THE AUSTERITY ENTREPRENEUR

OPPORTUNITY AMID MISFORTUNE?

WES NEWS DESK 17 FEBRUARY 2012 

Further doom and gloom for the UK economy with the recent unemployment rate at 8.4%; the highest in 16 years. Those between 16 to 24 years old are the hardest hit as the recent figures indicate a sharp rise from 22,000 to 1.4 million who are without jobs.  It appears big retail companies are not hiring. In addition, some of these businesses are going into administration.   Although the economic downturn has a startling effect on business in general; potential start ups may consider that in this time of austerity they should take the gamble.  Pundits  argue that “These may not seem like ideal conditions for investors, especially those seeking to back small businesses, but the truth is that young UK start-up companies have the power to defy the downturn. Such an environment is ideal for such companies to flourish”. Smaller start-up businesses can respond to shifts in this ever-changing market in a timely and flexible manner, whereas it is well known that larger businesses are less flexible and find it harder to respond in the same way. One recent survey of Companies House data indicates that “more than 200,000 new businesses were registered in the first half of 2010. Entrepreneurs have traditionally viewed recessions much as magpies view road kill”.  These are the austerity entrepreneurs who see “an opportunity amid misfortune”. 

RECESSION SUCCESS STORIES 

As the saying goes  “with every problem there is an opportunity”.  The recession may have hit many hard.  Graduates often complain that they cannot find jobs, more than half the young people in UK say they want to start a business – but only one in 20 actually does.  Unemployed graduates, Rob Drake-Knight and Mart Drake-Knight were jobless on the Isle of Wight in 2008; the brothers spotted an opportunity in the market for fashionable eco-friendly clothing. "You don't need a big idea to be an entrepreneur, but a can-do attitude is essential. We were buoyed up by the wild possibility of actually making money by ourselves. You've just got to believe," said Rob.   Within two years of trading, the company has had a steady growth of 300% per year and plans to reach a turnover target of £1m this year.  The company also employs 12 people. Another recession success story is John Abbott and Simon Weatherall, who both had full-time jobs – as well as young families – when they started Oobafit, a website offering tailored fitness programmes and nutrition. It was finding the time to develop the idea that was difficult. But they had an incalculable advantage over entrepreneurs in previous recessions i.e. technology.  "We wouldn't have been able to do this five years ago," said Abbott. "The internet enables you to reach a huge number of people across the globe. You don't need to have an interview or even pay much money to start a website, you just need an idea. Our website is based on open-source software that's free to use, connects with Tesco supermarket and is run from the same computers Amazon use, which we rent on a monthly basis."  The pair spent less than £1,000 on building the prototype website, which won them seed-funding from an investor.  Abbott stated that "The most valuable lesson we've learnt, is that if you have an idea, just get on and do it. Get it out there in front of people so they can tell you whether or not it's good."  A similar success story was former marketing man Sam Alison, who loves cycling.  His passion for bikes prompted him for eighteen months to get up at 4am to deliver bike-frames to a TNT depot in Luton before driving to Watford and taking the train into the City of London to work a full day as a marketing manager. He then spent the night in his shed, preparing more frames for dispatch. This was only his side-line job as he was reluctant to give up his job; however, the financial crisis affected his firm in the city. Alison accepted his redundancy and went on working full time designing steel bike frames that were then manufactured in Taiwan. “Good business is about doing the right thing when opportunities present themselves. The extra time has made a massive difference: I've spent it developing a dealer network, pursuing marketing opportunities and catching up with bookkeeping,” stated Alison.   His turnover in the first year of full-time business was around £300,000. 

THE GOLDEN RULES  

As an entrepreneur Alison has perseverance, which is the primary golden rule to enterprise success. "Where we are now, in a global economy, you can have a very lean business model with few overheads. Everything can be outsourced." However, importing bike-frames incurs high costs for Alison, "The biggest drain is the process by which VAT is assessed and collected. As soon as the frames arrive in the UK, I'm thousands of pounds out of pocket at once,” stated Alison.  Arguably, today's entrepreneurs have higher hurdles to clear than previous generations. Alison’s case and many other austerity entrepreneurs illustrate that in such troubled times you do not need massive funds but a good idea and hard work. Sometimes being a risk-taker against the odds may lead to great success.  The famous success stories are those of Steve Jobs of Apple and Bill Gates of Microsoft, who both started their businesses without money and in the depths of the 1970s and early 1980s recession.  Pundits advise that entrepreneurs should not “waste time in the spaghetti of red tape for funding, pick up the phone and sell some more stuff”. Another golden rule, “austerity forces you to pay as little as you can for goods and suppliers – and borrow as little as possible”.  Indeed banks aren't lending, people aren't spending and public-sector cuts are destined to bite hard. However, defying austerity requires an innovative and a flexible approach; of course this may not suit larger established organisations. Indeed most big companies are the hardest-hit during these troubled times, and start-up entrepreneurs can find the necessary gaps in the market. In the 21st century the internet is a useful tool for marketing, it has often opened the door to any would-be entrepreneur wanting to start a business on a shoestring. One golden rule to also take into account is “You need a strategy, yes. You need a business plan, yes. But most of all you need to sell something, anything, to keep you going to give you cash and cash-flow. But you also have to be cheeky and do deals. Get 10 per cent off the fax machine by offering cash, or ask people who maybe don't have jobs to work for you for nothing other than expenses and a cut if the business does well. That way you share the risk”, explained George Freeman who started his bio-tech consultancy in the 1992 economic downturn. If one needs to ride the wave of austerity coming out a success, the paramount golden rule is your customer and having strong customer relations, ultimately it’s the personal touches that matter.  Share your stories in this time of austerity …..