Starting a business in a recession

What kind of nutcase launches during a downturn?

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)

Startups defying the downturn
Think you have what it takes to start a business during a recession? These 8 entrepreneurs are giving it a shot, with mixed results.
When do you think the economy will improve?
  • Next year
  • Over the next few months
  • Not for at least a year
  • It's already on the mend
6 companies born during downturns
Think a recession is a bad time to start a company? Imagine if the founders of these major corporations had thought the same...

(Fortune Small Business) -- Would you consider launching or growing a business in the midst of the Great Recession?

Some would applaud your courage; others might think you had a few loose screws. And yet economic downturns have often been fertile ground for innovation and entrepreneurship. More than half the companies on the 2009 Fortune 500 list were launched during downturns, according to recent research by the Kauffman Foundation.

Economists offer many reasons for this phenomenon: Corporate layoffs release entrepreneurial talent, the decline of old industries creates opportunities in new ones, and so on. Still, recessionary entrepreneurship is not an easy game. What does it take, psychologically, to pull it off?

Jim Kremens, 42, runs a New York City-based software startup called Fhtml. His product, Fluid HTML, is a Web markup language designed to be an alternative to standard Flash animation. He plans to exit stealth mode this fall. Although Kremens has secured buzz, startup capital and encouraging responses from top-tier companies, Fhtml's success is not assured, especially in this brutal economy.

"I've been working on this project for a long time," he told me recently. "It evolved into something very real and more powerful than I originally thought. Entrepreneurs like me have to think we've got some kind of game changer. That belief, valid or not, drives innovation."

The impulse toward distinction and accomplishment is very powerful (although its psychological sources are different for everybody). Under the right circumstances it can help entrepreneurs turn inspiration into reality.

If it were that simple, mind you, Edisons and Bells would be a dime a dozen. "This is a high-risk endeavor," Kremens says. "It's frightening to come home to my kids and wonder what I'll do if this doesn't work."

Yet Kremens finds the challenge energizing. Why? Like other pioneering entrepreneurs, he combines ambition, optimism, fortitude, resilience and confidence. At the other end of the spectrum, however, you find entrepreneurs whose personalities prevent them from capitalizing on the opportunities that all economic crises create.

Paul F., 37, owns several high-end fitness centers in the Baltimore-Washington area. (I've changed his name and other identifying details here.) Paul was looking to add locations, as prime real estate was plentiful and affordable and construction costs were low. But his customers -- mostly white-collar professionals -- were cutting back or searching for work. If he built, would they come? Paul couldn't make up his mind, and as a result his expansion plans were going nowhere.

This would be a tough call for any business owner. For Paul, however, there was more to the problem than calculating risk and ROI. A champion high school and college athlete, he felt that the initial leap from sports to business was trivial.

"I train hard and play to win," he told me during our first consultation. "This field just uses different muscles."

Paul had no trouble making tough decisions before the recession. Why was this decision different? The economic crisis brought out the powerful dread of weakness that lurked beneath his muscular bravado. Where did it come from? When Paul was seven years old, his father, a successful Ivy League-educated financier, suffered a debilitating mental breakdown. Feeling sad, betrayed and angry, Paul vowed never to become like his dad.

Problem is, you can't try not to be like somebody (psychoanalysts call this "disidentification") without always keeping that person in mind. When Paul tried to be decisive and powerful, he was actually trying not to feel weak and stuck -- the way he felt when his father collapsed. In sports, relationships and business, that impulse drove him to create artificial crises in which he could make decisions that would help him feel powerful. In this case Paul faced a real economic crisis and a real opportunity, and he didn't know what to do.

This story ends well: Paul mustered the strength to acknowledge his weakness and reach out for professional help. By the way, don't underestimate how hard this is. Confronting unconscious obstacles, then changing patterns and responses, is seriously tough.

My Recommendation: Remember that not all your business to-dos are about doing; understanding why is equally essential. Next time you're at the proverbial crossroads, think about what I'd be asking you: What's really happening here, and why?

Oh, and Paul's fitness center business? He decided to expand.

Alexander Stein, Ph.D., is a practicing psychoanalyst in New York City and a principal in the Boswell Group, a consulting firm.  To top of page

To write a note to the editor about this article, click here.

QMy dream is to launch my own business someday. Now that it's time to choose a major, I'm debating if I should major in entrepreneurial studies or major in engineering to acquire a set of skills first. Is majoring in entrepreneurship a good choice? More
Get Answer
- Spate, Orange, Calif.

More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.