Resources for Starting & Running a Business During a Recession
Summer is winding down and Labor Day is behind us. Although the recession technically started in December 2007, many of us did not feel the full effects of the financial crisis until the sudden collapse of 158-year-old Lehman Brothers one year ago today. This has been a year that none of us will soon forget. The outlook remains uncertain, but the future seems brighter than our immediate past.
Many economists are seeing signs of a so-called jobless recovery. A jobless recovery is a situation where the economy resumes growth, but employers remain reluctant to hire. The pattern could be similar to the aftermath of the 2001 recession, which was followed by two years of low employment. As of August, the unemployment rate was at 9.4%, and the underemployment rate – which includes part-time workers who cannot find full-time work – was at 16.8%.
Historically, high unemployment has translated into forced entrepreneurship. To paraphrase Plato, necessity is the mother of invention. Indeed, many successful companies such as Microsoft, Hewlett Packard, GE, FedEx, and Trader Joe’s were started during recessions (for more, see 14 Big Businesses That Started in a Recession and Defying Gravity).
With this in mind, we’ve collected a few resources to help entrepreneurs succeed in this tough environment:
- The Best Industries for Starting a Business: As consumers and businesses cut back in some areas, they continue to spend in others. Here are brief profiles of five markets with great potential for today’s entrepreneurs.
- Starting a Business When the Economy is Down: This talk by serial entrepreneur Michael Jones discusses several key issues that startups must address. [Note: This video is no longer online.]
- Is Starting a Business Brave, Smart, Stupid or Nuts?: It depends on who you are and who you ask. People are different, and it has to be right for you.
- How We Got a Loan: Banks have tightened their lending standards, and many are turning away small businesses. This story of how one company managed to get a loan may give you some ideas. The key lesson learned is that it isn’t going to be easy, even if you are thoroughly prepared, but it can be done.
- Startup 101: How to Build a Startup: Bernard Lunn, another serial entrepreneur, has published an online book that covers a lot of the important aspects of entrepreneurship. Although geared towards web technology startups, the majority of the information here applies to any technology venture. Lots of excellent advice for first-time entrepreneurs, and quite a few important reminders even for folks with several startups under their belts.
- Finding the Path to Success by Changing Directions: When what you’re doing isn’t working, it’s time to consider new strategies. It’s all about staying responsive to the marketplace. The best line in the article: “It was like people were smacking us around with a fish trying to get our attention about this high cost of storage problem.”
- Meeting Short Term Cash Needs: If your business is generating revenue but is facing a short-term cash crunch because your revenue can’t keep up with your existing debts, the SBA has a new program that can help. The American Recovery Capital, or ARC Loan Program, provides up to $35,000 to help you stay current on the principal and interest payments on your other existing loans. The ARC loans are interest-only for the first year, and amortizing over the next five years. To be eligible, you must demonstrate that your business was profitable in one of the past two years – this is not a program for startups. Note: The ARC Loan Program has been discontinued.
- Six Ways to Speed Up SBA Loan Approval: The American Recovery and Reinvestment Act made SBA loans easier and cheaper to get, but these special provisions will expire by the end of the year. If you’re thinking about applying for one of these loans, you need to act quickly.
- To Slim Down, Businesses Team Up: Creative alliances can mean lower costs while allowing everybody to focus on their core strengths. This is a simple strategy that any entrepreneur can employ.