Birmingham Business Journal: Starting a Business : Business Advice

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In order to understand why a down markegt creates so many opportunities for a startup you first need to understanc why a bull market makes it so difficult to In abull market, the cost of everything skyrockets. As more capitao 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'ved got three guys pretendingt to do exactly what you do - all the whild increasing the cost of runningy your business. Conversely, a bear market drives the cost ofeverythinb downward. Companies go into a panic, losingy sight of their growth goal s and in some cases falling intobankruptcy altogether.
The sudde drop in demand forces the prices of everythingvsharply downward, creating a perfect storm for a well-prepareds company to create unprecedented gains. Before you get your offensd together, you need to get your defense linee up and that means getting very leanvery quickly. The problek with coming off of a bull market isthat we'ree not used to pulling back. We'r used to knowing that the next year will be even biggee thanthe last, so we plan and spenr accordingly. This time around, we've got to create a very differengt plan. This plan is abouft reducing staff, marketing and all possible operating costs you have beforer circumstances force such movexsupon you.
Make no mistake, this is goint to suck. Nobody is ever exciterd about downshifting, especially after a good run, but it's betterf than sending the entire company home becauseyou weren't read to make changes. A healthy approach is to plan for a very long Assume you'll lose more salex than you can possibly Think of your business in terms of what it is your companyy can operate on and still keep the lights on. You can alwaye add more resources if you needthem later, but you won't be able to make up for overshootingy your income forecasts. Kicking butt in a down markety isn't just about crawling up in a hole and waitingfor spring.
It's about gettingt lean so you can get focused onhunting again. Your competitionm may not react as quickly asyou did, whic is great news for you. Chanceds are their lack of planning is puttingv the company in atighyt spot. Their senior management is more concerned about makinh payroll thanmaking acquisitions. Their foot soldiers are more worriexd about whether or not they are goinf to have jobs than whether thei customers are as happt as theycan be. And that's where you swooo right in. There is never a more cost effectiv time to attack the competition and take over their customers than in adown market. The cost of advertisingh plummets as the competitionpulls back.
The challengde of getting media attention dwindles as fewer companies are vyingfor attention. And the cost of wooinb customers drops as salew representatives go into a defensive In some cases you may not even have to attacktheitr customers. As your competitionj pulls back or goes outof business, you can let theirr customers come to you. Try that in a bull market.