Thursday, February 07, 2008

Building business in Austin despite a possible recession

How can we buffet the effects of a possible economic recession with regards to business growth in Austin? Recently there has been a bunch of press about the growing threat of recession coming to the US. The New York Times tells a story that all of us as entrepreneurs need to start preparing for called "As Lenders Tighten Flow of Credit, Growth at Risk"
From the article there are two important paragraphs to note:

Credit flowing to American companies is drying up at a pace not seen in decades, threatening the creation of jobs and the expansion of businesses, while intensifying worries that the economy may be headed for recession.

The article goes on to focus on small business, and how small business is getting hit the worst. So why is this important? Small business is where all of our growth and job creation is coming from. From the NY Times article:

In recent months, smaller companies have been adding jobs even as larger firms have been shedding workers, according to the ADP National Employment Report, which tracks changes at companies with payrolls overseen by ADP. From May to October, 276,000 of the 378,000 jobs added were at companies with fewer than 50 employees, the report found.

It is the entrepreneurs that are building startup and small businesses that are contributing to the greatest growth of the US economy. Programs that are being structured by the government should take this in account- and support small business- versus focusing on solutions for large, slow moving corporations that typically are the benefactors of the pork coming out of Washington DC.

So what can entrepreneurs do in lieu of dealing with a drying up of financial capital other than make sure that they voice their vote strongly in the coming election? I and a number of international collaborators have been examining what can be done through how we organize our businesses together for the purpose of building our business... And given the continuing news of financial crisis, it is time to take action as business people and not wait on government programs. Even though financial capital might not be as available, social capital can be utilized to continue to build businesses. Social capital, called "human capital" in Paul Hawkin's book called Natural Capitalism can be a somewhat replacement in lieu of financial capital. Creating social capital is what we have been doing in Bootstrap Austin and other entrepreneurial social networks that we have been building. In fact, it has always been true in the US that social capital carried the day during financial crisis. A historical example of this can be found in our region's history of farming. In order to sustain their farms, farmers helped each other raise barns together... these farmers were creating social capital with each other ("I help you, you help me"). There are many examples in the past, including from my family, where farmers had no access to government support, nor other access to financial capital... but they could help each other, and survive the worst of economic downturns. It appears that the US is entering into a time that once again that entrepreneurs building social capital together will be the way that we will continue to build our businesses, as financial capital runs and hides during the storm.

Thankfully, Austin's wired technology community has been organizing into what I call "Enterprise Tribes" helping entrepreneurs build their businesses, recession or not. Research has shown that business that organize themselves as ecosystems (or as I say "enterprise tribes") positively grow each other much faster than businesses that try to stand alone. This social networking behavior with groups like Bootstrap Austin, Refresh Austin,, Jelly in Austin (among others) are making a difference, supporting entrepreneurs to innovate at a level never before seen in Austin. Yet as much of our "tech elite" figure out these new ways of doing business and new ways of lowering the cost of work, we must as the community of Austin create broader integration between our businesses, cultivating a richer business ecosystem. Through this we shall build an even more vibrant Austin into the years to come.

As you build your business, please do join our Bootstrap Austin network to collaboratively build businesses together and join the discussion around my forthcoming book and my Exponential Entrepreneurship blog.

1 comment:

Unknown said...

It's good to see these posts coming. There is more talent in this community than we as Austinites seem to realize. By bringing forth companies that are making great strides and sharing our strengths and challenges with each other, we will ensure this community rides any storm that may ensue.