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Is Now a Good Time To Start a Business?
In the world of entrepreneurship, timing matters less than passion and preparation
There seems to be plenty to worry about if you read the headlines. Some say a recession is overdue, interest rates are high and may go higher, and no one seems to be happy with the domestic political situation. Polls show most Americans believe the country is heading in the wrong direction. If you listen to the most extreme doomsayers, the world is about to end—whether through war, climate change or artificial intelligence run amok.
We live in an age of doom-and-gloom, but what does this mean and what should this mean for the entrepreneurs? There certainly appears to be a high level of risk aversion: Studies show a decline in entrepreneurship and the number of startups. People are concerned about the effects of a troubled economy on their chances of success in starting a business, and many are deciding that entrepreneurship is simply not worth the risk.
I’m a serial entrepreneur myself. I’m aware of the risks of starting a business, particularly in a time of considerable economic uncertainty. But I’ve been down that road, and I’ve learned that external factors don’t matter as much as many would-be entrepreneurs worry they will. If you’ve done the homework and you’re passionate about your idea, then the right time to start a business is indeed right now.
Tough Times for Entrepreneurs
Roll back the clock to the early 1980s, when I planned and founded my first startup, Bookstop, the first chain of giant bookstores. The nation was politically divided. The Berlin Wall was still up, and Cold War tensions were in full force. The prime rate reached a record 21.5%.
Yet these issues did not prevent me from moving ahead. I was able to raise the $350,000 I needed to start the business in early 1982. The chain doubled in size the next year, tripled the next, then doubled again the following year. In 1989, Barnes & Noble bought the company for $41.5 million.
Certainly, there are parallels today to the economic challenges I faced in the early ’80s. But these days, the climate is actually better for entrepreneurs.
When I started Bookstop, I chose Austin, Texas, as the place to do it—I thought it gave my fledgling company the highest odds of success. But the environment for entrepreneurship Austin provided then was nothing like what we see today. Austin had one small, insignificant venture capital firm, Rust Ventures. Few attorneys knew how to set up a startup or prepare the appropriate fundraising documents. Austin-based accountants handled few startups.
In fact, the “Big Eight” accounting firms at that time did not even have Austin offices because the city was too small and too low-income, with little business presence. It was a college town and, as a state capital, a political town. Furthermore, there was no entrepreneurship curriculum at the University of Texas, and very few at any other universities. Business schools prepared their students to work in the world of big corporations, not in the emerging world of startups.
In the early ’80s, there were few incubators and no coworking spaces. There were no podcasts or blogs about entrepreneurial success. As opposed to franchising someone else’s idea, anyone like me who had a totally new business idea was completely on their own, with no startup infrastructure or support system. And there were few entrepreneurial mentors to turn to for advice.
Technologically, it was a vastly different world. We were several years away from widespread use of the internet. Computer screens were black with white letters; the printers were dot-matrix, black and white. Spreadsheets, word processors, databases and image manipulation software were primitive. The Radio Shack TRS-80 microcomputer on which I prepared my projections had 16K of RAM and cost around $6,600 in 2023 dollars. For the sake of comparison, laptops today with 16 gigabytes of RAM cost around $500—that’s 1 million times the amount of RAM for a fraction of the cost.
Asking the Right Questions
As you can see, entrepreneurs in the early 1980s faced similar challenges to what today’s entrepreneurs experience, but we did not have the support system that today’s founders have. But does that mean it wasn’t a good time to start a company? Definitely not: For me, and for Bookstop and its investors, it was the right time. And for entrepreneurs today, the conditions are even better.
A few years before I arrived in Austin, John Mackey and his friends had begun Whole Foods Market. A year or so after the first Bookstop opened, a college kid named Michael Dell started selling computers from his dorm room. Clearly, the world was about to change: Over the intervening 40 years, entrepreneurship became a hot topic from coast to coast.
Today, even the smallest cities and most remote areas have coworking spaces, startup clinics, university programs, and a mentor or coach on every corner. Angel investors and other funding sources are abundant for the right ideas. Software as a Service (SaaS) and advanced software have lowered almost every cost and increased productivity on every task. From my perspective, this is a dream time to start a business—not just in the United States, but around the world.
But while there may be more opportunities than ever for entrepreneurs, success is never guaranteed. As someone who’s been there myself, I know the way to increase your chances of starting a successful business is to truly prepare. And to do that, you have to start by asking yourself the right questions.
First, have you studied the industry you are interested in joining? Do you find it fascinating? Have you become something of an expert in it? What does the future look like for that industry? Is it growing or shrinking?
Is anyone else doing anything similar to what you plan on doing? I have reviewed thousands of business plans and judged dozens of business plan competitions, and far too often, I see clones and undifferentiated product or service offerings. Unless you have a whole new twist, an innovative approach or offering, why bother entering the business?
If your business is geographically based, such as brick-and-mortar retail, restaurants, the delivery of healthcare, educational services or transportation, have you studied the geography? Boomtowns and growth regions have always drawn thinking entrepreneurs, whether from Europe to the U.S. or from the Eastern states to the Wild West in the 19th and early 20th centuries. Do you know which places or even neighborhoods are growing, which are shrinking, what the future holds, and why?
Have you identified the key skills needed in order to succeed? Focus on what the core skills are in the business you are entering. In banking, you need people who can assess loan risk. In retail, you need people who know and love the merchandise you are selling. In software, you need the best engineers. Do you possess the needed skills yourself or have the confidence that you can learn them, or do you need to add the right people to your team to bring those skills to bear?
Do you have evidence or reason to believe that people will be willing to pay for what you offer? And at a price at which you can be profitable, and thus survive? How many potential customers have you talked to? How deeply do you understand their needs and motivations?
Have you laid out a plan, with specific projections, for where you think the business will be in three, five or even 10 years? Give it your best effort. As the great general and president Dwight D. Eisenhower said, “Plans are worthless, but planning is everything.” That is, the process of thinking about the future—what might go wrong and what needs to go right—is what matters and best prepares you for that future.
Do you have friends, relatives and work associates who will be straight with you? Are they prepared to challenge your ideas, to tell you when they think you are wrong? Do you listen to them, yet still make your own final judgments?
And, finally, are you ready to devote your life to this cause? Maybe not forever, but at least for “as long as it takes”? Frequently, I see founders whose goal is to sell the company they start, ”built to flip.” But almost no great companies were started that way. If you do not have a passion for the business, you are far less likely to succeed. Are your loved ones, the people most important to you, ready to support the risks you are facing?
If you cannot answer such questions, then now is likely not a good time for you to start a business. But if you have good, well-thought-out answers, then it is a good time. Doing so was key to the success of Bookstop, even in a time when the economy was less than rosy and resources paled in comparison to what we have today.
No matter which way political and macroeconomic winds blow, it is always a good time to start the right business. We often forget how many companies were founded or prospered during the Great Depression, particularly in the growth industries of the era, such as radio, trucking, auto services and insurance, and mass-produced consumer products. Ultimately, any business owner’s success depends on their ability to serve others, to give customers something they cannot get elsewhere. Only the marketplace can judge whether the idea and the execution are good or not.
When an entrepreneur has passion for their business and has fully thought through their idea from all angles, their odds of success and overcoming any outside challenges increase dramatically.