Don’t Be Fooled By the Startup and IPO Hype: It’s a Tough Economy for Business

Apple and Google are soaring.  Fresh startups and new IPOs have everyone excited again about new found, quick wealth.  Meanwhile, most businesses are struggling.  I’m not trying to be Negative Nelly,  but for every high flying start-up there are 20 businesses that are on the brink of failure.  And that’s why I’m so excited.

When times got tough it seems that the American economy moved towards cheap entertainment and away from larger personal investments.  When money is a little more scarce it seems that people have not been afraid to spend their extra few dollars on what makes them happy.  The Internet has made many things much cheaper and more available than ever before.  Thus the success of the hardware and the goods that can deliver that content.  The amount of people going to the theatres may be down but more people than ever are watching movies.  They’re just doing it on Netflix at home.  One dollar to $5 apps are selling like crazy while all but a few titles of $60 video games are stagnating on the shelves. Large purchases have become a special treat for most middle income and lower families.

The common quote is that big business doesn’t “get it” but it’s just not true.  They get it, they just don’t have the equity to make it happen.  The companies that are flourishing are the companies with cash or capital.  When the economy took a dive, banks stopped giving out easy loans. For the past 25 years, companies were relying on this operating capital and deep credit lines to keep their business moving forward.  That dried up and with it so did the competitive ability of the average company.  They are competing through cost cutting and price slashing.  Often cutting advertising budgets and dropping prices.  A strategy that essentially a “stay alive” tactic that may work for a few years but has moved into year three.  To make it even worse, banks are pushing harder than ever to liquidate.  Calling in loans before they lose everything.  Companies like Borders or in my field, a store like Sid’s Greenhouse.  Companies that have been in business for years but at a point where banks are no longer willing to take any more risk.

So while you can’t understand why a company would not want a category killer domain you need to remember that many barely have enough money to meet operating loan repayment.  The free cash just isn’t there for most.  But that is how you make money.  Big money.  For those that DO have money and the ability to build and buy right now,  you are going to be rewarded in ways not seen in 50 years.  You can buy used assets for a dime on the dollar in many fields due to the number of companies heading to liquidation.  And top talent will always be harder to acquire but the job market is tough and you can get quality people for less than ever before. In our industry, I truly think the premium dot coms will look incredibly cheap compared what they will cost in 10 years.

This window will close soon.  I really don’t think commodities and gold will stay at all time highs.  They are being propped up due to the fact that people still don’t feel comfortable putting their money in corporate stocks.  They are taking a large hedge using other investments.  That will eventually change but in the meantime, build an infrastructure to be in place when things do pick up.  Use the Internet to build a company that doesn’t rely on any one economy.  And of course, take advantage of the failures of others.  I don’t look at this as a case of the rich getting richer.  I look at it as an opportunity to move from comfortable to rich.

Easier said than done?  Not really.  I can only speak from personal experience. We’ve been to several auctions around the nation buying up greenhouses and product from those that have failed.  Often ten cents on the dollar or less.  We’re buying domain names in our field to be able to “own” that plant on the Internet so that when the time comes to open our online plant sale company, we will have a distinct advantage.  We can do it because we either had the cash or the ability to borrow.  We are building because down times are the perfect time to build up.  I am very confident that we will all look back at this time and realize what a great opportunity we had.

PS:  Too Rick Shwartzish?