5 Startup Lessons From the Recession

Running a startup in a recession is not an easy task. All the experts say that survival is the name of the game, but entrepreneurs are hard-wired to move quickly, and simply surviving is not what you imagine when leaving your Fortune 100 job for life at a start up. It's been frustrating, but I've also learned a ton. Here are five lessons I've learned from running a business in a recession.

1. You can save money, you just have to do more work
In the past, we came up with a product idea, got a general sense of what we wanted the product to look like, and then passed it off to the designer. Inevitably, the designer would come back with a great design, but not necessarily what we were looking for. Then we would have to go back through multiple reviews and changes. This way of working is incredibly expensive and time consuming.

Now, we do a ton of work before passing anything off to a designer. We put a wireframe together, we review it multiple times and we do a complete creative brief before asking a designer to do anything. It's a lot of work, but that's what start-ups are all about. The harder you work, the more you learn. Extra preparation on the front end will save you a ton of money and time on the back end.

2. Some bills are more important than others
Deciding who to pay and when to pay them becomes a very difficult decision when you're trying to run a start up with little to no money. You have to constantly evaluate things that you would never normally think of, like, if I don't pay rent, will they kick us out or let us slide for a few months? Or, if I don't pay the accountant today, will I have enough in the bank to pay him in two weeks? Then there are other things like, how long can I personally survive without a paycheck?

The interesting thing is, when you're in a recession people are more understanding. Your landlord probably isn't filling his office space, so kicking you out is pointless. Your accountant can probably wait two weeks to get a $500 check, especially when he knows that $500 could keep your business alive. If you plan on bootstrapping your company, or waiting out a recession, you better get used to negotiating and in some cases, not paying your bills until you absolutely have to.

3. You will want to quit, and so will your partners
There's no doubt about it, if you're running a company with little money, you can't move fast, you get nervous and you will want to quit. Every single person at Brazen has wanted to throw in the towel at some point. Penelope and I have had discussions about whether or not we should shut down and I've had conversations with the other guys about whether they should be looking for something else to do.

But a good rule of thumb is that the companies that don't quit don't fail. I'm convinced that the only reason the failure rate is so high for start-ups is because most founders can't get through the dip. We've been in the dip for more than six months now. If all goes as planned, we'll be able to actually run our business the way we want to very soon. But until then, we'll keep supporting each other when we're ready to call it quits.

4. If you don't share your ideas, no one will know you have them
For the past six months I've been brainstorming different products that Brazen should launch. I have solid reasons for when we should launch them, how they will improve our traffic and how each one will help us achieve our goal of being the top network for young professionals.

The problem was that I didn't verbalize my ideas well. I have tons of PowerPoint's and spreadsheets with projections and wireframes, but instead of organizing everything and presenting it succinctly, I let it pile up. Finally, after talking things through for two months, we've determined the right direction for Brazen to go. Investors like it, the board thinks it's great and the team thinks it's the right thing to do. And other than a few tweaks and updates, we're using the ideas that I had stored away on my computer for months. Going forward, I'll be sure to present my ideas in ways that everyone understands so we don't waste any more time.

5. Sometimes the best breakthroughs come from arguments
A few weeks ago, Penelope came into my office on a rampage. She screamed and yelled, and she called me a jerk. So, I yelled back. This went on for a solid ten minutes before it dawned on me. She wasn't mad at me. She was mad that we have such an amazing business plan, we know exactly where we should be and we know how we can get there, but right now, we're not even close.

I pointed this out. She agreed, and ever since then we've stopped blaming our lack of execution on not having money and decided to focus on putting processes in place and getting everyone to do their job. In a few weeks, the whole culture has changed. We all know exactly what we're doing, our meetings are productive, and we're all working towards the same goal, even if it's not as fast as we would like.

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Jun 2nd, 2009 at 7:46 pm

[...] people to vote for him with placement on Brazen's main page. I appreciate that he provides real advice based on real experiences and doesn't piggy back on re-hashed content from the Gen Y echo [...]

Cash

Jun 16th, 2009 at 5:48 pm

Hi Cash here

i think that when you first start working online you really need loads of information.Once you really understand what you have to do. You look back and realise all the mistakes you made.All the time you could have saved yourself if only you had someone telling you the facts.

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Jennifer

Jul 17th, 2009 at 5:46 am

Hey I have written something about pre-employment in recession. Check out my blog: http://hirelabs-hirelabs.blogspot.com/2009/07/pre-employment-screening-in-recession.html

I have mentioned how pre-employment testing becomes much more important in economic slumps. Do tell me how you found it.

Paul Maurice Martin

Aug 19th, 2009 at 7:17 pm

"Some bills are more important than others" – a good tip in good times and bad…

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