Open a business in a recession? Work is hard; rewards are earned

Starting a business in a tough economy taught Chuck Tanowitz and Todd Van Hoosear the value of time.

They 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.

The duo quickly detemined how to structure conversations 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.

We learned "how to figure out ... the ones who are just tire-kicking," Tanowitz said.

Conventional wisdom says you don't start a business during an economic downturn. In 2007, there were 844,000 start-ups in the United States. By 2009, that number had fallen to 700,000, according the Bureau of Labor Statistics.

But starting a company during bad economic times can be good business. It often teaches entrepreneurs how to run their businesses smarter, as well as reap benefits such as savings on rent, products and services, and access to a better talent pool.

In a downturn, entrepreneurs have to work harder to get and keep customers, said Caroline Daniels, a lecturer at Babson College in Wellesley, Mass.

"When the economy is booming and a lot of resources are around, we get sloppy. We take customers for granted," Daniels said. "In a recessionary period ... we need to get to know our customers better."

Fresh Ground's founders, who had been laid off from their jobs in 2009, flipped some early disppointments into a strategy that is helping them build their business. The firm's revenue has doubled in the last year, according to Tanowitz.

"We knew consciously that coming out of a recession we'd be much stronger, we'd have a good base of clients," he said.

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 - her included - and there was very little hiring going on.

"I didn't realize how bad the recession was going to be - I don't think anyone knew right then," Hamilton said.

Business was tough at first, but she 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 she could send out on temporary jobs and to interviews. And because she was able to pull together a large group of strong temporary workers and job candidates, she developed a good reputation. Since midway into her first year, she said, revenue has climbed 4,000 percent.

The recession also gave Hamilton the opportunity to work with her own staff. Since business was slow, she spent more time on training, doing role-playing exercises and listening to employees as they worked with clients, then giving them feedback.

"When you have crazy times, you don't have time to do that," she said.

For Karen Posniak, the prospect of opening a knitting shop in the aftermath of the recession looked risky. The economy was hard on boutiques that sold designer yarns, knitting and crochet needles, and patterns. Many went out of business as people cut back on hobbies.

But it also meant that there was less competition. So Posniak, a former retail saleswoman and personal shopper, decided to open a 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 in a New Jersey suburb 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 the tough economy brought prices down. The soft real estate market made it easier to negotiate a three-year lease, Posniak said - the landlord originally wanted $3,100 a month.

"I'm just starting out," she said she told him. "Maybe you can help me - can't you give me a better price?"

Posniak ended up with a one-year lease for $2,800 a month, with options to renew for $3,000 in the second year and $3,150 in the third year.