Blood in the Streets: Home Business Economics in Troubled Times
Towards the end of the Great Depression, J. Paul Getty — the first American billionaire — bought the Pierre Hotel in New York City at a fire sale price. He paid $2.5 million, a quarter of what it cost to build the hotel just eight years earlier. He later quoted Baron Rothschild, 18th century British nobleman in saying:
“The time to buy is when there is blood in the streets.”
To paraphrase America’s current fearless leader, it’s time to go shopping.
Democrats in the United States have been playing the recession card for years now. As far as I can gather — and I try to avoid watching the news, so I don’t gather much — everything sucks since Georgie Boy weaseled his way into office. Am I right so far?
Whatever your political slant, you’ll probably agree that most people think that America is in an economic crisis. The auto industry, the oil industry, the recent Lehman brothers debacle — basically people are freaking, no?
The lovely Pam Slim of Escape from Cubicle Nation alerted me — via Carlos Hernandez — that the New York Times has recently published an article stating that with the economic crisis being what it is, now is not a good time to start or run your own business. (If you really want to read it, you can create a free account. Frankly, I wouldn’t recommend it. The link’s just there to show that I’m not lying.)
I call bullshit. Oh boy, do I ever call bullshit.
When it comes to following advice, it’s generally a good idea to take the advice of someone who knows what the fuck they’re talking about.
You want financial management advice? Don’t take it from poor people.
You want child rearing advice? Don’t take it from people with rotten kids.
You want corporate ladder advice? Don’t take it from a career housewife.
The people who are failing are ALWAYS going to be the loudest and the first to lay blame. Think about it — they just failed. Are they going to publicly blame themselves, or are they going to blame something big and uncontrollable like “market forces” or “economic downturn”? Of course they’re going to blame everybody else — it’s a self-protection mechanism.
But when THEIR self-protection turns into YOUR hesitation, the results can be deadly. They can lull you into a false sense of doom and gloom. Don’t take business advice from people who just filed for bankruptcy.
In this writer’s opinion, this is the best goddamn time in history to start a business. Let’s investigate, shall we?
1. Small business competition is flatlining.
The average person is looking around saying, “I’ll keep my safe day job, thankyouverymuch.” (Yes, because your day job is SO FUCKING SAFE right now.) The rate of new business creation is going to slow dramatically. The rate of people bailing on their existing businesses is going to skyrocket. People are running scared back to the best day job they can find, and as the illustrious NYT tells us, “the unemployment rate rose to 6.1 percent in August, a five-year high, so …small-business owners might find it harder to land another job“.
Your competition is scrambling to find a job at Denny’s. Hello!?
2. The internet is the great equalizer.
As an internet entrepreneur, you have no boundaries. I have no doubt I’ll talk about this in a future series, but in the meantime, think about it. If you run a business on the internet, you have access to everyone with an internet connection. You are not limited by who has money in your broke ass town. You have access to the entire fucking world. Even a mildly optimized marketing campaign can get you on the radar — both emotionally and financially — of anybody you want, including people untouched by economic downturns.
(I, for example, just gleefully paid nearly $30 for 50 yards of eco-friendly yarn, and I’m on my way back to buy a shitload more. I’m buying my son a train set for his birthday that, if you look at all the add-ons and accessories, is going to cost close to a grand. My husband just went out and got me a VERY upgraded engagement ring, simply because he saw me admiring it. And we’re not alone.)
There are six billion people on this planet. Some of us have money and we really like spending it.
3. People are broke and selling assets.
When times get tough, people sell. Since they don’t particularly want to sell their homes or their cars, they tend to sell things that don’t matter as much to them. Like, say, websites.
Their spouses are freaking out and telling them they’re sitting on a very liquid asset. They are under extreme pressure to free up any money they can. If you have any spare money at all, now is the time to start buying websites.
Start hanging out where people sell websites and domains. I have a feeling there are going to be a lot of fire sales between now and February. Now because they’re terrified, November and December because they’ll need money for Christmas, and January and February because they just received one scary ass Visa statement in the mail.
(If you have or are thinking of starting an EBay business, now’s a good time for that, too. Remember the whole “buy low, sell high” thing? Start buying low now.)
4. Capitalize on The Lipstick Effect — or how to sell hope and happiness.
It has long been known that as an economic situation gets worse, lipstick sales go up. Seriously. Every single time. Google it if you don’t believe me.
