By January 2009, our industry was down in head count by 3,000 companies nationwide — an all time industry high.
As recently as June 2010, our audience marketing team (the people behind LCT who work hard to find new faces to send the magazine to) came up with nearly 5,000 start-up companies in business less than 12 months.
What is going on? Well, it goes like this: Whenever a recession hits an industry, the weakest, most cash-poor and unstable companies go out of business first. They never seem to go quietly, either. There’s always a fire sale as the desperados grasp for straws and try to eke out any last ounce of business before they dry up. This pesky activity creates shaky ground for the survivors. As part of survival mode, companies thin out capacity by reducing fleet sizes and head count. And by the way, the entire business world has the same M.O.
Finally, things begin to settle down for everyone, with one exception: The newly unemployed people that can’t find work. They don’t settle down at all. Indeed, they get very restless. The next thing you know, those out of work chauffeurs, office managers, AND former executives are no longer milling around Starbucks (after severance runs out they can no longer afford a $4 cup of coffee). So it’s six months, nine months, etc. and there are no jobs to go back to and no one new is hiring. It’s then that the light bulb goes on for this crop. “Time to start my own business,” they conclude. So all at once, BAM! Here they come.
First, the good news. These start-ups have the potential to HELP you. They may be excellent candidates for outsourcing. There’s something to be said for keeping a tight fleet size and supporting competition through committed alliance programs with newbies who are willing to finance the metal as long as there are jobs lined up by your company.
Second, the bad news. Every time a fresh face comes into a market there’s a learning curve, which can adversely affect everyone around them. Also there’s always a non-team player (as in a chauffeur with a vendetta) who holds no interest in working in a strategic partnership with you. These types can be dangerous, especially if they know your weaknesses.
In this case, you have two choices. Get your helmet and prepare for battle or (my preference) be proactive and set up a meeting right now with any possible competitor that KNOWS you and make amends, whether you want to or not. Many empires throughout history were toppled by ego.
Sara Eastwood-McLean Sara@LCTmag.com