An economic downturn or recession is a time of feast or famine for individual small businesses, and a time of feast or famine for small business as a collective. On one hand, you will see lots of new businesses pop up as larger companies shed talent or functions, and people suddenly without jobs strike out on their own. Often in these scenarios, the intellectual property assets held by the new entrepreneur—IP rights that they develop, or ones that they legally took with them—gives the new venture an instant level of business stability. They have the know-how and customers who are looking to do things differently.

 

Others might take a more daring path and pick up the mantle of “small business entrepreneur” out of necessity. As we all know, necessity is the mother of invention, and this necessity is an important relative of innovation and IP. Times like this support and encourage new ideas, methods, and channels; in turn, this makes the likelihood of increased small business activity, especially IP-based, high.

The opportunity to improve or fully leverage your IP may reside in the market’s need or desire to do things differently, more cost-effectively, or with/without certain steps, in search of operating efficiencies. All of this points to the central role of IP in maximizing value in times of downturn.

This is a double-edged sword, however, and you’d better watch out because the blade is sharp. On the other side are small IP-based businesses already in existence and their potential for famine. Depending on where in your company is in life-cycle and strategic activity, you can be left in a precarious position. It’s one thing to enter a chaotic environment to grasp at perceived opportunity (as described above), and another to suddenly find yourself and your business (with all of your plans in progress) in the middle of chaos. So the current situation is treacherous for existing small businesses. For them, the contraction of credit markets can mean that something as simple as receivables lines sliding to 60 days being the difference between bonuses and layoffs. The reality is that businesses executing strategies that don’t center on the recession are likely at a higher risk because their plans don’t incorporate changed economic conditions, other than retrofitting to manage the variables.

In markets like the current one, economic upheaval itself is likely to foster rapid change and turnover in small business. More businesses will undoubtedly be born of this downturn, for all of the reasons I described above. Conversely and simultaneously, small businesses are at risk if they execute strategy conceived without these conditions as part of their risk.