Home' Trinidad and Tobago Guardian : January 18th 2015 Contents SBG12 FINANCE
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt JANUARY 18 • 2015
Currently the economic sit-
uation is the big topic.
Energy prices are low---
our main source of rev-
enue---and since we have
a one-horse economy
based on oil and gas, this
could be disastrous for us.
The $7 billion projected budget deficit and
the projection by some of a three-year period
of low oil prices is keeping the mood sombre.
Our Central Bank has estimated growth of
0.5 per cent for all of 2014 and that means
we are dead in the water. The debate is whether
we are doing enough and the timing of the
restructuring? But can we escape a recession?
Globally, the news is not good either. Except
for the US, China and India, the world eco-
nomic situation is grim. The world is burdened
by large deficits and excess capacity.
While the debate continues, some aspiring
entrepreneurs are pondering whether this is
the time to start a business or is it a wait-
and-see situation. It seems to be a bit murky
and ambiguous. Should I hold back my plans
of launching a new business because it is too
risky and uncertain?
I have two cases that might help shape your
plans to answer that question: launch or not
It was one of the worst economic situations
a country could ever face. The T&T economy
in the 1980s was experiencing restructuring
as prescribed by the IMF. Between 1983-89,
the economy contracted and the unemploy-
ment rate peaked at over 15 per cent.
Trinidadians were struggling. It seems few
things were selling and bankruptcies were up
and Trinidadian learnt some new words;
receivership, vagrancy and refugee status.
In 1986, I graduated with a degree in mar-
keting and could not find work. So having
experienced Haagen-Dazs ice cream, I thought,
well this should sell here. My mother made
a great coconut ice cream and I worked out
the costing and figured we could sell it at the
supermarkets. I thought there must be a seg-
ment that hated the ice cream with lots of air
in it (economy ice cream). My parents thought
I was crazy to embark on such a journey. Why
would people buy homemade (premium) ice
cream in a deep recession? It seemed a logical
Cannings and Flavorite ice creams were
doing well and were the dominant brands. I
later abandoned my plan because of little
financial backing (thanks mom and dad).
One day, in late 1986, I visited my friend
in Edinburgh, and heard someone bursting
coconuts. I found out that Wilbur and his
workers were making ice cream to sell down
Chaguanas. I pondered whether my parents
were right about people buying premium ice
cream in a recession. I was told that the brand
Willie s Ice Cream was doing well.
From an economic point of view, people in
challenging times should not buy expensive
ice cream. It is illogical to do so. But people
were buying and my marketing head told me
differently. People, even in the midst of a
recession, will still buy and even buy things
they shouldn t. Why were Willie s customers
buying Wilbur Balgobin s product?
It seems that even in gloomy times there
is a need for products that go beyond the
physical attributes. My guess is people wanted
to "escape" the doom and gloom with a nice
scoop of ice cream that would put them into
a different world. I reflected why I bought
Haagen-Dazs in the US and it was after a
tough semester at university, it was a way to
enter another microcosm. We all want another
world sometimes and ice cream can do just
Face in a jar
In 1932 Charles Revson started to produce
nail polish and lipstick in the US.
At that time, the US was in an economic
depression, unemployment was close to 30
per cent and the financial system was in a
mess. People could not put food on the table
and there were soup kitchens to assist them.
Revson s business, however, was doing well
even in those times when large corporations
were struggling. This seemed illogical that
women would want to buy a non-necessity
when food was a big issue. But they did and
Revson, who named his company Charles
Revlon, explained that he was not in the cos-
metics business. He stated in his famous quote,
"In the factory, we make cosmetics, in the
store, we sell hope."
So even in a depression, women still wanted
to look good, maybe to get work or to help
them get emotionally out of their sad mindset.
Again, there are strong emotional reasons why
we buy and even in challenging economic
times, we will still buy and buy a lot of some
Tough time advantage
There is a saying that tough times make
tough people. Maybe the same is true for com-
panies and entrepreneurs that start in a reces-
sion. If you start in bad times you have the
opportunity to build a lean organisation. When
times improve, your cost structure will be low.
This means more profit margin.
During challenging times, you also have the
advantage to negotiate favourable terms (wages,
rent or packages) and this can take take you
through the good times. Your competitors who
start in an economic recovery will not have
the same advantage.
In addition, when you start early you know
the market and get the first mover advantage.
It means you have the chance to perfect your
business model and strategy. You can build a
strong brand and have a supply chain edge.
In other words, you have a sustainable and
Tough time disadvantages
There are downsides to starting in uncertain
You might have underestimated the length
of the recession and your fledging start up
might not have enough cash to rally you
through. Your business might go bankrupt
right before the next boom.
You might also have a great business model
for the recession but that might not be one
for the coming expansion. You might have a
booming used furniture venture, but when
times get better people just want new stuff.
You have suppliers and staff for selling used
goods, but not for new and this means your
reputation cannot transfer.
Research your idea
Given the good and bad side of starting in
a recession, what do you do?
You might want to start where all good
entrepreneurs start. They start with an idea
and research it. Is it a business idea or just an
idea? If you are like Willie s Ice Cream, by
picking a niche you can grow slowly with the
Niches are good places to start as they have
little competition, but they have small volumes.
Willie s and Dairy Bar basically invented the
local premium ice cream market. Sometimes
a niche can grow into a large segment as was
the case of the premium ice cream market.
Today, we have Ben & Jerry s, ColdStone
and Haagen-Dazs, which have occupied the
super premium segment (with a higher fat
content). A number of local entrepreneurs
have entered the market with exotic flavours
using local fruits and mixed concoctions.
When Willie s started he used a low-cost
business model; a hammer to smash the
coconut shells, a hand cranked ice cream pail
(and body men to turn it), a garage to operate
his production facility, a box cart as his retail
outlet which he could wheel down to nearby
Chaguanas. This is the lowest cost way to test
the market. Willie s had no idea if his business
model was viable. This technique of using
easily available and cheap resources is called
bootstrapping. This is the way of the world
While I cannot say for sure if this is the
best of times for business start up, I can say
that recessionary times do have its advantages.
Maybe crisis means opportunity as we saw
with Willie s and Revlon.
Sajjad Hamid is an SME consultant. He
can be rached at firstname.lastname@example.org
Is this the best
time to start
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