The young crop of China-based entrepreneurs is starting to stress out. Whether local or expatrapreneur, owners of new China businesses are hitting a wall right now. It’s happened in China before — real estate goes through it every time the government passes a new law and manufacturers have been living it for a while. But a business slow-down is just now hitting the Starbucks set in Shanghai. Those Bull Boyz who rode the boom and transformed themselves from waiters and English teachers into international business cover stories — many of last year’s success stories are now struggling to keep things afloat. They were better at expanding than at building & holding, but now they’re suddenly facing a market that is both more competitive and tighter on spending.

Be on the lookout for 30 year-old dinosaurs so locked in the glory months of the boom that they can’t acknowledge that the ground has shifted. They may not have time to get it together.

What entrepreneurs in Shanghai should be thinking about to prepare for a bear market.

1) Race to the bottom in services
When I first came to Shanghai, lunch sets in decent places were 20 - 25. Then they shot up to 80 - 120. Look for lower-priced options and specials to start making a come-back. That doesn’t necessarily mean a drop in service quality - just more options at the low end. This will be a big challenge to the Bull Boyz who are used to ratcheting up sales terms and going for more, better, now. Businesses that can maintain strong relationships with old customers do the best at surviving the downturn — and capitalizing from the recovery.

2) Panic is bad
Bull market bosses shout and curse and rail, and they sound like captains of industry. In a bear market the yellers and quick-draw decision makers tend to come off whiny and scared. The difference is money. Yelling when you spend is ‘decisive’. Yelling when you don’t spend is ’stressing-out’.

3) Leader or Boss
This will be a killer for the Bull Boyz. Bosses fix problems by spending and buying. Leaders plan and build. You’ll want to hold on to good people and build relationships with former clients and partners. Stomping around and barking only works when there’s money around.

4) Check the model
Starting a business servicing 3 different high-end markets with a product you only barely understand was hilarious in 2006 — and made great headlines when it hit big. It’s suicide now. This is a great time to re-examine your value proposition — what are you really offering your clients and customers. What should you be selling to people who are worried about a recession and their economic futures?

5) This could last a while
If you are waiting for the market to shake off the doldrums and start spending again, then you could be in for a long dry-spell. If we are in a full-blown global down-turn, it could last 12 - 18 months (easily), with some regions and economic sectors feeling the effects for a decade.

This entry was posted on Friday, October 3rd, 2008 at 8:39 am and is filed under Expatreprenuership, Managing in China. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.