There are two reasons for the lipstick effect:
Lipstick is cheaper than other indulgences. Women buy lipstick when they can’t justify the purchase of something bigger. This is especially true for high end lipstick. Instead of buying a $500 pair of shoes, they’ll buy a brand of lipstick that is better than their current one because they need the feeling of luxury. They spend more on lipstick because they have to spend less on other stuff.
Lipstick makes people feel hopeful and confident. We buy lipstick because we want the hope of good things to come. A thirty dollar lipstick at Chanel can give that to us, and it’s about the price of a pizza delivery order.
Thinking of starting a home business? Now is an AMAZING time.
Sell the right thing. Sell it to the right people. Hit the right trigger buttons. Do those things and you’ll be the richest person you know. Make your buyers feel the same way those women feel when they buy that lipstick and you’ll have more clients than you can see or more sales than you can ship.
Next Post: When Something Goes Wrong With Your Small Business
Naomi,
Smartest thing I’ve heard all week, in a week filled with fear and doubt - and I’m not surprised to have heard it here.
This is *exactly* the time to start a business, and when people start cutting back and looking for ways to save, perhaps that’s the time to provide a service that saves them money.
(back to the labs I go…)
-Brett
“…New York Times has recently published an article stating that with the economic crisis being what it is, now is not a good time to start or run your own business. (If you really want to read it, you can create a free account. Frankly, I wouldn’t recommend it. The link’s just there to show that I’m not lying.)..”
Well, we’re all just supposed to be hick morons in flyover land who look to the NYT for advice on anything from politics to business to what to read to what to wear take this, too. The sky is always falling, no more so than just before an election. Without the NYT to tell us, we wouldn’t have a clue about anything, right, Pinch? Talk about running something into the ground — check NYT stock and circulation trends.
You are absolutely, 100% on, Naomi! It’s always a great time to start a new business! That’s what makes this country really swell — you always have another chance, especially if you just get up off your posterior and do something! I have been amazed by people who wouldn’t just get up and MOVE to where they might be able to get a job, instead of sitting around whining that there was no work wherever they were. Now, with the Internet, you don’t even have to do that! The job can be in your living room coming right out of that glowing little box! Handy!
“The rate of new business creation is going to slow dramatically. The rate of people bailing on their existing businesses is going to skyrocket. People are running scared back to the best day job they can find, and as the illustrious NYT tells us, “the unemployment rate rose to 6.1 percent in August, a five-year high, so …small-business owners might find it harder to land another job“. ”
Thanks for the reminder, NYT, that there will be another wave of attrition and my competition pool is going to shrink again! Man, this is an early Christmas!
Yep yep yep. :D
You’re so smart.
“Sell the right thing. Sell it to the right people.”
Seriously brilliant in its simplicity. And really, how hard is that? If a client comes to me and wants X, I should give them X, not Y.
Look at how many of our famous millionare ( and billionare ) families made the start of their family money during the depression. THey didn’t HANG ON to their money. They MADE it then.
They figured out what people wanted and needed and got it to them. OH..BY THE WAY… they were also willing to roll up their sleeves and work their pattooties off.
It’s time for the weak and the whiners to go home, but you are SO right, Naomi, the ones with a great work ethic who can put their finger on the right want/need are going to clean up.
It is actually getting exciting out there. Scary…but exciting.
A-FRICKEN-MEN.
I stopped following/watching the news a while ago. If I need to know something it finds me. Yes I am aware of what’s going on with the economy–I know enough to be sure my choice to not follow the media’s alarmist, doom & gloom crap was a wise one.
I dabble in real estate investing and it’s the same thing. “What!? Are you crazy?? Real estate is so scary right now.” Um, yeah, and picking up that house down the street for 40 cents on the dollar was a realllllll frightening decision to make.
I love it. I’m about to start an ittybiz myself and I believe the timing couldn’t be more perfect.
Thanks for this post, it just solidifies what I already knew in my heart.
Right with you, Naomi - I call bullshit as well.
I started my side business BECAUSE the market was down … and it’s growing every month.
