You want to open a business. You’ve said to yourself numerous times throughout your corporate career that you should scratch your “entrepreneurial itch” before it is too late. Or perhaps you are already a business owner and understand the need to diversify. You want to get into another business that doesn’t demand the same level of time and attention as your current business and one with a time-tested, proven system. Whether you are trying to escape corporate America or diversify your current portfolio, you know you want a business that would give you more flexibility, with a business model that is manager-led rather than owner-operated, and has stable long-term prospects to put you onto a firmer foundation for those years when you are ready to slow down a bit.
But right now, something is holding you back. Let’s talk about the two elephants in the room (or country). First, the fear of how the future will play out as the United States navigates reopening large portions of the country. Second, the unknown of when the country will settle down after periods of unrest that have perpetuated in various cities. It is completely understandable and normal for someone to be questioning the wisdom of opening a new business in such conditions.
Yet, there have always been businesses that have started up in even the most tumultuous of times. Here’s a list of businesses you might recognize that opened in an era of troubled times…
- 1890 General Electric (Social & Labor Unrest)
- 1896 IBM (Panic of 1896)
- 1908 General Motors (Industrial output fell 17%/GNP fell 12%)
- 1939 Hewlett-Packard (Great Depression/WWII breaks out in Europe)
- 1953 Burger King (Post-Korean War Recession)
- 1957 Hyatt (Eisenhower Recession)
- 1958 Trader Joe’s (Eisenhower Recession)
- 1971 FedEx (Inflation increases to 4.3%)
- 1975 Microsoft (Recession of ’73-’75 & OPEC Oil Embargo)
Additionally, as we have seen at Sport Clips Haircuts, businesses have continued opening even during this current downturn and will continue to open as the economy reopens…tomorrow, next week, next month and in the near future. In the four months after the 2020 lockdown began, Sport Clips has opened 16 new franchises and is scheduled to open approximately 30 more by the end of 2020.
So, who should consider moving forward with a new business opportunity and why?
First, let’s deal with the why. America’s favorite investor, Warren Buffet, is quoted today as saying, “Be fearful when others are greedy and be greedy when others are fearful.” Setting the “greedy” adjective aside, there is important truth in this statement because there will be significant opportunities to take advantage of during the down economy. For example, the current economic environment is presenting several advantages to new Sport Clips store openings, including more and better site availability, a more favorable lessee environment, additional stylists to recruit and less overall competition. Sport Clips stores experienced temporary closures during the pandemic, but strong support saw franchisees through these weeks and prepared them to ramp up for reopening. The combination of these factors points to a tremendous opportunity when turbulence calms and normalcy returns. However, those who wait may miss out on the best opportunities.
Since it usually takes time (six months to a year or longer) to get a new store open, now is the time to move forward on a new business opportunity. At Sport Clips, the qualification and application process is typically four-to-six weeks and then site selection, lease negotiation, buildout, staffing, training and grand opening can often push the timeline out a year.
Next let’s address who should be taking advantage of these unique circumstances. First, business owners who are still doing extremely well should take this opportunity to diversify. Even now, there are many small businesses that are actually doing better in the down economy. These include small transportation companies that are critical to the supply chain, such as delivery businesses tied to Amazon, along with many smaller businesses in the health sector, such as those that provide medical testing services. These business owners have a great chance to take a portion of their profits and reinvest into a cash-flowing asset rather than count on turbulent financial markets to generate an adequate return.
Second, those who have spent a couple of decades climbing the corporate ladder and have accumulated a significant portfolio to prepare themselves for retirement. Taking a portion of those proceeds to invest into a wealth-building, cash-flowing business makes a lot of sense not only as way to transition from the grind of corporate life, but also as a hedge against future inflation.
Finally, the last group primed to consider business ownership in this environment are legacy investors. Specifically, parents who are in a strong financial position, but who don’t necessarily want the full responsibility of operating a start-up business and can partner with their adult child or children to give them opportunity for a path other than corporate America. As long as the parent is willing to stay engaged to advise and closely oversee the start-up and has confidence their adult child or children have the knowledge, skillset, drive and personal responsibility to handle a start-up, this can be attractive on a number of fronts.
First, the parent can take a portion of their retirement and diversify it from trusting volatile markets with unpredictable returns to a business in which they control the destiny. Second, they get to make an investment in their most valuable asset: their adult child or children. Third, they give their adult child or children an opportunity to control their own destiny rather than being beholden to the demands of a long-term corporate career. The adult child or children are given the financial help they need and can begin building a business early before they have children of their own or before the demands of a growing family consume time and resources. This investment can also provide an opportunity to gain financial independence before they begin to climb the rungs on the corporate ladder and postpone their entrepreneurial desires until the twilight of their career.
It’s normal to feel a certain level of fear about opening a new business in the current economic climate. Yet, as we have seen during trying economic times in the 1970s, 2007 or even today, consumer demand for certain goods and services will continue to grow in all economic conditions and presents great opportunities for aspiring entrepreneurs who are ready, willing and able to take advantage of the unique upsides offered in such an environment. Do your homework and find the right opportunity that aligns with your ambitions and don’t let these uncertain times stop you from fulfilling the freedom, flexibility and firm foundation you can achieve through small business ownership.