The contrarian in Hoover actually sees this as a better-than-usual moment for startups. After all, he says, you have the benefit of knowing when the next recession is going to hit -- it's happening right now! -- which means good times will probably prevail two years to four years down the road. Launch a startup now, Hoover argues, and it will be hitting its stride when the economy is coming together. "It may be worse six months from now," he says, "but the odds of it being worse two years from now are pretty small."
Hoover developed his chronic optimism in the trenches. He founded Bookstop Inc. in 1982 (since purchased by Barnes & Noble) and, in 1990, launched Hoover's Inc., the business-information service (now publicly traded). Before that, he served stints as a retail securities analyst for Citibank and the manager of strategic planning for May Department Stores. He's also the author of a new book, Hoover's Vision: Original Thinking for Business Success. Hoover spoke with BusinessWeek Senior Editor Rick Green last week. Here are some edited excerpts from their conversation.
Q: Isn't this an unusually perilous time to do a startup?
A: No. Normally when you start a business, your hope is that your idea intersects with market realities two to four years down the path. You want to be looking at where the puck is going to be instead of where the puck is right now. So when I think, "Would I want to start a biz in Oct. of 2001?", I really have to ask myself, "What do I think the economy will look like in 2004?" It would be difficult for it to be worse.
In fact, this could be a good time. Thanks to the dot-com bust, it's easier to hire. People in the tech fields have had their expectations brought down to earth. You can get better rent in most American cities, you can get suppliers to give you longer terms and [to] work with you more. The only thing you can't get is venture capital -- but I think that's somewhat dangerous anyway. They're doing the same old lemming thing, always looking at The Last Big Thing instead of The Next Big Thing. So it's an era of bootstrapping, but I think that's healthy for the entrepreneur.
Q: What kinds of startups look good now, and which don't?
A: I don't think the events of September 11 changed things very much for most entrepreneurs. If you're near the World Trade Center, sure, your whole world has changed. And if you want to make something like airport security equipment, well, you can't jump into that now. This is time for the people who already make airport security equipment to get creative and move quickly, but they've got to be already prepared. For most of the rest of us, we'd be starting businesses in different places.
Q: Such as?
A: The travel industry is one of the great growth businesses of the next 20 to 30 years.
Q: That's very contrarian of you.
A: It's part of the aging of the baby boom generation. The four businesses I think are really going to rock and roll are financial services, health care, education (which is an industry that's just beginning to be created on a for-profit basis), and travel. As the baby boomers age, they're going to find they don't all fit on the golf course. They're going to reach out to see everything, from all the national parks to the baseball parks to going overseas. Long term, say ten years from now, travel to Egypt is going to be a great business. [Pause] That's probably one I might wait a year to start.
I've thought about starting some hotel chains. I looked at it last year, and the hotels were all full. The building prices were high, and the room rates were high. I said, "Maybe I'll wait till the next downturn, [when] someone will build a new hotel and it goes broke. I can go in and buy one cheap and try some of my concepts."
Q: Do you think it's better to buy an existing business or to build one?
A: Starting with a clean slate is best. You don't want someone else's headaches and problems and their cultural errors. It's so hard to innovate because [those businesses] come with all that baggage.
Having said that, if you've already got an idea and it fits, you might want to buy. If I buy a hotel, that's just real estate, a raw material. My concept involves how you work the inside of the room, not redesigning the walls -- how much electronic [equipment] you put in, the service, how big a TV. I can go into any hotel and make it into my concept in a couple of months.
Q: What should someone starting up today be focused on?
A: Be curious. Ask lots of questions, especially about how people are changing the way they live. Look at how you can help improve their lives, whether you're selling to businesses or individuals. Then look for where that intersects with your own passions. People ask me what business would I start. That's the wrong question. There will always be fortunes made in every business: Every business has opportunities.
The issue is what business do you want to start? What business do you love? Because if you don't love it, you're not going to make it. You then have to find where what you love intersects with what people need. That's where so many high-tech people went wrong. They weren't paying attention to what people needed.
Once you do that, you need a vision that's clear -- plain English, no buzzwords -- that's consistent and doesn't change with the ups and downs of the market or current events...and that's unique.
Q: What pitfalls should small businesses avoid?
A: Going with the herd. You've got to look at what Wall Street and investors want -- because they tend to be a couple of steps behind. Look where others aren't. If all the great businesses in the world were started by a group of people sitting in a room behind closed doors, then every great company would have started at Harvard or Yale or Oxford. Almost none did. Even a guy like Bill Gates of Microsoft who was going [to Harvard] dropped out!
I'd tell them: Get your butts down to the mall. Hang out in the food court. Listen to people! If you want to do something that serves businesses, persuade some big company to let you hang around in the cafeteria for a couple of days. And when you hear somebody down the hall scream, "Oh, no, not again!" -- somebody who has a problem, somebody for whom things aren't working the way they should -- that's a chance to start a company.