1. Don't let the economy get you down. While many workers view precarious economic conditions as a time to hunker down in their jobs and try to weather the economic storm, others see it as a window of opportunity. Starting a business in a weak economic environment can have several clear benefits: The cost of doing business can decline because suppliers and partners may be more willing to negotiate on pricing and conditions, and the opportunity cost of lost income from a traditional job may be lower. Access to capital is also improving: The Small Business Administration's Office of Advocacy reports that in mid-2010 commercial banks started easing lending conditions while levels of venture capital investments increased.
Of course, there are also precautions to starting a business in a weak economy: Discretionary spending is down, so businesses selling goods or services that appeal to budget-minded customers may have an easier time gaining new customers in this economy than sellers of full-priced luxury items. Similarly, do-it-yourself services and low-cost substitutes may fare better than full-service or premium alternatives. For example, self-service storage and organizational retailer Organize.com saw a greater than 10% increase in year-over-year sales from 2007 to 2008 and again in 2009. Explains Terry Shearer, CEO of Organize.com, "Even in a recession, people want to improve their homes, but they want to do it inexpensively. Buying good home products from a reasonably priced online retailer is a much less expensive way to improve your home than, say, hiring a construction team or designer."
2. Don't think that an idea equals a plan. Too often people start businesses with a general notion of what they want to accomplish but lack a solid, well-conceived plan. While a business plan is always important, in a tough economy, it's even more vital to think critically about your product or service, customer acquisition strategy, pricing and promotion plans, and key logistics like inventory management and fulfillment. Similarly, it's important to be very clear about your unique business angle and your differentiation from competitors.
3. Don't be an island. Though entrepreneurs tend to be well versed in a wide variety of areas, even the most skilled entrepreneur cannot expect to be an expert in every aspect of business. From IT issues like network maintenance and website development, to marketing and customer acquisition, to accounting, payroll and legal services, there's too much for most people to handle alone. Have a clear sense of your own strengths, and surround yourself with the right partners and advisors for the remaining tasks.
4. Don't expose yourself to unnecessary financial stress. Starting a business can be extremely costly, both in terms of lost income from a full-time job and in terms of capital investments — but it doesn't have to be. Don't quit your day job too soon, seek outside investors in addition to your own personal assets, and consider lower-cost options for starting your business. For example, if you're going into a retail business, make sure you consider both brick and mortar and online business models, given the considerable difference in capital requirements for each model.
5. If you build it, they may not come. Having a great idea and even a great skill and product are very useful in starting a business, but you also need to have a carefully thought-through marketing plan. Customers won't just come to you. You need to think through all of the tactics at your disposal — from newspaper and radio advertising, to online marketing, to good old-fashioned referrals — to consider how to acquire customers and then turn those customers into repeat buyers.
6. Don't launch without specific goals in mind. Starting a business can be as simple as turning your hobby into an online store or as complicated as building a capital-intensive new product or service requiring research and development. In any scenario, it's important to map out clear goals for yourself and set up times to reassess your progress. Consider setting targets for product availability, establishments of key partnerships and vendor relationships, sales levels, and profitability levels. You don't want to wait until you're two years into a business to discover that you need to make fundamental shifts in your strategy that could have been identified 18 months earlier. Set regular, realistic goals and review periods to learn from your experiences and make changes as needed.
7. Don't be afraid to fail. Many of the most successful entrepreneurs failed before they were successful, and most have had significant failures along their paths to success. Henry Ford failed multiple times before finally launching his successful car company, and Bill Gates and Paul Allen formed a firm called Traf-O-Data before going on to create Microsoft.