Starting a new business in the current economic climate might not seem like a good idea, but an Iowa State University College of Business professor says people are still spending money. Howard Van Auken says new business owners can succeed in a recession.
“We have to remember that even if the unemployment rate is 10%, there’s still 90% of workers with jobs and they are spending money,” Van Auken said. But, Iowans who are hoping to launch their own business should plan to spend even more time researching their potential customer base. Van Auken says it takes more than technical skills to successfully operate a business.
He says understanding the market and preparing a good “financial forecast” are every bit as important as creating a product people want to buy. Many new businesses fail to survive because of a lack of adequate cash reserves. Van Auken says new business owners should be prepared for slow sales for the first one or two years and never expect to get rich.
“I tell my students that they shouldn’t go into business to make money, they should go into business to serve their customers,” Van Auken said. “If they serve their customers well, if their customers leave happy, if they develop a good reputation because they’re doing such a good job serving their customers – then the profits will follow.”
Studies show 50% of new businesses fail to make it past three years, while 80% close up shop within five years of opening. Van Auken suggests startup entrepreneurs should surround themselves with a team of experts. He says the team should include a mentor, insurance professional, banker, account and lawyer. The Iowa Small Business Development Center offers free consultation to new and existing businesses in the state.
The Iowa Small Business Development Center: www.iowasbdc.org