The unemployment rate may be stuck at around nine percent, but for recent college grads, it’s thought to be dramatically higher. Meanwhile, Groupon founder and CEO Andrew Mason became a billionaire—at least on paper--the day his company went public. Put the two together, and it can’t be all that surprising that 54% percent of Americans aged 18 to 34 say they want to start their own company, according to a new survey from the Kauffman Foundation and Young Invincibles.
I’m all for entrepreneurial enthusiasm, no matter who the potential founder is. But it’s discouraging to see many of these young people make a classic mistake before even getting off the ground: They’re letting a poor economy stop them. In the Kauffman study, 38% of respondents cited the economy as the reason they’re not already entrepreneurs.
That’s a lousy excuse. Statistically, an entrepreneur’s odds of success are the same whether he or she starts a company during a boom or during a bust. There are distinct advantages to starting a company during a recession. And there are so many other factors that influence an entrepreneur’s timing—having the time and money to devote to a novel idea, meeting a great co-founder, or spying the opportunity to be the first mover in an exciting a new market—that the current state of the economy is not, in the grand scheme of things, as important as you might think.
If you don’t believe me, take it from Fred Smith, who founded FedEx in 1973, at the start of a two-year recession. Bill Gates and Paul Allen started Microsoft in 1975, when the country was still suffering from stagflation and flat GDP. Ted Turner started CNN in 1980, during the first slide in what was to become known as a ‘double dip’ recession; Steve Jobs rejuvenated Apple in the midst of the dot-com bust.
Entrepreneurs like these, who launch when no one else seems to have the guts, do reap advantages. In a recession, you can hire better people, and pay them less, than you could during a boom. Even if you’re not yet in a position to hire full-time staff, you probably have a lot more negotiating power with freelancers and vendors now than you’ve had in a long time. Rent is cheaper too, whether you’re working out of your apartment, buying time in a commercial kitchen, or renting office space.
Most important, you’ll have fewer competitors in a bad economy. Venture capitalists often say that there are probably four companies chasing every good idea. That’s in a ‘normal’ economy. And if you don’t remember what a boom looks like, let me refresh your memory: During the dot-com bubble, Pets.com, Petstore.com, Petopia.com, Petsmart.com and PetPlanet.com were all competing on price, all selling the same low-margin products with high shipping costs. Does that sound even remotely promising? In a recession, you’re not going to have five well-funded companies chasing the same second-rate idea. Relatively speaking, in an economy like today’s, you’ve got your brainstorm all to yourself.
So if you think the lousy economy is holding you back, think again, and stop making excuses. Take that great idea, and make the most of it.