by Victoria Duff

   This article was originaly published in The Productivity Institute Newsletter

Experienced business professionals will tell you that a recession is the best time to start a new business.  Your competition is cutting back spending or going out of business altogether, while your overhead is small and your message is new and fresh.  Opportunities abound to pick up customers that have seen their usual vendors go out of business or cut personnel and services in an attempt to stay alive.  You can also find good employees among those who have been laid off in your industry.

With all this opportunity, life for the new entrepreneur should be a walk down Easy Street, but it is not.  Most start-ups have one vital problem in common: a very small budget.  Funding a start-up is even more difficult during a slow economy because even your family and best friends are not willing to give you what may be the very money they need to keep their own lives together.

First Mistake – Foolish Thrift
It is times like this that many new entrepreneurs make their biggest mistakes in hope of saving money.  When professional experience and contacts makes the difference between costly judgment errors and accurate planning, many entrepreneurs will choose to cut corners by attempting to develop and implement their business ideas all by themselves.  This may be the pioneer way, but many pioneers got lost in the woods and eaten by bears.

It is a well-documented fact that entrepreneurs who go through an extensive business planning process dramatically increase their chances of a successful business launch and profitable operations.  When statistics show that over half of all business start-ups fail in the first year, and half of the survivors will fail in their second year of operations, it makes no sense for an entrepreneur to avoid careful planning and development.  In fact, it usually costs much less to hire a professional to advise and assist than it does to make that first costly mistake. 

A professional start-up consultant can quickly guide you through structuring a strong business model.  He or she can plan a strategic build-out of revenue streams that are geared to bring money into your venture, so you don’t need to go looking for further investment just as growing expenses threaten to destroy your company.  A start-up consultant also knows the work and reputations of other service providers you might need such as website developers, attorneys, accountants, and can help you identify potential joint ventures, which can make the difference between success and failure.  Start-up consultants also know many investors and what they want to see in a potential venture investment.

Second Mistake – Limited Vantage Point
When the economy begins to slow, many entrepreneurs freeze like deer in the headlights just at the time when they should be sitting down to plan how they can best deploy their assets to take advantage of opportunities that arise as their competition fails.

The greatest enemy of an entrepreneur is the inability to step back and see the broad picture because of being so closely involved in the day to day operations of the company.  It often takes a third party coming from an exterior view to point out what the entrepreneur just can’t see from an interior vantage point.  Should you lay off your staff, or hire more sales reps?  Should you move to larger quarters while landlords are lowering rents, or should you sublet part of the space you already have?  Will your vendors remain in business, or should you cultivate back-up relationships?  These are the important questions that govern survival or failure for the established business, and they are questions that wise entrepreneurs hire consultants to investigate.

Third Mistake – Fear of Negotiation
With plenty of skilled consultants available, it seems illogical that entrepreneurs aren’t taking advantage of being able to hire professional help as it is needed.  Unfortunately, while many entrepreneurs are proud of their persuasive abilities, they shy away from negotiating with consultants over fees and services.  Most consultants know how to work within your budget.  However, consultants you would want to work with rarely will work for free.  In fact, that is one of the first lessons that a consultant learns:  Nobody values free work.  So tell the consultant how much money you can spend and ask what the consultant suggests.  Sometimes all you need is an occasional few hours of brainstorming, and most consultants are happy to provide that kind of service.  Remember that consultants are in the business of giving advice, so ask for their advice about how they can provide you with what you need at the price you can afford.

Victoria Duff, founder of Southern California-based aBusinessPlan.com, is a widely acclaimed start-up facilitator, enterprise analyst, strategic advisor, venture finance catalyst, investor liaison, author, and speaker.  Her depth of experience lends itself well to efficiently providing solutions to over a decade of happy repeat clients.  Her advisory practice can be found at:  www.aBusinessPlan.com  Ms. Duff is available on a retainer or project basis vduff@abusinessplan.com .