When it comes to entrepreneurs surviving the recession, an old adage holds true: “What doesn’t kill you makes you stronger.”
Alice Bredin, small business advisor to America Express OPEN and a longtime tracker of small business owners’ behaviors, says a recent survey reveals that tough economic times make entrepreneurs better businesspeople. “When you’re riding high, things are busy and it isn’t a priority to negotiate with vendors or hold the line on getting the best deal on your lease,” Bredin says. “Those are the things you’re forced to do in a downturn, but those are also the best way to run a company, even in good times.”
If business owners can hone their skills in a downturn, their businesses will be better for it, Bredin says her data indicates. The American Express OPEN Ages Survey she conducted examined the post-recession opinions of entrepeneurs in Generation Y (ages 24-35) and who are Baby Boomers (age 48-70), as compared a pre-recession analysis of the same generations. The online survey was conducted in June and polled 600 small business owners/managers of companies with fewer than 100 employees.
Eight-in-ten entrepreneurs from both generations attribute managing their businesses through the recession as the reason they became better entrepreneurs. In the process, they have become more creative in their marketing and improved their financial management.
But the data indicate that experiencing a downturn has made the younger generation more risk averse—56 percent claimed to like taking risks, (down from 72 percent in 2007), and said they are less likely to want to start a business out of college, and less likely to express interest in becoming serial entrepreneurs.
Bredin blames factors ranging from the reality of living at home to being saddled with bigger student loans. But she thinks they’ll bounce back. “For many GenYers, this recent downtown may have been the first they experienced as an entrepreneur. It’s not a pleasant experience. You have to lay off employees, and there’s a lot of stress with cash-flow issues,” she says.
“Contrast that to Baby Boomers who have likely been through this once or twice before and know that what goes down must come up.” Indeed, survey data reveals that Boomers’ appetite for risk is little changed since 2007 (54 percent say they like taking risks). And they even seem to have lightened up in the years since the crash: today most Boomer entrepreneurs claim to work 9-hour days instead of 10, they drink 2 caffeinated beverages a day instead of 3, and 73 percent of them say “having fun is a priority in my business.” That’s up from 66 percent in 2007, and it means more Boomers than GenYers prioritize fun.
“The longer entrepreneurs are at it,” Bredin says, “the less these ups and downs impact their enthusiasm and their willingness to have at it. It becomes a reason to make adjustments. They don’t callously lay people off. They say, we ‘need to streamline, tighten up cash-flow.’”
Still, in some ways, the two generations have experienced the recession similarly. While more than 60 percent of both groups claimed in 2007 to be “very happy in life,” today that share is down to just over 40 percent in both generations. Confidence in securing the capital they need has also dropped in both groups. But both groups also overwhelmingly believe that “going into business was the right decision”; 81 percent of GenY and 91 percent of Boomers agree with that statement.
Another finding of the American Express OPEN research is that the more passionate an entrepreneur is about the business, the more likely she is to survive. And more Generation Y entrepreneurs than Baby Boomers went into business doing something they are passionate about.
According to the survey, Gen Y small business owners who were motivated by passion to start their businesses are more likely to:
- Have experienced higher revenue growth over the last three years (37 percent) than Gen Y overall (24 percent) or Baby Boomers overall (10 percent)
- Have a social media presence for their business (89 percent) than Gen Y overall (79 percent) or Baby Boomers over all (59 percent)
- Offer customers rewards or discounts for their repeat business (65 percent) compared to Gen Y overall (56 percent) or Baby Boomers overall (32 percent)
- Have a business mentor (52 percent) compared to Gen Y overall (41 percent) or Baby Boomers overall (23 percent)
“Passion equals revenues,” Bredin says. “What comes to mind is a company that’s doing something the person is driven to do and is doing this because they love it. That kind of enthusiasm and excitement is naturally going to lead you to success. It fuels you to work harder and make connections.