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Smart Start up Strategies in a Recession – Part 2

November 30, 2009 by Frank Goley, Business Consultant

Blog Sponsored By: ABC Business Consulting 

In the previous blog, I tried to explain in simple terms, why a Smart Start Up, or any stage company for that matter, concentrates on three main financial areas:  Cash Flow, Sales & Profitability and Debt Burden.  This is a necessary foundation which needs to be built for these forth coming strategies to have traction.  In that blog, I also referenced some other ABC Articles which properly dissect each area for your follow on exploration.  With that said…….Let’s look at some strategies you can use as a young Company in a challenging economy.

Plan for Revival

The disguised blessing of a Recession is the pressure cooker demand which is waiting to be released Post-Recession.  No matter what the nay-sayers are prognosticating, we are already there in terms of Planning.  Start planning now for economic rebound so you will be hitting all cylinders when stimulus dollars really kick in and demand returns.  When the statisticians say demand is back, it is too late.  You have missed a ton of business and the opportunity to be the market maker.  

Recession Forces Niche Marketing

A Recession forces young companies to be very smart and make targeted decisions which offer the greatest chance for success.  For this reason, Niche Marketing becomes much more pragmatic and has much less risk involved.  This is a blessing!  Niche Marketing is much more profitable on a per unit / per sale basis.  Your chance of success in a Recession increases exponentially if you concentrate on bulleted, narrow scoped marketing.  Spend time narrowing down the most profitable niches, select one or two, market to them, learn, revamp and perfect, then roll it out more aggressively yet still keeping your Marketing Strategy highly targeted.  Getting good at Niche Marketing today will bring survival success in a Recession and growth success in a rebound.

Earn your Own Seed Money

Funding may be tough right now, but you can make it much easier by earning your own seed money.  Put your money where your mouth is before going to funders.  I’m not talking about using your Credit Cards to seed start your Biz.  Some have successfully started this way, but I highly discourage it.  I am talking about equity cash you earn working two to three jobs and living frugally.  Amass cash.  Do not cash in your 401K!

There is nothing more impressive to a funder than a presented growth opportunity, already seeded by the Owner’s earned cash.  You will be amazed how many multi-million dollar companies were started on just a few grand.  These companies grew successful, quickly, because ownership was forced to build it block by block, putting in place a solid business model, which quickly grew when growth capital was supplies.  I have started all my businesses with a $3K – $5K Business Plan, keeping it focused, niche oriented and using technology to be super competitive.  For more on Seed Finance, see my Bootstrapping Biz Finance Blog and the ABC Finance Articles.

Use Open Source Software

Technology is absolutely essential when trying to survive in a Recession with little capital assets – to be ultra competitive – to be small but have large, yet sophisticated, imprint on the market.  Open Source Software is often better than for purchase software and certainly cost effective compared to proprietary products.  In this age, think Online Business Models.  Build your company around an online interface of multifaceted, open sourced software and web ware.  This technology gives you the footprint of a larger company but without the payroll burden, while giving you a platform to perform highly targeted, sophisticated, niche marketing.  Best advice I can give:  build your company around an Online Strategy & Architecture.  And by the way, you do not need to be Tech Savvy to be highly effective with open Source.  Dive in and learn by doing – it’s not that hard in today’s user friendly software and web ware platforms.

Work from Home

Picking up from the Open Source, Online Model, there is no need to have a money sucking office and all the money pit holes involved in having an outside office.  Work from home and use open source collaboration software to communicate with your partners and manage associates.  I think I ran better businesses using the online, home based model.

Use Mentors Effectively

There are a host of volunteer mentoring services and Associations in any community – take advantage of the free entrepreneurial, experienced help.  Go out, go online, network and seek out targeted mentors to help you make smart decisions.  The smartest move any good business person makes is who that person surrounds him or herself with – you are only as smart or good as those around you.  Particularly during a Recession, when business decisions have little room for failure, experienced mentorship and collaboration is absolutely essential.  Take an hour every morning to read forums and blogs to learn what others are to be successful in this economy.

Strategic Alliances

Partner with experience and strength, reduce your risk, and maximize marketing dollars by affiliating and cross promoting.  Find others who have a similar niche and add value to their offering and customer relationships with your solutions.  The biggest trait to look for in a Strategic Ally is Integrity, as well as, one which you should espouse.

The Y Combinator Example

In the June ’09 issue of INC., “The Soul of a New Start-Up Machine” by Max Chaftein, Paul Graham, Start-up Incubator Guru, explains the wave of the future with his Y Combinator “hybrid venture capital and business school that invests in and advises” 40+ start ups a year.  One founder company gets $6K in funding and ratches up to $18K for 3 founder companies.  Y Combinator’s average stake is 6%.  Graham puts the “students” through a fast tracked, real world biz school and urges the entrepreneurs to release products as quickly as possible, often in just a couple – few months.  He keys on young tech stars that opt to starve for Key Knowledge and opportunity to do something special.  How special?  Less than 20% fail and the others find follow on investment, get acquired or rework their direction.  Reddit, a social news website, was acquired by Conde Nast for $10-19 Million.  Loopt, a cell phone software developer, received $13 Million in follow on venture funds.

Ø       Graham Keys:

ü       Take risk out of start up with experienced mentoring.

ü       Spend energies on product development, forget investor relations and PR and produce a finished “version” in 3 months.

ü       Let customers and users help you work out product kinks and relate niche data back.

ü       Live frugally and spend concentrated energies on your business, not going out on sales calls but rather getting cash-flow positive with the develop – test – rework pattern on a short cycle biz model.

ü       Capitalize on cheap band width, open source software and cloud computing to start and grow your company.

ü       Biz today is all about software – use it, develop it, and leverage it.

Well, does any of these Grahamisms sound familiar?  These strategies are important during a Recession start up but really, these are Start-Up Biz 101 Tactics & Strategies for success in any economy.  Start small, work smart, leverage technology, niche market, ally strategically, be customer – centric,  seek mentorship and key on Cash Flow, Profitability and Debt Burden….you are well on the road to being not just Business Successful but Recession Successful.

My next Blog is on Technology to make your Business more successful…..come back soon!

I greatly appreciate your Feedback and Comments!  Let us know how you are doing in this Recession and Strategy / Tactics that are working for you.

Please Refer the ABC Biz Success Blog to your fellow entrepreneurs!  Thanks!

Date:  Nov. 30, 2009

Author:  ABC Business Consulting, Chief Business Consultant

Subject:  Smart Start up Strategies in a Recession – Part 2

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Posted in Business Recession Tactics.

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