According to Kimberly Palmer, writing for US News & World Report, “going against the tide and starting your own business in a recession not only lets you escape from the corporate grind, but it also can be easier than it would be during boom times.” Looking back through recessions past, she may be right.
Starting a Business During an Economic Downturn
Several once-small companies now considered giants in their fields started during economic downturns:
- Burger King and Sports Illustrated magazine both started in the recession of 1954.
- Trader Joe’s opened its doors in 1958.
- LexisNexis and FedEx, Corp. began in 1973.
- Microsoft Corp. in 1975–when unemployment was 8.5%.
- The ubiquitous MTV started up in 1981, on a shoestring budget and a risky idea.
- Then, there’s Revlon Cosmetics. Founded in 1932 during the Great Depression, one product helped launch the company into a multimillion dollar corporation less than a decade later: Nail Polish.
Rebounding from the Recession
Many industries are expected to rebound from the recession. In USA Today Jayne O’Donnell explains that because people continue to use–have to use–cars, appliances, furniture, and apparel they tend to replace these items, sometimes during, but especially after tough economic times. Some companies, such as Starbucks, Hershey, and Netflix, are doing well now, in spite of the recession. The NY DAILY NEWS reports that the health care, home appliance rental, and video game industries are also thriving.
Should I Wait or Should I Go?
So, should the out-of-work and underemployed simply wait for the economy to turn around and for other companies to get on their feet?
For Stacy Perman, who covers small business and entrepreneurship for BusinessWeek, the answer is, maybe not. She admits a strong case can be made for starting up a start-up now. Other business reporters agree there are several reasons why starting a business during a recession is not only a good idea, but makes good business sense:
- Protection from layoffs
- Income self-determined
- Easy to find partners
- Low start-up costs
- Less competition
- Work is more gratifying
Philip and Nellie Akalp, an attorney husband and wife team and founders of CorpNet Incorporation Services, an incorporation service that helps small business owners get their businesses off the ground, also agree. In addition to assisting entrepreneurs with incorporating or forming an LLC (services that start at only $49 plus state fees), they offer tips for anyone considering starting a business during a recession:
Tips for Starting a Business in a Recession
- First, choose a home-based business, using existing equipment and resources.
- Research the industry and develop a business plan, both of which can easily be done with an Internet connection.
- Only hire those individuals or services absolutely necessary to get business up and running.
- Use the advice, expertise, and hands-on assistance of family and friends where possible.
- Keep advertising costs minimal: generate word-of-mouth referrals with the use of family, friends, neighbors, colleagues, and coworkers
- Set up a website and blog, both of which can be done cheaply.
- Take advantage of free online social networking sites such as Twitter and Facebook.
Fear and Apathy are the True Enemy
Little is needed, it seems, to launch a good idea into a successful business. According to a study of 549 company founders by the Kauffman Foundation, the most commonly named barrier to entrepreneurial success was a “lack of willingness or ability to take risks.”