By Mike Southon, FT Columnist
Ever since the recession began to bite in 2008, I have been confidently predicting an imminent recovery. As spring inevitably follows winter, good times are always just around the corner. We should buckle down, get costs under control, look for new niches and sell our way out of the recession.
This was not just based on the intrinsic optimism of the serial entrepreneur; I am old enough to have lived through several downturns, and now specifically advise people to start businesses in a recession, so long as they can generate cash quickly.
I argue that recessions are the perfect time to do so, as the products and services we might want to buy are cheaper than usual. New opportunities will emerge from the demise of less nimble competitors who found themselves over-leveraged by debt and often arbitrarily closed down by their unsympathetic bankers.
But even I have been taken aback by the length and seemingly unending nature of the current recession. Banks and even whole countries are on the brink and this autumn the stock market took another lurch downwards, with plenty of people predicting worse to come.
Then I remembered attending a very interesting presentation a couple of years ago by Darren Shirlaw, whose company works with mid-sized, owner-managed businesses and large corporate enterprises in 26 countries.
He argued then that the recovery would be w-shaped, with a plateau from September 2009 to September 2011; the markets would bottom out in March 2012 but recovery would start in September 2012.
He has published a free e-book, which outlines his arguments, based not on 'gut feel' or misplaced optimism but hard empirical and historical data. He explains the five typical mistakes that companies make in a recession, some ways to manage risk and how to catch the first wave of the recovery. A link for free e-book is at the end of this column.
Let us hope that his predictions are accurate and we all emerge wiser from current economic turmoil. Certainly the sprit of enterprise has not been crushed; I recently interviewed Business and Enterprise Minister Mark Prisk at the Conservative Party Conference on behalf of the Federation For Small Businesses (FSB).
He explained that over 500,000 new businesses had been started since they came into office, and outlined the measures that his department had taken to enable home working, reduce red tape and force the banks to stop rebuilding their balance sheets and actually start lending to small businesses.
This last issue was met with some scepticism by the audience, but Prisk responded that he was aware of at least seven potential new entrants to the banking market, who were well positioned to be true entrepreneurs' banks if the present incumbents continued as before.
My own advice to the 500,000 new start-ups remains the same. Run a cash business as long as possible, with, ideally, payment up front. Grow your businesses in the early stages by revenue, not by leveraging your personal debt or the acquisition of ailing competitors.
You should set simple but achievable financial goals, which for the self-employed or part-time entrepreneur might be as basic as paying off your student loan or mortgage.
Once you have a track record in paying off debts and have grown enough to afford a full or part-time finance director, you can then borrow from the banks with confidence.
The government needs us entrepreneurs to be successful to pay off its own debts. Shirlaw's optimism for 2012 should be boosted by the London Olympics, which will inevitably turn out to be more expensive than originally expected, for all of us.
Originally published in The Financial Times: www.ft.com Copyright ©Mike[/i] Southon 2011. All Rights Reserved. Not to be reproduced without permission in writing. Mike Southon- Co-author of The Beermat Entrepreneur & Business Speaker- www.mikesouthon.com
Mike is one of the world’s top business speakers, a Fellow of The Professional Speakers Association. Mike is a Visiting Fellow in Innovation and Entrepreneurship at London South Bank University. He has made frequent appearances on television and radio, has a monthly sales column in Real Business magazine and is a regular commentator in the Financial Times.
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