This is a good time to start a business simply because the bad economy makes you more motivated. :-)
This gives me confidence to turn my freelance gig into my full time gig!! I’ve been worried about the ‘ressession’ although I didn’t really know how it effected me. Thanks! :)
Well, then, it’s a good thing Pace put in notice at her safe, comfy day job! (:
She’s quitting come the first of the year, and we’re going full time on the Usual Error Project. We smelled that smell, we can taste it in the air - that sense of what you’re talking about here. It’s an awesome time to be doing what you love, and working from home, and we’re jumping in with both feet! (:
@Kyeli: “blood in the streets” + “jumping in with both feet”? Eww… I’m not sure I like that metaphor! (;
I have some friends who sell partylite candles, and they said sales are up astronomically right now, no matter what everything else looks like. Since people are staying home they want to spruce things up but can’t afford bigger remodelling tasks. Now is definately a damn good time for business. Thank you for this post!!!
“Safe” job indeed! Working for yourself is much safer than the corporate jobs of most of your clients. The projects I work on may get smaller or less frequent, but chances are the company will still need to communicate somehow, and they’ll be trying to do it with fewer people. I posted some suggestions for how independents (freelance writers, in my case) can make sure to keep paying the rent:
http://getitwrite.ca/2008/09/17/5-steps-to-keep-paying-the-rent/
Oh, you made my day! Confirmation that I’m on the right path, no matter how many family members ask”People actually PAY those prices?”
Indeed, they do and your reasoning is right one. Yarn is a luxury that is easily justifiable (more than lipstick, I think): you MAKE something out of it, providing you with both entertainment and something useful.
That said, I NEED to see a picture of what you crochet with your yarn!
Hm, this is reminding me that I really need more yarn.
Another useful thing about a shitty economy for many self employed folk: companies are less likely to bring on staff, but they still have work to do, so contractors become more attractive.
I have a part-time day job and there has been little indication of any slow down in fact it’s busier. Why, because it’s part of the lipstick effect. It’s primarily a wholesale store catering to those in small and not so small businesses which is about designing jewellery, creating and selling it to others. Customers have been talking about how well they are doing…everyone from low range goods to luxury price range. Business is good! I meet most of my future students in the store. What I’ve noticed is that they want to be more involved in the whole design process which for me means they want to take more lessons. I originally started out my itty biz to design and sell jewellery but now I’m busy teaching…which I love!
Naomi you’re right…it is an amazing time to be in business. You’ll have to excuse me I’m off to make some lipstick…I mean teach. :-) Bee
Also, would you rather make the move on your own terms or would you rather do it in a panic after you get laid off from your day job? Seems like being in control is kind of important. To me anyway. But that might be why I work for myself.
Also, you knit, too?! What more can I like about you?
Naomi,
Yes, yes, yes. Another thought–get off the ground when no one’s looking, and you’ll have your feet solidly under you for the recovery. This stuff goes in cycles. In two years we will all be wondering what we were so worried about.
Another devil’s advocate post you might enjoy (where I commented similarly):
http://blog.timberry.com/2008/09/hard-times-yeah.html
This post totally rocks. I see two kinds of folks right now: those who are freaked out, and those who are completely jazzed to have their field to themselves, and grabbing up all sorts of startup or expansion needs on sale. I can tell you, it’s a lot better to work with the latter.
Regards,
Kelly
Naomi THE OPTIMIST!!!!
Very good advice.
One of our analysts came in my office and said he was going to START learning about the stock market that he has some money in. START? Maybe not the time to start learning about stocks; Maybe not the time to start learning about buying websites either….but if you’ve got the knowledge,,,,,then START!
Thanks again for a positive article. I wasn’t thinking of stopping my endeavors just yet. And if you need a nice necklace to go with that engagement ring, be sure to check out my etsy shop! I’m an optimist too!
Naomi,
I am a reader who does not usually post comments, but I read your blog faithfully. I wanted to thank you for your inspiring post today and words of encouragement. I’ve been wondering what the hell I’m thinking trying to launch a magazine in these tough economic times.
I am completely swamped with freelance projects right now - so glad I made the leap in spite of all the naysayers around me! I even have an idea for another itty biz I’ve been sitting on, but man, now is the PERFECT time to get it going. As usual, honey, you rule!
Well said (as usual), Naomi.
The media loves bad news and they make the most of it.
As this article and your analysis show, “conventional wisdom” is often simply the collective and unproven assumptions of risk-averse non-experts.
Has there ever been a better time in history to get online and start a business?
Hear, hear, right on sister, Amen.
