August 1, 2008
In a recent issue of Inc. magazine, three companies — Method, RF Micro Devices, and Clif Bar — were profiled as three case studies exemplifying the benefits of starting up in a down economy. For Adam Lowry and Eric Ryan, who started Method during the dot-com bust, success meant keeping costs low. "Starting a business in a recession is like vacationing in the off-season," says Ryan. "It's a little less crowded, and everything starts going on sale." By 2006, Method had $71 million in sales, and today the founders are pushing to reach $100 million.
But even before Method, RF Micro, and Clif came along, other long-standing top-performing companies got their start during times of economic uncertainty. GE started during the panic of 1873, HP began during the Great Depression, Disney’s start was during the recession of 1923-24, and Bill Gates and Paul Allen founded Microsoft during the recession of 1975.
Comments | 8 Total
August 1, 2008 at 9:18am by Allen Laudenslager
I like the “off season vacation” metaphor. The real challenge is that in tough times you can’t get by with just an OK product or service, you have to have a killer idea.
The genius part is the right idea for that moment in time. In good times a lot of things can be made to work, but as time get tough, the margins get smaller and many products or services don’t survive.
It’s the killer idea that’s the hard part.
August 1, 2008 at 11:47am by Larry Refsland
This is the old concept of zigging when everyone else is zagging. In the early 80's thousands of people left the real estate business because of high interest rates and recession. Those of us that got in the business at that time and worked hard at establishing a niche stockpiled a list of loyal clients that came back time and time again as the rates fell and the market improved. The question isn't whether a recession is the best time to start up a business, it's what business will benefit the most when the recession ends? It's not much different than buying stock when everyone else is selling. The key is to identify the opportunity that is temporarily undervalued but has tremendous possibilities of a recovery.
August 1, 2008 at 12:35pm by Rip Empson
It seems to me that launching a startup in a recession will teach you how to be shrewd and prudent with your time, money, resources, and investment. Another "upside" of a bearish economy is cheap resources. Lower rent rates on office space and cheaper labor, for example, tend to increase during a recession. In the current downturn, as opposed to the dot-com bursting bubble, venture capital is still there for those seeking it. Many investors are eager to find worthy business ventures. In the end, though, entrepreneurs have to be resourceful with their money in order to be successful, and a recession forces one to be smarter with your cash than you might be otherwise. It teaches patience and care. Not that we need those...
August 2, 2008 at 1:51pm by Carel Two-Eagle
Allen L. is right - the central idea is a vital key to successfully starting a business during a recession - providing you know how to stretch a dollar past the ordinary limits and you are creative and flexible in the necessary areas. I've started several businesses during recessions & they all did well. Of course maybe the fact that I motivated by succeed or die of starvation had something to do with it.. I haven't thought camping in a big cardboard box was cool since I was a little kid.... Whatever - when I hunt deer, I don't go into the woods when "all the other" hunters do.. I go in afterward, and I often stalk-hunt my way to my stand. Similarly, I sit tight at the times when most hunters leave the woods. With the result that in 24 years of hunting, I took 32 deer out of the several hundred I saw and passed by.. If you follow the herd, all I can see you get out of it is eating the dirt of whoever is ahead of you. I've always gone my own road, and it has always been good for me.
August 3, 2008 at 6:18pm by Peter Metcher
While sounding counter-intuitive launching a startup in a recession provides a springboard for when times pick up. Building a business when money is tight, and customers are perhaps more wary of holding on to their money is the environment in which getting marketing, CRM, financial and HR processes, systems and thinking into shape is more critical.
August 6, 2008 at 10:34am by Erin Dougherty
It’s true: the very hardships that emerge from economic downturns can become opportunities for success for entrepreneurs and business owners who are adept at taking advantage of the situation. The skills that make great entrepreneurs – the same skills that help keep small businesses afloat – creative resourcing, flexibility, virtual tools, and a penchant for risk are all vital at times such as these.
In an effort to teach young entrepreneurs these skills, the Innovation and Entrepreneurship minor (I&E) at Clark University offers a campus-wide undergraduate curriculum that benefits students of all majors by encouraging them to follow their passion. After spending more than 20 years at Inc. magazine, the founder and director, George Gendron, saw the disparity in entrepreneurship programs offered to college students. The I&E program is a minor concentration, which enables student entrepreneurs to spend the majority of their time following their passion (i.e. major) for which to apply the entrepreneurial skills. By focusing their studies on a primary interest (anything from psychology to art), I&E students learn how to apply small business skills and overcome financial adversity – and perhaps even thrive in a economic downturn.
August 7, 2008 at 5:39am by guru .cat
Normally recessions push many people to create their own companies. Just have a look to the statistics.
August 10, 2008 at 12:54am by Jay M
Every idiot is out there wants to start a business and can better attract capital for mediocre and me too business plans when times are good. They might even be able to eke out slim profits for a time. However, It takes a superior product, a solid business plan and a viable market to attract capital and multiply it in tough times. Entrepreneurs would be wise to remember that spending doesn't cease in tough times, it's just more focused. This is instructive in creating a business that is built to last.