ADVOCATE COLUMN 3rd WEEK JANUARY 2012
New Zealand Chambers of Commerce Northland has a wide range of resources available to assist start up businesses avoid many common pitfalls and is also a partner in the Regional Business Partnership whose objective is improved business capability for Northland businesses. Over the last months of 2011, New Zealand Chambers of Commerce Northland received a number of new membership applications from start up businesses.
At the time I thought why anyone would want to start up a new business given the tough economic times we had been experiencing over the last 18 months or so? Yet upon closer examination there are probably a number of good reasons why you would consider starting a business during a recession. It is also likely that the events of the last two years will influence management practices of these businesses long after the recession is over.
Statistics show that while there are currently more businesses exiting the market than entering, there will always be those who wish to start a new business. In some cases recessionary times put people in a position where they feel that by starting their own business may be the best way of providing some financial security. This is supported by overseas studies which show areas of high employment will generally exhibit higher levels of stat up businesses than those of low unemployment.
Then will always be entrepreneurs who have an aspiration and the energy to take on new challenges and many successful companies have their origins in recessions. The increased churn as businesses are forced from the market provides opportunities for others to offer products and services more efficiently and innovatively. This does not mean that their chances of success will be any easier but it may mean that the new business owners will develop traits different from those who started their businesses in a more buoyant market.
One possible legacy of the last two years may well be a new breed of managers. These people will be operating in an environment that requires disciplined financial management skills if they are to be successful and a high level of business capability. Yet history has also shown that managers who have begun their careers during recessions are risk averse and took on less debt. While this in itself is not a bad thing it does mean that they have also been shown to invest less in research and development. This may lead to slower growth and less innovation than has been experienced in the past.