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5 reasons to start a business in bad times

June 12, 2009

Nicole Williams wrote a good article on why you should start a business during these bad times. The reasons are pretty compelling: supply is less expensive, help is more affordable, competitors are weak in the knees, customers are looking for cheap alternatives, and motivation is contagious right now.

Seeing how its Friday and all, I thought I’ll give my take on how each one stacks up against the realities this side of the world.

1. Supply is less expensive.

Damien says: True if you are trading in real estate, pre-owned autos and other second hand goods. Not so true for anything else. In fact from what I hear, the key driver of the price of everything – oil price – is set to go up soon. That will spark off another round of increases to the wholesaler. Would you bet that the retailers will reduce their prices then? What I’m seeing is that rather than reduce prices, wholesalers prefer to shut down and disappear, some to escape their creditors. The next wholesaler takes over the market and simply maintains the same price levels. So I give this a 3 out of 5 on the truth-o-meter. 5 being totally true, 0 being totally imaginary.

2. Help is more affordable.
Damien says: True for general unskilled help. Not so true if you’re talking about skilled talent. Believe it or not, amidst a sea of jobless folk, companies are still grumbling that its hard to find a good programmer, musician, chef, designer, anything that would give their competitors a solid kick in the butt. And when they do find somebody, he won’t come cheap. And if he did, you can bet he’ll jump ship as soon as things get better and you’re back to square one. So I give this point a 3 out of 5.

3. Competitors are weak in the knees.
Damien says: Yes I’ve seen some restaurants close down. I’m seeing many department stores putting up Sale signs. Wait a minute, that’s what I saw before the recession! But what about the fast food chains that are giving recession specials, you say. Well, here’s something to chew on. Fast food has been threatening the hawkers’ $5.00 bowl of Har Mein with their $5.95 lunch sets so why do you suppose the hawkers haven’t reduced their prices one bit? Look at the sticker price of new cars, new homes, gadgets, books, home appliances. See any weak-kneed reductions there? I didn’t think so. Remember we’re half a year into the recession and competitors are digging in and sticking to their guns. So this point gets a 2 out of 5 from me.

4. Customers are looking for cheap alternatives.
Damien says: Yes, people like me look for less expensive substitutes and I thought everyone was like that too. Until my associate told me he had to wait to get a table at Sushi Zanmai the other day. And wait for a table at Chili’s the day before that. The menu prices hadn’t changed, he said. Even hawkers still enjoy a roaring business despite stubbornly clinging to high prices. So for the working class in the city, that segment you’d wanna target when you start a business, the verdict is clear. Screw the cheap alternatives, we’ll take taste, convenience and class anytime. So I give this a 2 out of 5.

5. Motivation is contagious right now.
Damien says: In the face of adversity, people buck up and work even harder to find success. That’s great theory but does it really happen? Here’s what I see. Yes, people get motivated, but not always in ways that protect your business interests. You know, the “newly motivated” employee who sells your leads, use your office equipment to conduct his own side business, or goes out and starts up a business that competes with yours. So, depending on how your staff relate to you and how ingenious they are, you don’t always get to benefit from that extra bit of motivation so I give this iffy point a 3 out of 5.

Okay, I know it might sound like I’m throwing cold water over good ideas but for me, its hard not to walk into a book store, flip through some self-help book and laugh my head off. Not the author’s fault. Maybe what works there is a disaster here but dudes, think when you read. Otherwise you’d buy anything a product flyer tells you (uhh… come to think of it, that’s actually good for business so forget I said that. πŸ˜€ )

Seriously, for me, there is only one thing that works. Demand. Being a market-driven person, that’s where I take my cue from. If the demand justifies new supply and if that demand looks to be sustainable, then I’ll start up. Whether in good times or bad, whether I live up there or down here, the rule holds and its the only rule I’m confident of sticking to.

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4 Comments leave one →
  1. June 12, 2009 6:44 pm

    well , there are always good reasons to start a business during good times ..
    and here we also have good reasons to start a business during bad times ..

    Damien , maybe you should change the post title to
    “screw u , just go start a business , anytime is good ” :p

    Hey I should hire you as a headliner, hehe. πŸ™‚

    Yeah, timing is everything in a business. It allows you to bump into an interested investor, stumble on cheap supply, make unexpected clients. So I guess the author was trying to determine timing from these market indicators.

  2. June 13, 2009 9:23 am

    I think starting a business is more like a personal thing. If u have a product, and a demand for that product, and u feel like you really wanna do it for some reasons (tired of your boss n colleagues, wanna surround urself with people u can work with, etc), then go for it IRREGARDLESS of how cheap the employees are.

    Why? coz if u r a startup and i am a good employee, u think i will go to your place meh? of coz i choose big companies. we’re in RECESSION after all. so u won’t get good employees cheaply. bad employees? yes. :p

    for the other factors, not so important also. so wat if the food is really cheap or the supplier is really cheap, bla bla bla……so u just gonna start a business like that? what are u going to sell then? something with high demand? or just anything will do?

    don start a business just because everyone is saying it’s a good time.

    Yeah, that’s why I see demand as the only reliable indicator for market entry. No amount of cheap raw materials, low cost labor and motivated staff will compensate for the lack of market interest.

  3. June 13, 2009 1:20 pm

    hmmm..but if there is large demand , everybody will hop into it until the whole industry gets screw up , everybody under cutting everybody ..etc..

    but anyway , how long can a demand last before everybody starts jumping in the industry ? 2 months ? 1 year ?
    entering is easy , but i think maintaining is even harder ..
    (like they said lah , striving to be the first is easier than being and maintaining the first )

    i believe in multiple streams of income ..
    my business does music lessons , studios and recording , retailing used and brand new musical instruments , events , renting out PA and Amps , performance ..

    so if one fails , at least i have the rest to cover it ..

    and then there are “seasons” …such as , usually , sales will be great from september-dec ..mac-july will be super quiet .. but mac-july is where all the events occurred , there my rental , studio and events will cover up that dry season of sales ..

    well , sorry for the randomness and the unrelatedness comment of mine :p

    Haha, no worries man, any comments are welcome.

    About the gold rush, actually there are industries that survive even when everyone and his brother jumps in. Just go to Digital Mall or Low Yat or Petaling Street. You get 10’s of shops selling the same things at the same price. They’ve probably been at it for years. Ordinary marketing gurus will tell you that’s a recipe for disaster and yet there they are, doing a roaring business. I think in these places, the demand for products is so great it can support 40-50 competing points of supply easily. So its doesn’t really matter how many opportunists are attracted to what you’re doing. As long as the demand exceeds supply, people will buy.

    Looks like you’ve decided to bet on more than one horse. Smart move. At some stage you might diversify to other industries. I hear some IT entreprenuers here also open up bars and restaurants. One even opened up a used car biz on the side.

  4. June 13, 2009 1:36 pm

    i guess my point is ..

    demand is just the beginning of the game ..
    one should focus more on his/her business strategy and structure

    no point entering a market with alot of demand with a shitty plan

    Oh yes, absolutely. Most businesses crash not during take-off but somewhere in mid-flight so sustainability is absolutely vital. πŸ™‚

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