There Is Never a Bad Time to Start Up a Company

Recently I presented at the New Haven, CT Professional Net Impact chapter at Yale University. The task at hand: talking about why starting a company during the biggest recession since the Great Depression isn’t crazy.

startup in a recessionIt may seem counterintuitive to launch a new business during a recession, but even in bad times there are opportunities. In fact, many well-known and successful organizations were founded during a downturn. Fact is that 16 out of 30 companies – more than half – that make up the Dow industrial average were started during a recession or depression. These include Procter & Gamble, Disney, McDonald's, General Electric and Johnson & Johnson.

But what about companies that want to have a social impact? If you have the right idea at the right time, there isn’t a bad time to launch a business as these four social impact companies have proven.

  • The Jim Henson Company was created by puppeteer Jim Henson during the 1958 downturn. The company’s vision was to inspire and celebrate life and empowers people to follow their dreams. This they have done for generations now, making education entertaining and interesting for everyone in the family. They are responsible for some of the best-known puppet characters of all time including Miss Piggy, Kermit the Frog and Elmo.

    Today, the company is managed by Henson's five children and continues to thrive by developing shows, services and products that have expanded the franchise and strengthened the brand. It produces film, television, commercials and theater/live events and provides video production services. It also operates recording studios and soundstage and post-production facilities; stores for DVDs, plush toys, and t-shirts; and Creature Shop, which provides digital visual effects, animatronic creatures, animation and soft puppets for professionals. The company has revenues of approximately $110 million. 

  • Trader Joe's started as a chain of convenience stores called Pronto Markets out on the West coast. It, too, started in the slow financial times of 1958. Joe Coulombe was hired to grow Pronto. In 1967, he decided that the chain was too similar to 7-Eleven and came up with a unique market position. On a vacation to the Caribbean, he noticed that Americans were traveling more and returning with tastes for more exotic food and beverages. He decided to satisfy that need by providing these foods and beverages at an affordable price.
    Trader Joe’s keep costs low by cutting out the middleman, expensive packaging and marketing, and pass the savings on to customers. According to Supermarket News, the company now operates more than 321 stores with sales of $7.2 billion in 2008. Trader Joe's ranked as the second-best supermarket chain in the nation, after Wegmans, in the May 2009 issue of Consumer Reports.

    Employees are described as cheerful and passionate about helping customers. Perhaps that’s because employees are paid a fair wage; a company policy was instituted in the 1960s ensuring that full-time employees make at least the median household income for their communities. Store managers, or captains as they are called, are primarily promoted from within and can make six figures annually. Health-care benefits are offered to part-timers. The company has been owned since 1979 by German company, Albrecht Discounts, but the same policies for employee compensation remain. 

  • Clif Bar was started during the early 1990s recession when Gary Erickson, while on a 175-mile bike ride, realized he simply couldn’t stomach eating another energy bar from the only brand on the market at that time. Gary owned a bakery and applied his talent to developing a good tasting, good-for-you energy bar. Clif Bar is now over $150 million in revenue. Seventy percent of its ingredients are organic.

    Clif Bar has five bottom lines or as they like to call them aspirations: sustaining the business, brands, people, community, and the planet. All are of equal importance and create a framework for decision-making within the company.

    Convinced that the only way to compete was to be acquired (Balance Bar was selling itself to Kraft and PowerBar was selling to Nestle), Erickson almost sold the business for $120 million to Quaker Oats in 2000, which would have meant relocating the company and laying-off staff. Instead he bought out his partner and decided slower organic growth was the right way to go. His values were what guided his decision. 

  • Method Products was founded by Adam Lowry (chemical engineer) and Eric Ryan (trend spotter and branding expert) during the collapse of the dot.com bubble and post 9/11 downturn. Method is now one of the fastest-growing private companies. After seven years, their non-toxic household cleaners are reported to generate over $100 million in revenue per year. Adam and Eric demonstrated that opportunity can happen in the most unlikely places – an oversaturated commodity market dominated by some of the biggest names in business.

    Method is a certified B Corporation. B corporations (the B standing for "beneficial") are a type of organization proposed by B Lab a 501(c)(3) nonprofit. They use the power of business to create public benefit. B Corporations:

    - Meet comprehensive and transparent social and environmental performance standards
    - Legally expand the responsibilities of the corporation to include stakeholder interests
    - Build collective voice through the power of the unifying B Corporation brand

    Method products bear the Cradle to Cradle seal, which assures consumers that the entire life cycle of the product, including how it's made and ways in which it is disposed, is environmentally safe and healthy. The transparency of the product represents the purity of the product and the company mission, a message that clearly resonates with consumers.

I look forward to the time when we can look back at this period of time and reflect on the successes that grew out of this recession. One thing I’m sure of is that these successful organizations will be run by resourceful, creative thinkers who had the guts to move forward despite the gloom. Will this be you?

Geri

Starting companies in recessions

Thank you so much for these insightful columns. I honestly feel as if they are being written specifically for me. After a long career in corporate America I am anxious to explore new options. Your down-to-Earth tone combined with great real-world examples are the perfect blend. Your blog gives me the belief that there can be positive change and successful new ventures even in these challenging times. I look forward to the next!

More Help Is on the Way

Anne –

I’m delighted that the blog strikes a chord with you. I also wanted to let you know that Ventureneer will be rolling out FREE Webinars in June to help you determine if you have the right stuff to be an entrepreneur. Not to worry if you don’t have all the traits. I sure didn’t. I’ll talk about ways you can fortify yourself. Ventureneer will also do a FREE webinar on ways to develop ideas for small businesses and how to evaluate their potential. To insure that you receive announcements about these webinars sign up to receive promotional announcements, Vistas or the vewsletter.

Regards,
Geri
 

Reinforcing a key point

Finding opportunities during a downturn is a key point that bears reinforcing whether we are starting up a business, an independent professional or a staffer. Those opportunities may not play out now, but they reap future benefits.

Congratulations on the new blog launch! I look forward the roll out of the rest of Ventureneer.

You Gotta Sow Seeds to Harvest

Janet, great insight! Opportunities aren't limited to entrepreneurs. Freelancers and intrapreneurs are also creative, resoureful and gutsy. Planting seeds now allows anyone to harvest them that much sooner. Geri

Not to mention: 1980: Ted

Not to mention:

1980: Ted Turner launches CNN
1981: IBM PC released
1981: MTV hits the air
1981: American Airlines, Delta Airlines launch frequent-flier programs
1990: Renault introduces the Clio
2001: Apple launches the iPod one month after 9/11

Inspiration Abounds







There are so many wonderful examples of companies, products and marketing initiatives that launched during downturns. Let the stories of these successes inspire you. Steve, thanks for expanding the list.

 

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