I run a big company (over a Billion dollars in sales). I started small though. I began my company from the trunk of my car and grew it to $350,000,000 in sales (before I sold to SYNNEX in 2004 which is how I now run a large company). I understand small business and entrepreneurship and I understand large business as well.
To understand the opportunity in the turbulent times right now, you need to understand how large companies will react.
In short, big companies are stupid but you can be smart and profit from their stupidity. As CEO of a large company, I constantly fight this and try to help us be less stupid.
In tough times, large companies cut costs. Many times their cuts will be arbitrary. The mandate will come from Head Office to “cut 20% of your staff” or “get out of a businesses” This is the opportunity. Big companies will no longer be your competition, they will be opening up opportunities for you.
New opportunities require some resource to get going and large companies will be cutting all excess (and more) from their companies. This means they will not be entering new markets and will be reluctant to make new investments. What this means for you is less competition from big companies if you are going into a new market. For example, my son, David is going into the alternative energy/fitness business – pedal power electricity. Everyone knows environmental businesses and fitness are both growth markets and if times were good, many big companies would be entering the market. Now he will have little competition from big companies.
Big companies will no longer take chances. One of my mantras is “fail often, fail fast, fail cheap”. This is what entrepreneurship is all about. You will have almost no competition from big companies in anything new or creative now.
There are people opportunities now that did not exist a month ago. Many good people will be downsized. They will have time to help you. And since you can be creative, many will work for future prospects, for stock options, part time, as advisors etc. Use these times to build a strong team of supporters now.
Turbulence paralyses large companies. People are afraid of losing their jobs so do nothing. They tend to get very centralized and autocratic, making arbitrary decisions. This paralysis keeps them out of your business.
As big companies downsize, they will still often need to do the work. They will often turn to other companies to do that for them. They will outsource the job. For example – the mandate from head office is to reduce people and the manager will cut the IT person. But they still have a problem with the printer not working or the network needing work. They will turn to an outside consultant to do that work for them. Managers in large companies are highly creative at getting around “mandates” from the top. Often this is done by having different budget areas – they will stop spending in one budget area but spend it in another one. Yes this is stupid business but this is what big businesses do.
On principal to understand is what is a huge deal for you can be nothing to a big company. For example, I distribute computer products and consumer electronics. If a good product is available to distribute that I can sell $200,000 per year, chances are good, I will not bother doing it. Why? Because I cannot do enough small deals like this to have a meaningful impact on my billion dollar sales company.
This crisis includes a severe shortage of credit so many small entrepreneurs are say “but I have no cash”. This is where entrepreneurial creativity comes in. You do not need money, you need the goods and services that money can buy.
In tough times, many businesses will have surplus capacity. As a small entrepreneur this means you can negotiate or trade more. If I have surplus office space, I will be willing to rent it for almost free – just pay utilities and taxes. The same goes with almost everything. Look at anything you want to buy and you are more likely now to find someone willing trade with you, offer great deals, take future consideration etc. Small businesses can be highly creative (large companies won’t be but will often listen to your ideas and agree to great terms for you). Your best source of cash right now are the many suppliers who have surplus capacity and need you to help fill it.
In turbulent times, big companies tend to overreact creating major opportunities for small creative entrepreneurs. It is a good time to be a small entrepreneur.
About Jim Estill: Jim started a computer distribution company, EMJ Data from the trunk of his car in 1979. With a great team, he built the company up to $350,000,000 in sales and sold it to SYNNEX in September of 2004. Now, he is the CEO of SYNNEX Canada, selling approximately $2 billion in computer products.