I agree wholeheartedly with what you are saying. And at the same time, being married to someone who has a biz who has been hit HARD by the current economic environment (heavy equipment construction), I will say this:
1) Now might not be the time to start a biz that requires huge capital investment unless you are really sure (by testing lots, not just wishing) that you have a very viable market who already likes you and is willing to give you money. So lipstick wax-making tubs? Probably a good investment. Yarn inventory? Yeah, but keep only as much inventory as you need. Big ass equipment to serve a market that has been halved in 6 months, definitely not.
2) If at all possible, set up a biz that depends on what is between your ears. The absolutely great thing about being in a “knowledge” biz like coaching/consulting, etc. is that you can immediately make up new products or services depending on the market need. I LOVE that about my business, and feel very lucky that my only real overhead is Oreos and coffee. (ok, network access and an occasional ream of paper).
3) Business models are important and will separate those that make it from those that don’t. If you set out a vague shingle and can’t describe exactly what you do, who you serve and what value you provide, you lose.
4) Watch closely those that have successful businesses. Pay attention to how they communicate, what they offer, and who they serve. A friend says “hang out in a barbershop long enough, you will get a haircut.”
I am RIGHT with you and the other commenters that say start something now, even if you are in your day job. Do not wait until you get laid off to make things happen in a panic. The key is to test, test, test, and get as much experience as you can doing “the thing” (as you and Havi are fond of saying) that you are selling.
To use another cheesy metaphor, “make sure there is water in the pool before you jump.”
Yup! My old-fashioned career counselor pointed out this principle to me long ago. Every economy creates momentary winners and losers. For example, she said ESL teaching was great for her in bad times, because unemployed and underemployed people were looking to become more competitive. In good times, her business was bad, people aren’t improving their prospects while jobs are plentiful.
Another couple of examples (brick-and-mortar, sorry!) 1 - The restaurant that serves lunch downtown loses business when people are brown bagging. The nice restaurant people go to as the replacement for the nice vacation they can’t afford gains business. 2- Immediately after people lose their jobs but before they start really hunkering down, they often spend their spare money and new spare time on “detoxing” - personal training and massage business goes up!
You hit the nail on the head 100%!
Right before I went out to start networking and marketing my company I started to freak out about the economy and how it could take a long time for me to be able to make money at it. Well, after my first networking meeting not only did I receive a ton of positive feedback from other small business owners (my target market) but I even got a phone call the next day from one of them that is interested in my services. Everywhere I have turned local people are telling me this is exactly what this area needs right now, and no one is really providing the service.
You rock, Naomi! Wa-hoo!
This is dead on great advice. Everyone is freaking out, and my business is kicking ass.
The best time to launch into a sprint is when everyone else is back on their heels.
Abso-frigging-lutely right. And remember, the lipstick effect applies to chocolate, too.
You really get me going when you write stuff like this. I’m absolutely buzzing with excitement now and I’ve got no one to take it out on.
Worse still, I have no damn business to launch, so I’d better get to work inventing one! All I’ve got to show for my efforts this evening is a pile of toe nail clippings. Well I suppose it’s worth giving ebay a try for a one-off sale, but I don’t think I could build a shop on the back of it. Still, you got me thinking! Thanks.
Can’t add much else to what everyone else has said. Right on. All this was also just confirmed to my by my bank guy. I’m not panicking while I’m starting up my own biz too. Now *is* the time.
Thanks for the boost Naomi. :)
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Love this point, Naomi, and helpful filter to use with the news.
Sigh, I’m quote-challenged. The point I loved was:
…they just failed. Are they going to publicly blame themselves, or are they going to blame something big and uncontrollable like “market forces” or “economic downturn”?
Right on. And well said! The supposed recession is exactly why I went into business right now. Thanks for getting us jazzed up.
I don’t think you are an optimist or contrarian. You have good ears and eyes, you think with your head, and come to realistic conclusion.
This is my first year in my business, and I’ve noticed the world market effect. My fee probably looks really attractive for someone is Europe and Asia. And even though it is a few times more than the Chanel lipstick, it may have the similar effect — okay, I’d like to think it is far more powerful — of feeling better in this hard time.
Thank you for writing this post.
My husband is just getting started with the E-bay thing, so I sent him this link to encourage and inform him. Thank you for something other than a grim view. I work with a bunch of musicians who also love to track what’s going on with the economy and politics. They keep saying we’re doomed. It’s a relief to hear it ain’t so.
