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Downturns Can Be Fair Weather For Business Liftoffs

| September 21, 2010 | 3 Comments

The official unemployment rate today hovers around 10 percent — far higher if you include those who have given up looking.  Still . . . things have been worse.  The U.S. unemployment rate during the Great Depression reached a high of 25 percent in 1933 and remained above 15 percent through 1940.

Nobody in their right mind would have thought of starting up a business during a rocky, hardscrabble era like that.  Or, would they?  Research business history from October 1929 through 1940.  You’ll find some astonishing, I dare say, uplifting facts:

  • Howard Johnson’s was a single restaurant until 1932.  Through franchising, it was able to add 40 more restaurants by the end of 1936 and had a total of 107 units by 1939.
  • Boeing created the first modern airliner — the 247 — in 1933 at the depth of the Depression.
  • Hewlett-Packard originated in a Palo Alto garage in 1935.
  • Hormel introduced its canned Chili in 1936 and SPAM in 1937 while the Depression was in full swing.
  • The Estée Lauder company came into being in 1935.
  • The Carlson Companies — today a multi-billion-dollar behemoth — was founded in 1938 by Curt Carlson with a $55 loan.

Well and good, you may say, but this was all before the era of information technology.  Remember the face of technology is an ever-changing one.

The world of high-tech audio today may be all about MP-3 and Super Audio CDs.

Back in 1934, while the likes of John Dillinger and Baby Face Nelson were spraying Tommy guns into the banks of Middle America, the Hammond organ was being invented.  This seemingly tame breakthrough revolutionized the sound world from radio broadcasts to church services.

A downturn can spark great things.  I’ve learned more than a few people who lose their jobs in a stalled economy decide to give the “entrepreneurial thing” a shot.  They may end up investing their entire life’s nest egg on a fling.

In 1975, at the end of another serious recession, Roger Schelper and his buddies decided to open what is today Davanni’s — a unique New York-style pizzeria in Minneapolis-St. Paul.

Launching a business, especially in tough times is a high risk play which you should only consider with a cool head, a solid plan and the anticipation you will have to dedicate an incredible amount of personal work and patience.

Here are some of the things Roger learned in his venture that any budding entrepreneur will do well to bear in mind during a downturn or, for that matter, at any time:

  • Research the market carefully.  Your chances often hinge on identifying an attractive, unoccupied market niche — one you have the know-how and raw ingredients to fill with authority.
  • Know the success factors.  In the restaurant business, for example, you could be the greatest chef since Julia Child and still end up chowing down your own leftovers. Running a successful restaurant has a 3-course menu:  Location.  Location.  And location.  Roger’s team zeroed in on a high-density trading area of customers with ideal buying traits, finding an optimum site with the right zoning.  They were cooking with all the right ingredients.
  • Be tight-fisted about raises.  Starting with your own.  Roger clocked 80-90 hour weeks from the get-go.  He gave himself his first raise after the business retired a small loan.  Get this:  This was the first time the business paid him even minimum wage!
  • Do something you love.  “If you don’t, you won’t be able to put in the necessary hours to make the venture work,” Roger notes.

Today Davanni’s has more than 20 pizza shops and a dedicated customer and employee base.  But there’s one other fact worth remembering.  Roger was the kind of guy who was paying his way from the time he was eleven — shoveling snow and mowing lawns throughout the neighborhood while he carried two paper routes.  So, before you make the leap and open that bed-and-breakfast or sink your savings into a digital widget factory, take a long, hard look at your own track record.  Does your past say you really have the makeup to take this kind of a pounding?

Mackay’s Moral: Entrepreneurs who make it are usually born entrepreneurs to start with.

Reprinted with permission from nationally syndicated columnist Harvey Mackay, author of the New York Times #1 bestseller “Swim With The Sharks Without Being Eaten Alive.”

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  • http://www.michaelgholmes.com Mike Holmes

    I like this article. I have read over and over that the investors, entrepreneurs, and businesspeople seem to make their greatest fortune while everyone else is running for the hills. For investors its when people are pulling out and they can pick up investments dirt cheap, for entrepreneurs its starting a venture while everyone is busy looking for a job, and for businesspeople its plowing everything they have into expanding market share while everyone else is just trying to hold their own.

    Thanks for the reminder!

  • Usama

    “I demolish my bridges behind me… then there is no choice but to move forward.” — Fridtjof Nansen
    People tend to live in the past, that’s why they don’t take a step forward. The only thing to take from the pasts is your errors and mistakes.