A recession can mean opportunity, and our experts showcase five examples to inspire business owners everywhere.
You may think a recession is a terrible time to start a business, but, in reality, there are a lot of reasons it might be a great time. Smart entrepreneurs are taking advantage of new opportunities and unique needs presented by the economic downturn. The trick, business owners say, is to find a way to meet the new needs of the recession. Here are five ways you can start and grow during this protracted economic instability.
Be Less Expensive
Andie Hecker, owner of Ballet Bodies, which offers Pilates, personal training, ballet and aerobics, started her business in the spring of 2008 out of her apartment.
Today, her business occupies a 1,500-square-foot space.
She thinks that offering customers a less-expensive alternative for a service they were already paying for was what allowed her to ride out and even grow during the recession.
"I was willing to work for cheaper, starting out so people who didn't want to pay exorbitant prices for quality fitness, dance and Pilates training came to me and felt like they found something very new, unique and distinctive," said the former New York City Ballet dancer. "Then word caught on and people who could and would pay more money helped me up my rates and expand my business."
Identify a Need
Don Battis' company, Pawntique, allows you to post your items in a virtual pawn shop and receive short-term collateral-based loans. It was born after Battis observed a credit shortage during a time of great economic need.
"We were able to translate an economic recession into a new business opportunity. We leveraged the difficult lending environment to expand the concept of pawning to a wider customer base; namely, formerly affluent people looking to tap the equity of their varying personal assets," Battis said.
Battis said a recession should not discourage others from opening their own businesses.
"There is always a place for a new good business idea," he said. "You can always build a profitable business by identifying and satisfying a market need."
Offer a Solution
W. Michael Hsu, owner of DeepSky, a company that offers outsourced accounting services so companies do not have to have their own in-house accounting departments, started his company in the heart of the recession in 2009.
He said the recession was ripe for a business like his.
"In rough times, people stop being wasteful and start to look toward better solutions," said Hsu, who initially invested $30,000 in his business and worked for two years without pay. "We are that better solution. The recession is a great help for my business. It's a great time for change."
"People…will tell you how crazy you are for giving up a high-paying job in the middle of a recession," he said. "Truth is, if you've got a model that offers value, people are always willing to buy from you."
Be the Alternative
Owen Schnaper, co-owner of Salmon Cove, which sells inspirational, lifestyle apparel through country clubs, specialty boutiques and online, started his business in March 2011.
"Convincing everyone we knew what we were doing in leaving great, stable jobs in turbulent economic times [was the hardest part]," said Schnaper, who started the company with longtime friend Charlie Roth. "I have always believed that the ((CONLINK|1099|best time to start a business)) is during an economic downturn. It forces business owners to really refine their plans and approach. It also allows your business to grow with natural economic cycles rather than against them."
Schnaper thinks the recession opened some doors for his business.
"The recession has forced retailers to really evaluate their businesses and evaluate what works and what doesn't," he said. "We potentially provide a new solution to help them differentiate in comparison to their competitors. We focus on helping our retail partners find the products to help their business rather than try to sell them as much as possible. Our flexibility and willingness to work with them helps us stand out. If everything was 'business as usual' they might be more reluctant to change."
Offer New Opportunities
Jason Frome and Phyllis Whitehouse Frome, owners of Pine Hollow Lodging, say their business has grown during the recession. The company , which manages vacation rental properties in the western Catskill Mountains of New York, found that the bad economy created a need among homeowners who wanted to make money on their properties when they weren't using them.
"The down economy brought us more owners interested in renting out their properties," Jason Frome said. "Owners were finding a greater need to offset the expense of a second home and, in many cases, they could not afford to leave the city to come to their own house. So our property inventory grew."
At the same time, vacationers who traditionally traveled farther afield were discovering that the Catskills provided an affordable alternative. It's not always easy, though, the Fromes admit.
"The economy is very fragile and the number of this week's reservations can almost be predicted by what the lead story was on last week's news. It is difficult to keep a positive attitude every day when a business roller coasters like this."