Understanding the whims of the stock market is a little like predicting the weather. You get some good indicators, but there's always the possibility the storm will blow over-or that you'll get hammered when you least expect it.
Understanding the whims of the stock market is a little like predicting the weather. You get some good indicators, but there's always the possibility the storm will blow over-or that you'll get hammered when you least expect it.
Many people are worried about the Nasdaq's decline. To some extent, that's a reflection of the dot-com meltdown. But it also indicates the whole high-tech product sector has slowed.
The broader Dow Jones Index has so far managed to stay above water, which could lead you to assume that the economy fundamentally is still strong and that there will be plenty of money to pay for your services. But stock indices are merely an average. There are some troubling signs rumbling underneath that haven't been there in a long time.
For starters, venture capitalists still have plenty of money - but they won't open their wallets quite so readily this year. VCs got seriously burned by the dot-com and B2B hysteria, and banks are feeling the same searing heat from their global telco investments. That will make both far more cautious about investing.
If you plan to expand your business with outside capital, you'll need a plan that shows how and when you're going to make money. We've just passed through the looking glass from a borrower's market to a lender's market. That means the attached strings will now look more like heavy rope.
Second, you'll need to consider whether it's better to buy, build, or partner. If you have cash lying around, this is prime bargain hunting season-but remember, most acquisitions and mergers look better on paper than in reality. A better alternative may be to build a practice. For the first time in years, there's qualified help ripe for the picking due to the first wave of this shakeout. And if you think your plan is risky, the best bet is to partner - particularly if you're considering expansion beyond your core competency.
Third, you'll need to put things in perspective. If the Dow average does sink, you won't have the same opportunity for global expansion that existed three years ago. Asia, Latin America and even much of Europe are in a slump.
If the US economy follows suit, the global economy is going to look like it just woke up from a wild party with a bad hangover.
Finally, you'll need to figure out when to make your move so you don't leverage your business beyond its ability to pay off any debts you may accumulate.
Ray Noorda, who turned Novell into a near networking monopoly a decade ago, once said that if you're feeling great about your business, you're on the brink of disaster.
That doesn't mean the storm clouds should rain on your plans, but you might want to consider packing an umbrella.
