Don't panic!

Paul Boag

According to Jason Calcanis and Michael Arrington the tech sector is in economic free fall. But, is the doom and gloom justified?

I am no financial expert. I have no idea how the economy works or how the actions of the stock market impact the rest of us. What I do have is my experience of the the dot com bust in 2001 and that tells me there is a lot of unnecessary panic flying around.

That said, I can understand why the likes of Jason Calcanis and Michael Arrington are twitchy.

I have said it before and I will say it again, any startup whose business plan is built solely on advertising revenue or venture capital has no business plan at all. When an economy gets into difficulties those are the first two areas of revenue to dry up. Companies do not advertise when they start tightening their belts. They certainly do not invest.

It is therefore unsurprising that there is a growing sense of unease in Silicon Valley. As with the last dot com boom there are a lot of companies with naive business plans. I am concerned for my friends who work in companies like that. I think they have worrying times ahead.

However, for the vast majority of web designers things are nowhere near as concerning. We are not supported by advertising or venture capital, but by delivering a service. Depending on our clients we probably have little to worry about.

There are of course exceptions. If your clients fall into the following categories, then I would look to alter that client base slightly:

  • Web 2.0. companies – If they are being squeezed then they will stop investing in their site,
  • Advertising agencies – As the wider economy tighten its belt they will stop spending with advertising agencies and this will trickle down.
  • Very small businesses – These people still see websites as a marketing spend rather than an intrinsic part of their business. If times get tough they will cut this expenditure.

However, if you clients do not fall into these categories, you probably have no need to panic. Things will slow down and you will see a trickle down affect, but if you can weather the storm there will be good times ahead. Recessions tend to clear the forest of dead wood and leave opportunities for growth later on.