Jason’s email has a “focus on the entrepreneurial and startup depression and economic downturns/depressions–and how you can deal with them.” He suggests that the economic downturns we’re seeing right now will kill 50-80% of startups within the next 18 months, and that entrepreneurs need to be prepared to take certain steps to fortify, but also to monitor and address their own “entrepreneurial depression and anxiety.”

I love this topic. I’ve stated many times on this blog, and otherwise, that one of the biggest defining characteristics of an entrepreneur is his/her perseverence and resiliency. Those characteristics are to an entrepreneur like water to a fish. These are traits that an entrepreneur just requires 100% of the time. Jason states,

“Depending on your DNA, getting your ass kicked is either complete torture or deviantly rewarding. Truth be told, I like getting my ass kicked because it makes me angry, motivated and focused.”

That’s just worded perfectly. You either got it or you don’t folks! I know, for myself, I work best when the chips are down. When I’m in second place, I move into first. When I’m behind in the count, I hit a double. I’ve always been like that. I think most entrepreneurs are wired the same way.

Jason makes some very specific recommendations about things you can do right now to cover your ass. Some of those recommendations are as follows:

1. Execute better: This is fairly simple, as I describe above. Rank
yourself and your performance and improve it.

2. Grow the talent you have: When the market is down, it’s a great
time to get your team educated and to the next level. Invest in
training and education of your top people, because they are the ones
who will lead your company through this mess.

3. Firing the average people: Again, it’s totally politically
incorrect, but I highly recommend firing anyone who is good or
average. Startups are an Olympic sport and every slot on your team is
critical. You wouldn’t put a “good” swimmer in a relay, would you?
Don’t have one in your startup. Fire the good and replace them with
the great.

4. Cut spending every where you can: Recurring costs like
connectivity, phones, rent and insurance are things that you can
easily cut. Go to each of your providers and ask for 20% relief
immediately or you’re leaving. Most, not all, will give it to you.

5. Find a revenue stream and ride it: If you don’t have a revenue
stream right now, you’d better find one on Monday. Seriously, by the
end of the day. Once you find this revenue stream, ride it. Put at
least 25% of your effort into bringing in revenue.

6. Focus on your profitable clients: If you have revenue, start
focusing on which clients are most profitable. Take them to lunch and
figure out how you can over-service them and sell them another product
(or more of your current product). You’re gonna want to protect these
accounts because the folks reading Point Five are going to be calling
them!

7. Make your top ten 10% better: Look at the top ten aspects of your
business and come up with a plan to make each 10% better in the next
30 days. Ask everyone in your company to make suggestions for the 10%
better program and execute on the ones that will provide the most bang
for the buck. Sometimes, there are things you can do today that will
make something 10% better for free–you just haven’t brainstormed
enough.

8. Hold an optional off-site breakfast meeting on a Sunday and see who
shows up: If folks don’t show up for you to grow/save the company on a
Sunday for a two hour breakfast, they probably aren’t going to step up
when the sh#$%t really hits the fan. You need to know who the real
killers on your team are and you need to get close with them now.
Again, it’s fine to have 9-5ers on your team–if you’re the Post
Office. You can’t have them at a startup company. Note: if you reading
this and saying I’m anti-family, save it. Folks don’t have to work at
startups and some of the hardest working folks I’ve met have families
and figure out how to balance things.

9. Build marketshare: One of the best things to do in the down market
is build marketshare. Look for competitors that are going out of
business and buy them or just “steal” their clients and talent (i.e.
pick them up).

10. Raise money: I know I said above most folks won’t be able to raise
money in the down market, but that’s not because the money isn’t out
there–clearly it is. The issue is that the big money out there
doesn’t want to fund small ideas that are in the death spiral. Build a
plan based on revenue and taking market share and folks will consider
funding you.

I think it’s also worth noting entrepreneur and author Seth Godin‘s statements in a recent blog entry:

“Inc. magazine reports that a huge percentage of companies in this year’s Inc. 500 were founded within months of 9/11. Talk about uncertain times.

But uncertain times, frozen liquidity, political change and poor astrological forecasts (not to mention chicken entrails) all lead to less competition, more available talent and a do-or-die attitude that causes real change to happen.

If I wasn’t already running my own business, today is the day I’d start one.”

I wholly agree with this and it seems others do too. Many contend that the best time to start a business is now, during a recession.

Inc Magazine has a nice piece from May that tells the story about a select few businesses who started during a downturn, and prospered too. Fast Company readers respond to this article.

The Industry Standard gives Five reasons why a recession is a good time to start a company.

With Congress on the verge of approving some sort of bail-out for this financial nightmare, it’s important that people keep their heads on straight and stay focused. Perhaps this is an overly simplistic analogy, but it’s sort of like when the power goes out during a winter storm. You don’t know when the power will come back on, you feel the temperature in your house dropping, the pipes might start to freeze, and your children, your pets, and everything starts to be affected. But that doesn’t mean you light a fire in your house either. You don’t start burning the furniture. You stay calm, you buckle in. You get prepared to ride it out by finding sweaters and doubling up on socks. You fill up jugs of water, you let the ice melt, you light a few candles, but not all of them, you play a board game, keep your spirits high, and take it slow. But you also have a plan.

Now is the time to fortify and strengthen, get better, get mean! Those who panic aren’t thinking and don’t have a plan. So think – have a plan. Have a plan B. But most importantly, stop for minute – recognize the opportunity that’s in front of you! These opportunities don’t come around too often.

