Sure, it sounds counter-intuitive, maybe even nuts. But it's true -- times like this can be a great time to cut your teeth as an entrepreneur. How should I know? Because I did just that -- I quit a good job in the darkening days of 1979, trading an office with a window over Midtown Manhattan for a ramshackle desk in my third floor attic. Over the first two years I made an embarrassing cascade of mistakes and had to inject $89,232 of savings and bank borrowing into the business. Learning from each mistake, I ended up selling a line of winter warmth garments by mail-order catalog that provided ongoing cash flow. To finance growth I sold our house and borrowed against the proceeds. I rented bargain office and warehouse space. With someone else making the garments and selling to me, there was no need to build an expensive factory or develop a complex technology product.
As the recession of the early 1980's deepened, I flailed away with my pipsqueak of a company, still making the inevitable mistakes of a neophyte entrepreneur. Since my company was tiny, however, the mistakes were also tiny--and survivable. They provided the necessary start-up lessons at a minimal financial cost. When the floodgates of the economy opened a few years later, I pounced. In 1986-1988 my little company morphed into an INC. 500 list honoree of America's fastest-growing privately-held companies and generated steady, 20-percent pre-tax profits. In 1990 I sold it in a competitive bidding process and walked away a free man, able to take a breather and put my kids through the best private schools. Starting small and proceeding like a tortoise had been the key.
To be honest, I didn't plan to start in a recession. But in retrospect, the dark days of 1979-1983 were, like today, an ideal time to birth a business, especially one with limited capital. It forced me to select a product line by trial and error, and then to learn its business' fundamentals from the ground up. It was a priceless boot camp that provided the mental template for later success.
As years passed, I saw many well-funded entrepreneurs start up, and then fail, wasting all their savings, and investors' capital, in the process. They were like boxers sent into the ring for important fights without adequate training and coaching. They all ended up losing their fights, and wasted precious resources. They had made their inevitable start-up mistakes on too large a scale. If they had made these mistakes on a very small scale, as I had, they would have been able to live to fight another day--and have a good chance to make the elusive 5% winners circle.
You don't necessarily need an expensive M.B.A. Experience, product selection, training, cost control, people skills, work ethic and instincts are what will determine your success or failure. What better time to hone them than during a dark recession?
And financing? If you pick a low-tech product and sell direct to the consumer, you'll be able to comfortably service bank debt.
Frank Farwell is the author of Chicken Lips, Wheeler-Dealer, and the Beady-Eyed M.B.A.: An Entrepreneur's Wild Ride on the New Silk Road, recently nominated for the Financial Times/Goldman Sachs Business Book of the Year Award. For more start-up financing advice, take a look at Chapter 10, The Magic of Smiling Dan.
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