“Recession drives innovation. If you actually believe in what you’re doing, you’ll find a way to do it.”
Starting a business in a recession is hard going. But right-minded entrepreneurs don’t let that deter them. New research shows 49% of British professionals plan to launch their own start-up if made redundant. And why not? Well-known, world beating companies had their birth in economic troughs: household name James Dyson launched his vacuum company in the downturn of the early nineties, while entrepreneurial icon Bill Gates founded Microsoft in the recession of 1975.
These two entrepreneurs – and the thousands more like them – are testament to the fact that if you have a good business idea and are prepared to work hard, success is up for grabs. Even in a downturn. Both David Williams and Mike Dauncey know it’s true: they started up in recessionary conditions and made good, too.
Mike, of recruitment agency TipTopJob, has steered his company through four recessions so far. The original version of his firm was set up in 1975, when the UK was in the depths of a downturn sparked by the oil crisis.
Fellow recession-beater, David, CEO and founder of global people development company Impact International, has made it through three downturns. He set up shop in 1980 when UK unemployment was high, strikes were frequent and fiscal policy was tight.
Both TipTopJob and Impact International are successful businesses with a global reach today. But it’s not like the hard times didn’t touch them: both entrepreneurs attest to the difficulties of dealing with falling sales in a recession; the pains attendant to securing credit; and the headaches of cashflow management.
Interestingly though, neither of our two entrepreneurs experienced the hardships of convincing cautious investors to offer funding: neither sought bank funding for their ventures. Nevertheless, Mike had such money trouble in the early stages that he sold his family home and moved somewhere cheaper; as a result he had sufficient funds to keep him going for about a year. Things were similarly tight for David, who couldn’t afford to pay himself for the first 18 months. “My wife was working as a hairdressers’ assistant at the time and we were living off her wages. It was tomatoes on toast for quite a while.”
But being short on funds when starting out isn’t the end of the world: it just means creating a leaner, more efficient enterprise. You should be keeping costs down anyway, though you don’t have to go as far as the Impact team did: they used to sleep on the roadside in sleeping bags to save money on hotel rooms.
If you set up your business model right, you don’t really need money to fund a start-up: you can fund growth through sales, as David’s company did. His business model insisted on a 25% deposit up front to secure any bookings for leadership or teamwork sessions. “Money shouldn’t be an object. We didn’t have any money at all,” David says of the early days of Impact, which started in his kitchen. “But we had a number of clients because I’d already been operating in this field for a while. Every penny that we earned had to be reinvested into the company.”
** image courtesy of LondonPermaculture on Flickr