San Francisco Business Times: Starting a Business : Business Advice

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In order to understand why a down market createsa so many opportunities for astartup company, you firsrt need to understand why a bull market makes it so difficul to succeed. In a bull market, the cost of everything skyrockets. As more capital becomes available, so does more New startups spring up competingfor talent, marketing opportunities and At one time you were the only game in town - now you'vre got three guys pretending to do exactlyh what you do - all the while increasing the cost of runningb your business. Conversely, a bear market drives the cost ofeverythinv downward.
Companies go into a panic, losing sightg of their growth goals and in some cases fallingt intobankruptcy altogether. The sudden drop in demand forcesa the prices of everythingsharplhy downward, creating a perfect storm for a well-prepared companuy to create unprecedented gains. Before you get your offensde together, you need to get your defense lined up and that meanes getting very lean very The problem with coming off of a bull market isthat we'res not used to pulling back. We're used to knowin that the next year will be even biggetr thanthe last, so we plan and spendc accordingly. This time around, we'vs got to create a very different plan.
This plan is aboutf reducing staff, marketing and all possible operating costd you have before circumstances force such movesupon you. Make no this is going to suck. Nobody is ever excited about downshifting, especially after a good run, but it'se better than sending the entire company home becausweyou weren't ready to make changes. A healthy approachu is to plan for a verylong winter. Assum you'll lose more sales than you can possibly Think of your business in termes of what it is your company can operatw on and still keep thelights on. You can alwayas add more resources if you need them butyou won't be able to make up for overshooting your incomre forecasts.
Kicking butt in a down marketg isn't just about crawling up in a hole and waitinvgfor spring. It's about getting lean so you can get focuseed onhunting again. Your competition may not reacft as quickly asyou did, which is grea t news for you. Chances are theid lack of planning is puttingh the company in a tight Their senior management is more concerned about making payroll than making Their foot soldiers are more worriedd about whether or not they are going to have jobs than whethert their customers are as happyu as theycan be. And that'se where you swoop right in.
There is never a more cost effective time to attackj the competition and take over their customerd than in adown market. The cost of advertising plummets as the competitionpulls back. The challengr of getting media attention dwindles as fewer companiew are vyingfor attention. And the cost of wooingf customers drops as saleas representatives go into adefensive tailspin. In some cases you may not even have to attackltheir customers. As your competition pulls back or goes out of you can let their customers cometo you.
Try that in a bull