Last week, a number of articles popped up in relation to some new statistics from The National Bureau of Economic Research declaring that the recession in the United States officially ended in June of last year. Added to this news was that this was the longest recession since World War II. There are a lot of ways to take this news. As usual, I prefer to see what’s good in it for entrepreneurs.
Despite the fact that a lot of businesses suffer during any economic downturn, there’s plenty of evidence that recessions can be good for entrepreneurial innovation. Of the companies listed on last year’s Fortune 500, more than half were founded during a recession or a bear market. And a study by the Kauffman Foundation suggests — counter to what one might expect — that startups grow during recessions while older firms shed jobs.
As economic historian Thomas Kuhn observed, during a crisis people are willing to try out new ideas, even ones they’d previously discarded. A lot of innovation happened during this downturn as individuals turned back to themselves and looked at what they do best. As Oscar Wilde said, “Be yourself; everyone else is already taken.”
Not only did they have the incentive to rediscover that combination of individual talent, passion, and wisdom I call Unique Ability, they were also more inclined to focus on what other people really needed — the core of every lasting innovation. To help them out even more, the breakup of other companies meant that good people, office space, and resources were all available — cheap.
Strategic Coach was founded during an economic downturn. When you start up under those conditions, you have to be really focused on what matters most — what you do uniquely well and what others need the most — because people will only spend money on things that seem genuinely useful and that will have a big return on investment. For someone who knows how to create that kind of value, a recession is a good time.
Many of our clients have had their best years ever during this period. They didn’t lose ground; in fact, a lot of them gained clients from other businesses that were falling apart. Some of this new clientele was made up of people who, under financial strain, had taken a hard look at a product or service they were paying for and decided it was time for something new, better, and different. During “normal” times, they might not have been willing to look for another solution.
In the coming years, I fully expect to see a new wave of really strong companies with their origins in this recession. And because it lasted that much longer, there will be even more of these success stories.