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• If you're starting a trucking company, you need at least one guy who knows about trucks. If you're going to franchise a network of muffin bakeries, better get yourself someone who can make great muffins. Have a guess what kind of skills you need to have before you decide to open a scuba school... give yourself a gold star.
  

Recently I met with a potential client (yay, I love potential clients, sometimes even more than actual clients.) The potential client shall remain nameless to protect their identity. We met. They stepped me through an impressive and well thought-out introduction to the business, all the way through a detailed business plan, laboriously detailed spreadsheets listing costs to be incurred in the first three years, introduced the entire executive team and... uh oh... ...there was no Chief Technology Officer on the executive team. There was no budget line for recruiting a top-line team of web developers, product manager, interaction designer and customer service manager. They were planning to outsource the whole lot.

Common mistake, but critical mistake nonetheless. Let me be absolutely clear on this: if you are a web business, you need to own your own web platform.

You need to have the people responsible for the web platform represented at director level in your company, aligned with your business goals and sufficiently motivated to bring onboard a web platform team of the highest calibre.

If you're starting a trucking company, you need at least one person who knows about trucks. If you're going to franchise a network of muffin bakeries, better get yourself someone who can make great muffins. Have a guess what kind of skills you need to have before you decide to open a scuba school... give yourself a gold star. In other words, web businesses are usually not businesses-that-happen-to-have-websites.

When you outsource a web platform you not only incur additional cost and add to your relationship-management burden, you miss out on all the intellectual property of actually running the business. For instance, if you discover a better way of helping customers choose and add something to a shopping cart, you can act on that learning lesson more quickly if you own the team that implements it, and crucially you keep the IP on not just the business process but the platform code used to build it, which lets you get better and faster at making other improvements in the future.

If you're a web business, how well your web platform works defines the success or failure of almost every metric of your business: converting consumers to customers, average revenue per customer, customer churn, competitive moves, and most crucially of all, time-to-iterate.

Name a big, successful web business that is still on an outsourced platform. It's OK to be the founding team and not have a senior technology guru there with you from day one, just as it's OK to not have your CFO or even your CEO hired yet. But recognise that you will need that person, and you will need that person to hire a team, and that team, while it may use off the shelf and SAAS and hosted components to build your web platform, will ultimately deliver something unique that your competitors can never hope to imitate; something your suitors will pay an arm and a leg to get to... the experience that comes from building and  operating a successful web platform.

Talent Pool

When a market tanks, job cuts follow.  When the market really tanks, lots of job cuts follow.  The IT industry is one of the worst industries hit by layoffs, as companies prefer to keep on their core staff that provide the bread and butter applications for the company, then cut the rest of their roster.  Most of the time it’s the young ones working on the cool new things the company had envisaged 6-12 months earlier, that get the chop.

Suddenly, almost overnight, the talent pool changed. The market is offering up brilliant young developers and designers that would have normally cost squillions an hour, to virtually nothing ­ all they want is to make their next rental payment.
If you had trouble finding good staff before, look now, in the right places and you will find them in abundance.

Less Competition

Remember reading about all those promising new tech startups that received bucket-loads of venture capital cash 12 months ago ­ and competed directly in your space -while you were busy writing your own business plan, in your makeshift office?  Most of them will be out of business in the next 12 months, which gives you a clear start.  VC backed companies usually have very aggressive business plans that are well suited to an aggressive market, once the market turns south, that business then chews through cash with a burn rate that would smoulder any page it was written on.  Some will be smart and begin saving cash quickly, others won’t and will head down into the deadpool. 

If your startup is compelling enough and you focus only on your primary proposition, you may find it easier and faster to grow in a lonely, lame marketplace than that of a busy, crowded marketplace.  The time to jump in is now. 

Perseverance and Money Management

If you thought juggling finances was hard 6 months ago, its gotten exponentially harder since.  An economic downturn whittles out the companies that have bad revenue models and bad fiscal management, those companies simply deadpool.  The ones that survive have solid revenue streams - no matter how much they make and strong fiscal management.  So if you want to survive this, better start learning how to control, allocate and conserve money well, very well.  If you come out the other end looking relatively bruised and battered, but all in all healthy, the market then has only one way to head and that’s up.  If you take the lessons learned during a market fall and keep applying them to your business while in good times, it will only serve to make you as an entrepreneur and your company that much stronger when the next one comes.

Real VC’s

The time of the VC firm that had too much money is now over.  VC’s will only invest in companies that they have researched to the point of lunacy, then they’ll research them some more.  Its good news for startups because the wrong investors wont get involved with your company.  Your business plan will only attract those VC’s or investors that know and connect with what you are trying to achieve.  It will be harder to raise money, but know once you have raised it, you will be on board with an investor who truly understands you, your business and its future.

History

Apple and Microsoft were both conceived and then later founded during the tail-end of the 1973-74 stock market crash - supposedly one of the worst stock market downturns in modern history at the time, where did they end up?
They now have a current combined market cap of US$316.3B.

To sign off, here are some of my ideas - Go out now and build your dream team, the people you need probably have no job at the moment.  Be frugal and smart with your companies money, if you get through this, there will be plenty on the other side.  Take advantage of a desolate playground, market your brand in smart ways, get in customers faces while no one else is.

Raise money smartly, if your idea is compelling and growing, you’ll be 1 in 100, rather than 1 in 100,000, so you have more room to move - get the investor that sees your vision.

If you do come out the other side, you and your company would have been born in and persevered through one of the worst economic landscapes the world has ever known.  You’ll have one of the strongest and smartest teams going, have VC’s throw money at you and be in one of the best economic landscapes the world has ever known.

Recession?  I think Progression.