Startups find benefits in launching in bad times

By Joyce M. Rosenberg
AP Business Writer

NEW YORK (AP) — Starting a business in a tough economy taught entrepreneurs Chuck Tanowitz and Todd Van Hoosear the value of time.

The duo started Fresh Ground, a public relations firm, in Boston in early 2010. The recession was technically over, but many companies were still feeling its effects. That translated to some prospective clients trying to get something for, well, very little. They quickly learned to structure conversations with prospective clients so they would know early on how much money a client was willing or able to spend — rather than discovering at the end of a long meeting that a client had just $1,000 for a project.

Conventional wisdom says don’t start a business during an economic downturn. Based on government figures many people agree. In 2007, there were 844,000 new startups in the U.S. By 2009, that number had fallen to just 700,000, according the Bureau of Labor Statistics.

But a starting a company during bad economic times can be good business. It often teaches entrepreneurs lessons that make them better business owners and it can reap benefits such as savings on rents, products and services and access to better talent.

Fresh Ground’s founders, who decided to start their firm after they were laid off from their jobs in 2009, took lessons from some disappointing client meetings and flipped them into a strategy that is helping them build their business.

BAD TIMES, GOOD PEOPLE
When Jeanine Hamilton started Hire Partnership, a staffing company, in Boston in mid-2008 it looked like the worst possible timing. Companies were laying people off and there was very little hiring going on. Like Tanowitz and Van Hoosear, Hamilton also had been laid off.

Business was tough at first, but Hamilton found that there were benefits to launching in an economic downturn. Because so many people were unemployed, she was able to get highly qualified candidates that she could send out to interviews. She says revenue has climbed 4,000 percent.

LESS COMPETITION, MORE DEALS
The prospect of opening a knitting shop in the aftermath of the recession looked risky. Many went out of business when customers cut back on their hobbies or looked for less expensive yarn online.

But is also meant there was less competition. So Karen Posniak, a former retail salesperson and a personal shopper, decided that it was a good time to fulfill her dream of opening a knitting shop of her own. She and her husband had moved to Hoboken, N.J., to be closer to his job in New York City. She used proceeds from the sale of their old house to open the store, Do Ewe Knit in Hoboken in August.

Hoboken’s proximity to New York had pushed rents up over the years, but like most of the country, the tough economy brought prices down. The soft real estate market made it easier for Posniak to negotiate a three-year lease with the terms she wanted.