I was once told that the best time to start a business is in a recession. The reasoning behind it is that the business would get stronger once the recession is over. Essentially you’re starting at the bottom and can only go up from there.
From my experience, this is true.
I’ve started several businesses over my life and have closed several businesses too. Some were better than others too. I (we) still have our real estate business but it’s morphed more from a real estate investing business to a holding company. We’re slowly selling off our properties and transferring those gains into the stock market these days.
My other successful business is/was my consulting company. I moonlighted in Engineering many years ago and over time built up a small set of clientele. It was great side money and it helped me transition to doing it full time when I was in between jobs at times. I also added Data Science consulting into the mix between 2017 and 2018 when I left RapidMiner and before I joined H2O.ai.
So how do you do it?
It’s my observation that the people who succeed in starting a business are the ones that have experience in a particular field. If I were an excavator I wouldn’t start a business in system integration, I would stick to moving dirt.
You need to take stock of what you’ve been doing and see if you can do it better by being on your own. Now if you don’t have experience in a field that you want to start a business in, you’re going to have to spend A LOT of time learning the ropes OR hire people that know the industry.
If you want to go the route of hiring people, you better have deep pockets or startup funding. That’s nice to dream about but the reality is that you won’t get any funding unless it’s from your savings or your family members.
Get experience, then plan.
It’s said that ‘proper planning prevents piss poor performance’ and right they are. You can’t just charge headlong into your chosen field without knowing what the costs were. Do you have an excavating machine if you’re an excavator? If not, where are you going to get one?
Right now, the soft fields (i.e. coding, Internet, consulting, etc) are ridiculously easy break into from a cost standpoint. You just need a good laptop ($2000), a domain name + hosting ($100/year), a phone ($100-$1000), and a place to work. If you’re living at home then cost is probably zero but if you want to rent a desk at WeWork you’re looking at $500/month.
So for less than $10,000 you can get started in your new business. You can even cut that down to $5000 if you have a phone and laptop already, you just upgrade as you go along and if you make money.
Cut Debt Fast
Years ago when I lived in New Mexico I thought about opening a ‘location scouting’ business for photographers. I sat down with an SBA guy that shot my idea full of holes. It was humbling, to say the least. I was not prepared and certainly didn’t do any planning. The one thing he did say to me that stuck with me is leveraging debt to expand. He said that some debt is healthy and will let you buy new equipment and write it off on your taxes.
Leverage debt is such an appealing siren song but it’s deadly, especially nowadays. If your business fails, you have to pay back the debt. If the economy fails (like now in the Covid19 pandemic) you have to pay back your debt. It might be wiser to only grow if you’re making profits and keep your debt very low.
If you do leverage debt, always watch it carefully and cut it down quickly. We live in such a debt-based society that it’s downright frightening. I’ve often thought about writing a blog dedicated to cutting debt because we all fall into its trap. Some of us get out, others do not.
Why start a business in the first place? For me, it’s about having autonomy over my life. My friend in Utah is perhaps one of the most successful Entrepreneurs I know and he’s started several Engineering businesses and a Restaurant. He always finds a way and is very innovative. The reason he does it? So no one can tell him what to do.
That, to me, is the best answer. I’ve often posted it here or talked about in my video channel that you have a ‘song to sing.’ That song is your life’s song and you should sing it loud and proud. If you work for others then they’re the ones that can tell you how loud to sing or sing at all.
Granted, some people are happy with going to work and collecting a paycheck. They’re ok with being a cog in a machine. I’m not. Maybe that’s why I end up working at Startups. Things are not defined and I can wear many hats and get stuff done.
I’ll leave you with this riff on a Calvin and Hobbes cartoon overlaid with Bill Watterson’s words from a commencement speech. It rings true to this day.