So Jason Calacanis lit a fire last week with a blog post about things to do and things not to do in a startup company. I was introduced to Jason a few months ago at a conference in LA by a mutual friend. We chatted for quite a bit while he waited for a ride to a Lakers game. We joked around, talked business and just gabbed. Seemed like a nice enough guy, and at the same time he struck me as a no-nonse kind of dude. Jason is extremely bright, and certainly successful and his reputation definitely precedes him. His blog post created quite a stir in the blogosphere. Many critics have piled on him. TechCrunch piled on starting with Duncan Riley to Michael Arrington. Don Dodge jumped in, and the latest to catch my attention was Mark Cuban.

About two weeks ago, after subscribing to Jason’s blog for a long time, I unsubscribed. The reason? He never seemed to have anything important to say – just the same ol’ promotional crap about his business Mahalo. Now granted, I think Mahalo is cool, but I don’t read Jason’s blog to read about Mahalo. I read it to learn his insights as an entrepreneur, and an entrepreneur I respect. But I’ve grown tired of his endless Mahalo postings. As one of my Facebook friends I’m also tired of his endless links to Mahalo. It totally clogs up my Facebook news feed! But this recent post, that I’m referencing here in this entry, is a damn good one and is reason for me to subscribe to his blog again.

Anyway, to the point… out of all the responses in the blogosphere to Jason’s entry, some of Mark Cuban’s responses are the ones that really stuck a chord with me. (interesting side note: Cuban is a Mahalo investor). In Mark’s response the ones that caught my attention were:

3. Hire people who you think will love working there.

That’s the first thing I look for – a gut, passion, a heart. All our job postings state exactly that! If I don’t see those qualities in the first 30 seconds of an interview, the interview is already over and I just go through the motions. My colleagues can attest to that. Anyone I’ve hired in CitySquares is there because they passed these tests. I grill them and if they can look me in the eyes and not bullshit me and show me some guts, they’ve passed my first test.

6. An expresso machine ? Are you kidding me ? Shoot yourself before you spend money on an expresso machine. Coffee is for closers. Sodas are free. Lunch is a chance to get out of the office and talk. There are 24 hours in a day, and if people like their jobs, they will find ways to use as much of it as possible to do their jobs.

I love Mark’s response here! Firstly, we have a coffee machine in the office. A Keurig brewing machine – ya know – the kind that take those little cups? The reasons are simple – the closest coffee shop is not terribly convenient. That’s time my sales staff is not on the phones. And, having one of these babies in the office always stocked up is a great way to just keep everyone caffeinated and thinking. I’m a big fan of caffeine. Heck, if I could I’d chew coca leaves all day! Caffeine keeps me thinking and often gets me thinking in very creative ways. I think my sales team find it just as useful as I do. Espresso machine? Eh – that’s a little, well, a little too snooty for me. As for lunches – I agree. Get the hell outta the office for a little bit. Breath some fresh air instead of your coworkers breath. Get out, clear your head, get some perspective, then come back refreshed and ready for the rest of the day. And my staff do work at all hours, mostly. I’ve had numerous exchanges with coworkers this weekend, including board members.

10. NEVER EVER EVER buy swag. A sure sign of failure for a startup is when someone sends me logo polo shirts. If your people are at shows and in public, its ok to buy for your own folks, but if you really think someone is going to wear your Yobaby.com polo you sent them in public, you are mistaken and have no idea how to spend your money

Yep, love it. The only time we’ve bought any shirts, jackets, or hats is for events, trade shows, and marketing activities. That’s it. I totally agree with Mark. No one, including my board members to my own wife, are not going to where our corporate threads. Please – spend that money on a coffee machine or coca leaves!

12. Make the job fun for employees. Keep a pulse on the stress levels and accomplishments of your people and reward them. My first company, MicroSolutions, when we had a record sales month, or someone did something special, I would walk around handing out 100 dollar bills to salespeople. At Broadcast.com and MicroSolutions, we had a company shot. Kamikaze. We would take people to a bar every now and then and buy one or 10 for everyone. At MicroSolutions, more often than not we had vendors cover the tab. Vendors always love a good party :0

As I think many of my previous posts would demonstrate, we make all sorts of efforts here to keep morale high and people giving a shit. This is more than a job, it has to be. Some of things we do to keep people happy here happen by accident, some are quite intentional. From happy hours on Thursdays, to a Kudos contest, to American Idol pools, company lunches, and just general Shenanigans and Tom Foolery, we have a lot of fun. But make no mistake, we kick each others asses and hold ourselves and each other accountable.

Long story short, I think that Jason is a proven entrepreneur with loads of experience. I do, however, think that what works for one startup won’t necessary work in another. I can think of other startup companies I’ve worked for, including my own, that have had totally different requirements for morale, for efficiency tools, and for productivity. What works for me may not work for Jason. What works for Jason may not work for Mark. And so on.

Ultimately, that’s what this blog is really about – my perspectives as an entrepreneur. I try to keep the self-promotion out of it. I try not to be obnoxious (which I can easily be) and keep marketing and PR efforts out of this blog. That’s what a future planned CitySquares blog will be – promotional and PR stuff.

So if I can be just one more person to jump onto the Calacanis pig pile, my only piece of criticism would be to make the Calacanis.com Blog about Jason Calacanis, about his experiences with and in entrepreneurship, not about Mahalo and Mahalo and Mahalo. I am now resubscribed to his blog – at least until I get bored again.
2008-03-12

Jason posted a new blog entry in which he states he’s going to change his tune. I think that’s brave and wise of him. He’s such a respected guy and people really admire him (myself included). It’s refreshing to see this sort of honesty and guts. See his blog entry here.