I’m old enough not to take a major recession lightly; on the other hand, I’ve seen them before, and I’m getting a feel for the market’s cyclical upturns and downturns. Each generation of politicians and economists tries to flatten the cycle of boom and bust, and every generation fails. I think it’s time for a new approach: keep in mind that the economy has its ups and downs, and by investing wisely, you can reduce the damage a downturn can do to your business or career.
If I could go back to the beginning (and was interested solely in maximizing my investments, which I’m not), I would invest only during recessions, when almost everything costs 50% to 90% less than it does during boom times. This would be good for me as an investor, and the economy would benefit from the investment.
This is hard to do for two reasons, first, because the economic cycle is slow — boom to bust can take a decade or more. We would have to learn patience. The second is even more challenging: entrepreneurs have to respond to ideas as well as the market.
There are times when an idea is ripe but the market is wrong — a situation many entrepreneurs find themselves in right now. What should they do? Simply shrug their shoulders and walk away? Of course not. We can’t. We can’t kill our enthusiasms at the touch of a button.
The answer is think big, but build small.
Create something you’re proud of, but don’t let it swallow you financially. You don’t need to slather money over a good idea. A good idea will grow by itself. For years, private space programs consisted of daring engineers in the middle of the desert attempting to launch one rocket after another. Today, thanks to aerospace engineer Burt Rutan’s brilliance, the team at Virgin Galactic is working on the world’s first feasible space tourism operation.
For all the misery the current recession has caused, you can be sure that fortunes are being made. There are big opportunities out there. Houses that were worth ?’5 million are being sold now for ?’2.5 million. Divide big, handsome houses in university towns into good-quality student flats, and — who knows — you might soon be able to afford that big country house you always wanted.
The idea should be simple — simple enough for an individual to turn it into reality. Small, lean, entrepreneurial companies are the future of business.
Not everyone is an entrepreneur. If you want to find out if you have what it takes, save your experiments for evenings and weekends. If you have a secure job, now is certainly not the time to hand in your notice unless you’re absolutely certain that you have a brilliant idea. People on a salary will suffer relatively little during a downturn. Wages may well be frozen, or even reduced, but since the price of everything is coming down, they will not be hurt much.
The prospects for people who lose their jobs are much worse.
If you are an employer, be aware that redundancies are bad for business. At its core, a company is its talent, its expertise and its relationships. Letting employees go must be a last resort. At the beginning of the downturn, we asked the chief executives in the Virgin Group to explore every avenue — from job-sharing to reduced working weeks to wage freezes to unpaid leave — before they laid off staff.
And what if you’ve lost your job? Not long ago, a journalist asked me what my advice would be to the newly unemployed. I pointed out, as gently as I could, that there were many people better qualified than me to answer that question. But there is one thought I will share.
If a company had just sacked me, I would look for ways for that very business to save money. All businesses — whether they’re booming or busting, boutique or bargain basement — need to save. If your office has an account with an expensive cab company, then undercut it. It burns regular light bulbs? As you take that slow walk to the elevator, count the bulbs. Do the math. Show them the savings they could make by switching to energy-efficient bulbs, offer to make the arrangements, and ask for a cut.
Many small entrepreneurial opportunities are there for the taking. Most have to do with saving energy. If there’s one thing we know for sure, it’s that fuel is going to get more expensive sooner or later. Many companies have yet to understand that an ailing business can be saved simply by reducing waste and using energy more efficiently. Many businesses have no idea how much money they’re flushing away on unnecessary document printing, old-fashioned light bulbs, energy-hungry office machinery, and pointless travel and shipment costs.
But you do. You worked there. You know what goes on. Say something, pitch something — and then name your price.
Richard Branson is a philanthropist, entrepreneur and founder of the Virgin Group.