KEY POINTS:
When recession hits and money gets tight, the last thing people think of doing is jacking in the day job or risking their redundancy money on starting a business. But if you did, you'd be in good company.
Among the many firms that started during a recession are
LexisNexis, the law media business, during the 1973 oil crisis. FedEx started trading in the same year and went on to become an international delivery company. News broadcaster CNN launched in 1980 at the start of a severe recession that lasted two years.
Duncan Shand is managing director of the business advisory and marketing firm Inside Out, which lists Vodafone, House of Travel and insurer AMP among its clients. He spent 15 years in the corporate world before leaving iHug.
Faced with finding another job or starting his own company, he opted to invest in himself: "I decided I had had enough and so started the boutique consultancy group."
Shand considers that launching a business during a recession is no more difficult than starting during an economic boom.
"In terms of starting a business in a recession almost the same rules apply," he says, "but business owners will probably need that extra level of conviction and certainty.
"When there is a massive change [in the economy] there are always opportunities. There will be opportunities everywhere this year."
Given that it is probably easier for some unemployed people to start a business than find a new job, Shand's advice on the best businesses to start comes down to personal choice.
"The opportunities come down to what your own personal experience is. So I couldn't say that there are two or three areas that everyone should be looking at. People need to look at their own experience and commercial background and decide which business is going to be right
for them."
However, he says sectors worth looking at include debt collection and firms that can provide necessities, such as food and clothes to the lower end of the market.
"These are obvious things to look at, but there will be opportunities across the board for smart business people," Shand says.
But there is a big difference between starting a business and trading profitably. No matter what business idea you have there's bound to be a competitor out there and they will probably be better established than you. So how can start-ups stand out?
"You need to really make sure you go into something that is truly different, is changing the game, or has a very clear proposition [to customers]," Shand says. "Now is not the time to be launching a 'me too' offering to try and attract some market share."
Shand says that anyone starting a business now needs to be offering something very different or to sell goods in a different way. "If you are looking at entering a competitive market you need to think how you can do something that is radically different when compared to your competitors," says Shand.
"I'm not saying don't do something other people are already doing, I'm saying you must do it differently. You can't enter the market and think that having a prettier logo will help you get a share of the market."
Shand says that analysing each operator in any given market shows that they run their business in pretty much the same way.
"One retail chain may add a particular element to their offering and all their competitors will follow. You have to be careful about what you change because by trying to stand out you may add unnecessary costs without adding any consumer value."
Entrepreneurs who want to compete with an established operator should identify every element of their competitor's operation, strip it back to the bare offering and replace the unnecessary elements with something else.
A lot of enterprise is born out of adversity and from people reaching the end of their savings, including those hard hit by this recession - middle managers. "There can come a point when you have no choice but to do something, and I think the middle management tier of people who are out of a job will have some very good expertise in their industry and the good ones will be saying, 'Well, if I were in charge I'd be doing it like this'.
"They will have the opportunity to play by their rules."
Out of the glass tower
Following more than 12 years in HR management and recruitment, Kate Billing decided she wanted more than a 9-5 job in a "glass tower". She craved variety and wanted bigger challenges.
So 18 months ago she dropped the day job to go contracting. It has worked out well but now she is forging ahead by starting a business that looks at employer branding, public relations, company culture, employment strategy and employee engagement.
The name Blacksmith may seem an odd one but it is a word which sums up their company perfectly, says Billing and business partner Paul Leacock.
"Working with black metal is an art, a craft and a science - that's how we see our firm," she says. "We heat things up, form them, cool them down and make something useful."
Billing left her job because she wanted to help firms at different stages of their development.
"The opportunities to do what I wanted to do within a single business were quite limited," she says. "Then one day - after months of mulling over my options - I resigned to go contracting. I figured that if I could get through the first six months then I'd be fine. What's the worst that can happen? You might lose some stuff if you fail."
After 18 months as a "hired gun" helping organisations such as government departments and the Auckland Philharmonic Orchestra, she has teamed with Leacock, a former manager of an IT recruitment firm.
And they are not worried about media reports of a global recession.
"It is wise to be aware of the environment," says Billing. "But we think it is easier for us, we are already operating within the market and growing the business."
Now is a chance to look for opportunities, she says.
"Our view is that in the areas we want to operate in, many employers have been on autopilot. We look at what firms are already spending and show them how to get better value."
Billing emphasises Blacksmith is not just another business offering to place recruitment advertisements.
"What we aim to do is go to firms, find out what they are really spending on recruitment and retention and then provide them with better options that provide them with a measurable result. That includes looking at their staff, systems and customers."
On the web:
www.blacksmith.co.nz
