy. This could be sharing thoughts on the marketplace in general, what other companies or folks are doing, all the way to each others’ key care-abouts, concerns and plans.
Meetings over coffee, attending a trade show or seminar together, playing together (from billiards to white-water rafting) or dinner followed by karaoke all help build a relationship. Not all relationship building need be done face-to-face — SMS or texting breaking news or a thought for the week, e-mailing interesting items of business or personal interest, newsletters, telephone calls or even the occasional instant message (IM or chat) can all help build relationships. Of course, be sensitive to the needs of the other party; you don’t want to be seen as a spammer or worse yet, a stalker! When in doubt, err on the side of less not more.
Notice most methods of building relationships are not transactional and even when interacting for a transaction, doing what your mother advised you to do — making small talk, being polite, saying thank you, all go to building a better relationship. And there is no better time to build relationships than now, so get started.
Validate market needs
One of the sheer joys of being an entrepreneur is the number of times you get turned down for appointments, let alone capital, loans or purchase orders. The fact that we persist and actually thrive despite this speaks of our faith in what we are doing. While such faith is good and even necessary, it can be just plain wrong. A good way to ensure that you don’t expend all your cash, emotion and energy barking up the wrong tree is to validate what the market needs. Such validation is a lot easier said than done.
Most consumers or customers don’t know if they really need something, especially if it is not something they have encountered before. Prior to Hotmail or more recently FaceBook people were not clamouring that their lives were incomplete; nor did the absence of mini-vans or flat panel plasma displays or soap in Re 1 sachets lead to consumer revolts. As Badri Seshadri, founder of New Horizon Media, a leading publisher of non-fiction in Tamil stated, “Supply has to lead demand, sometimes.” It is here that having built relationships with others in the business, you can seek to have your ideas reviewed, critiqued and if lucky validated.
As with New Horizon, sometimes there is no alternative but to get your product out there, but even then, you can validate the market need through calibrated testing be it pricing, and in their case distribution channels and different book titles. The market not being a static entity will require you to continuously measure it and tweak your response. Downturns are again good times for this for customers and the marketplace will be willing to provide you more time and greater feedback. However, given the ongoing need for testing the market, the sooner you embark on it the better. So once again, there is no better time to validate market needs than now.
One of the biggest mistakes I made when I first considered starting a business was to blow nearly $200 (yes, two hundred dollars) on fancy business cards. Granted this was 12 years ago, when I was a callow youth and some credit must go to my printer who up-sold me on the expenditure. Besides never doing business again with that printer, I learnt the hard lesson that money is better spent (or not) on so many other things than fancy business cards. But it is never too early to learn the lesson of frugality.
No company, however big, can afford to not watch its spending and particularly its cash position — this was true even before Lehman Brothers filed for bankruptcy. While there is a fine line between being frugal and being a miser, it is best learnt by constant practice. Yes, money has to be spent in order to build and grow a business, but how much and when is always a matter of debate. Most folks entreat employees to spend the company’s money as if it is their own, but then again most folks don’t manage their own money too well. It’s best to ask yourself ‘why’ three times — Why am I spending this money? Why now? Why this much? Bad economic times are good times to learn about frugality for you see so many people around you — your customers, partners and suppliers — practising it. Don’t be a laggard and don’t wait for bad times to practise it.
As with most advice, take this entreaty to be frugal as a good thumb rule, but use your own judgment on each occasion for there will be good times, particularly in downturns, to invest for the future.
Trust your instincts and if you have built relationships and continuously validated the market needs you’d have good reason to back your instincts.
This article first appeared in the Hindu BusinessLine in November 3, 2008.