More wonderful Naomi wisdom. IMHO downturns can also be good for freelancers because when business doesn’t hire a person they need they will often invest in outsourcing for selected projects. Outsourcing some special projects can be cheaper than hiring people who have to be paid all the time. In addition outsourcing hedges there bet about potential downsizing because layoffs are visible to the stock market and a change in the amount of outsourcing isn’t. They may not be able to justify headcount but they still have some projects that must be done.
Great post Naomi, I love the “can-do” attitude. Damn right this is a great time. I just found out yesterday that the contract day job I have that was scheduled to last until 1 Nov is going to be cut back to part-time hourly as of tomorrow. Woot!!
Now I will have a bunch of time to get cracking on the e-learning websites and other projects that I have lined up. This is gonna be KILLAH!
BTW I will now have time to participate on the Weds calls, really looking forward to it.
BTW folks, if you are subscribed to this thread and want to collaborate with me on something, connect via LinkedIn here http://www.linkedin.com/in/stephensmith6294
So I guess the question to ask is: what’s my lipstick?
You put some great words to what a lot of people are thinking. This post was well-thought-out and very cogent. More like this, and you will be the leader of a new cult.
Nowadays, when I (gleefully) tell someone that I own my own business providing SMB software solutions, they often express concern about my livelihood, given the times. What they are really doing is reflecting what they’ve heard (from the media) and not what they have seen (from inside their cube). I have to explain to them that the businesses going out of business are those that are poorly managed, highly leveraged or just unprepared for an interruption in cash flow.
In contrast, the businesses that I work for are feasting on the opportunities these times provide. Hard assets (equipment) and soft assets (client lists) are available at bargain prices today. No one in the media will report on these success stories until after the fact , i.e. when optimism fills the air again and it makes a great story.
I can’t help wondering if the NYT had a deep, dark, Bush-ish motive for this article.
Everyone knows you buy low, sell high. Everybody knows that the big businesses hand out more pink slips during downturns that small businesses close up shop.
So then why did they write it?
Were their advertisers telling them to shoo some of those pesky small entrepreneurs out of their niches so that the big businesses could have more business?
Something fishy about it…
[...] Naomi Dunford over at Itty Biz tells why this is a GREAT time to start your home based business. Sell the right thing. Sell it to the right people. Hit the right trigger buttons. Do those things [...]
Yes! Why close doors that might help us discover money and talents that we never knew existed. It’s articles like that NY Times one that just goes to show that too many people think in black and white.
It’s about looking at all the possibilities and taking an intelligent risk.
Fear is the direction of the masses…
Intention, confidence and creative know how the direction of the few.
Thanks for a good post. Good news for those that want to hear it.
So, according to the NYT, I’m supposed to bail ship and put my fate back into the hands of corporate America every time the economy nose dives? Yeah, that makes sense!
Experts are so often idiots. Idiots. More business for the rest of us I say, tally ho!
[...] deal of enthusiasm for starting something new. Naomi at Ittybiz had a post on this very topic - “Blood in the Streets” - and this is what she has to say on the [...]
[...] deal of enthusiasm for starting something new. Naomi at Ittybiz had a post on this very topic - “Blood in the Streets” - and this is what she has to say on the [...]
I can understand with point #1 - 3 but whats wrong with Lipstick?! I don get it..
[...] http://ittybiz.com/home-business-economics-in-troubled-times/ [...]
[...] week, we talked about turning economic tragedy into a boom time for your small business. A lot of people liked the piece because it provided them with one of two things. If they shared my [...]
[...] is this blood in the streets that everyone’s talking about? Maybe it’s not champagne, but it’s sure not blood. [...]
[...] a great post from Naomi Dunford (IttyBiz) on Blood In the Streets that does a way better job than I can on covering why this a good time to be making things happen, [...]
[...] the risk you take. What you need to realize, though is that this shake up will present opportunities to you and you’ll need to be persistent and determined enough to take [...]
[...] Believe in prosperity and abundance for yourself and others, and the nation as a whole. Refuse to focus on any lack that you may see before you. Know that you will always have enough of what you need, and that America will as well. [...]
Yikes! Pizza is some expensive where you live, Naomi. $30 for one?? Maybe we’re spoiled here in New Hampshire.
[...] 3. Naomi Dunford [...]