There was an interesting piece on the NPR Radio program Marketplace on Tuesday 11/18/08.

The piece was titled "Starting a Business in a Bad Economy."

In a short space, it identified a number of things that, from my perspective, are critical for small-scale entrepreneurs and startups to understand. It also highlighted some of the most fundamental misunderstandings about entrepreneurship that are in common currency.

What I would like this post to highlight is that small-scale sustainable enterprises are absolutely possible in this economy if you are willing to put in the time and effort. However, the amount of time required for these kind of startups is typically more than you estimate.

If your financial life is such that you need immediate pay-the-rent type cash flows, starting your own business to dig out of this is a very poor option, with low odds of success.

Let's start with current news. There is no doubt this economy is a massive mess. Each time there's been a ray of hope, it's been snuffed out by something unexpected from left field. Then we restart and the process gets repeated. This has been an awful year for the economy and the near future looks very rough.

That doesn't mean you get under your desk however. It means you smarten up and start building some solutions for yourself.

I've run small businesses through the last bunch of recessions, including the whoppers. If you are overextended and have built your enterprise on a platform of unsupportable risk, then you've got real trouble. For the rest of us, the sun will continue coming up. Birds sing after storms.

The Marketplace radio piece was done by Mitchell Hartmann of Oregon Public Radio. Mr Hartmann is a very good reporter and focuses on sustainability issues for Marketplace.

This piece summarized a few of at the many difficulties and opportunities that startups face in this kind of economic environment.

Mr. Hartmann spoke with an advisor at the Small Business Development Center in Portland about people rushing into entrepreneurship out of immediate financial need.

The advisor, Jackie Babacky Peterson, sounded a bit shell shocked, referring to the newly unemployed launching new businesses on their credit cards. That indeed is a very bad path.

Here's a transcript from that section:

"Advisor Jackie Babicky-Peterson is seeing unemployment and entrepreneurship meet but not necessarily in a good way."

"Many people get laid off from companies so they are deciding this is a good time to launch a business even though it may be very difficult."

"Many people will rush into biz for themselves without sufficient planning and with little or no savings they'll use personal credit cards to get going. 'Just pure startup money is now - and always has been - pretty impossible.'"

"Credit cards will kill you."

She concludes: "I think we will have more failures."

I'd like to parse this for what slow, measured, startup types can take from this.

Ms Babacky-Perterson is spot on identifying the process of 'rushing into business' as a way of pre-scheduling the likely death of your enterprise and damage to your personal financial welfare.

One line in that quote is critical. It was about the difficulty in attracting outside money to small startups. Outside investment money for brand new startups has never been available. Not in this bad economy and not in the past when things were better. Appropriate small-scale startup money only comes from your pocket. Alternately, outside investment can come, with an increasing chance for trouble, from friends and family.

And yes, using credit cards to finance your rushed effort will likely kill your startup.

And yes, with more startups there will be more failures. However, the most vibrant regional economies in the US have high startup rates AND high failure rates. What's working here is that cultures of entrepreneurship and participatory commerce are celebrated. If something doesn't work, you try something else. There can't be successes if there aren't failures. The key is how we deal with those failures and learn from them, and how we support the culture of entrepreneurship that engenders all this activity.

And yes, if you drive a boatload of other people's money off a cliff (see current events), you've created dysfunction and hurt the system for those that follow. If you lose a small amount of your own capital (and probably a large amount of time), then you're smarter and ready for the next effort.

In the past, I have quoted Vivek Wadhwa whose common sense seems to show at key points in these national discussions of entrepreneurship. (Jan. 5, 2008)

Vivek Wadhwa founded two tech startups and now researches entrepreneurship at Duke and Harvard.

While Mr. Wadhwa's comments speak specifically to large firms, his ideas deliver critically important meaning to the discussion of small startups.

Mr. Wadhwa says the Fortune 500 is full of companies that were founded during bad times: Johnson & Johnson, Disney, Cisco, and Intel to name a few.

The Marketplace reporter Mitchell Hartmann then referred to a big entrepreneurship organization as saying startups will not increase due to these terrible market conditions.

Vivak Wadhwa says that's the wrong conclusion to draw from the current economic conditions.

Here is where I want to shine a bright light on the good words of Mr. Wadhwa.

"We'll be back on track in 2 - 3 years. By that time you will have gotten your business model working, you've got your products perfected, you know your customers, you know your market space, and now you can go to the angel investors, the venture capitalists and pitch a real company to them."

Mitchell Hartmann closed his piece this way:

"So, if you don't have funding from your own nest egg, or from friends and family, you can pretty much forget about going from 0 to startup during this downturn."

With no diss at all to Mr. Hartmann, I humbly submit a concluding summary that would promote some glass-is-half-full action steps.

Mine would run something like this….

If you can invest a small amount of money and a large amount of your time, you can create your own sustainable enterprise in these difficult economic times. With hard work that enterprise can become a commercial platform allowing you to go forward in life with more personal options and more financial security.

Thanks to Mitchell Hartmann for the great piece and thanks, as always, to Marketplace.

Now get out there ASAP and start something. Slowly.


Marketplace broadcast of this story

A passion for problems

A good friend and mentor directed me to a wonderful book called Ripples From The Zambezi, by Ernesto Sirolli.

Mr Sirolli has been doing economic development work around the world and in the U.S. for more than 30 years. He is a 'bottom up' developer - nurturing small startups and then helping those entrepreneurs grow to the next level.

There are many great things to say about the book and the work. I want to focus on one aspect that I've always believed and taught to startup students and clients.

People often ask me what kind of business they should start. Often they're well along into researching business 'opportunities' being marketed to them.

I tell them that's the wrong question. The primary question is "What do you love?" Give me that answer, and I'll tell you what kind of business to start.

If you want to create your own small scale startup, focus on what you love. Build your enterprise around what you do beautifully or make with passion. The service or product will sell your enterprise in a way you couldn't duplicate with any other method, given small scale startup budgets.

Mr. Sirolli directs those that would help entrepreneurs first find the individuals who are passionate about their work and their ideas. Then he advocates getting the appropriate tools and structures in place to support that kind of enterprise.

He says this: "Success , we can therefore say, is to do beautifully whatever it is that you love doing…. And successful people come from every social stratum, race and sex. Some have been physically and psychologically abused; some couldn't see; some couldn't move and typed their books , letter by letter, with a stick held in their mouths. To be a genius in your own mind, however is meaningless; you have to dance it, build it, grow it, communicate it. Share it with the world."

The world gets made better by people solving problems. If you look around and can't see enough problems, I can't help.

Find a problem. Tell me why you know it passionately. Tell me what you love about your solutions, and I'll tell you what kind of startup you should organize. Your business will survive and grow only by continuing to solve problems with all the passion and skill that you can bring to your enterprise.

On top of that you get to live and work with what you love. It's a pretty great two-fer.

In closing, these kinds of small scale startups have never been more needed by the wider economy. The opportunities for small scale startups have never been greater. We are entering the renaissance age of entrepreneurship.

However, you need to remember that it will take longer than you think. The kinds of startups I'm writing about here are the most sustainable and most likely to succeed . But they take a while. I've called it the slow startup movement for a good reason. It's true.

What do you really love? Ready, Fire, Aim. Repeat. Good luck my friend.



Enersto Sirolli and the Sirolli Institute

Thanks to Sue at the Vernon County Economic Development office for the introduction to this good work.