Entrepreneurs can survive, thrive during economic downturn

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The biggest issue for most entrepreneurs is cash.

Whether the economy is booming or in the doldrums, entrepreneurs need investment capital to kick off their projects.

Many entrepreneurs have ideas that contain significant potential. But the idea is only the beginning. The trick is to implement the idea, to make it a reality. Doing that is not so simple or easy.

Entrepreneurs, generally, possess a significant amount of drive, especially when it comes to their own ideas. But they soon realize that there is no “free money” out there. No one is going to give them any capital until they invest significantly in their own idea.

The current real estate market makes getting a home equity loan — often used in the past by budding entrepreneurs — more difficult now. Some entrepreneurs have turned to using the “Visa/Master Card loan” by running up charges on their personal credit cards. This method of acquiring cash can work in the short term but becomes a very expensive means of financing in the long term.

There are other options for financing, such as venture capitalists and “angels.” However, for the most part, venture capitalists are more interested in companies producing revenue and those that have a solid customer base. Even angel investors are moving away from early start-up operations due to the significant risk associated with that kind of investment.
For the most part, entrepreneurs are on their own until they are able to secure some real customers and generate real revenue.
Advisors to emerging entrepreneurial enterprises often suggest the company focus on a single product or service to generate both customers and revenue. Once the company can establish a “market need” — proof that people will purchase their product or service — the risk factors for equity investors goes down significantly. The company is then much more likely to acquire equity investment or debt financing.

There are other options for entrepreneurs. The New Jersey Business Incubation Network (NJBIN, www.njbin.org ) is establishing a small fund for incubator client companies that will provide a cash match for up to $50,000 to assist start-up companies. The funds are provided by the New Jersey Commission on Science and Technology (http://www.nj.gov/scitech). NJBIN is an association of incubator managers connected to the 14 incubators in the State of New Jersey. Other sources are available for companies with “high-value” products. But most entrepreneurs will find themselves out on their own.

Those who do may also want to turn to support organizations such as the Entrepreneurs Forum of Southern New Jersey (www.efsnj.org), which holds monthly meetings to assist small and start-up companies in successfully building their customer base and revenues. In February, for example, the group held a meeting on leasing as an alternative method of financing a start-up or small business expansion. Meetings with similar topics are scheduled every month except during the summer.

Entrepreneurs also may look to higher education for assistance. The Rowan University Incubator has assisted more than 40 companies in the last year. All are “associate” companies because the Incubator has not yet moved into its new space in the South Jersey Technology Park (http://www.sjtechpark.com/). “We are expecting to move in sometime this summer,” said Peter Jamieson, associate director of the Center for Innovation and Entrepreneurship and the incubator manager. “Once we have actual space, we can offer support on a more regular basis to our client companies. The incubator provides monthly mentoring as well as office space and most business amenities as part of the total package provided to all client companies.”