Starting a Small Business in a Bad Economy

Things have been a bit slower than usual over at the Community Business Partnership, a resource for small companies in Springfield, Va. As Barbara Wrigley, an executive at the partnership, guesstimates it, there's been a 10-to-15 percent drop in folks coming in for information about starting new businesses. "I feel like people are being a little more risk averse these days," Wrigley says.

It's a natural reaction given all the scary economic headlines, but slowdowns don't have to be barriers to starting new enterprises, experts say. After all, Bill Gates and Paul Allen didn't wait for the recession to pass before launching Microsoft in 1975. And plenty of would-be entrepreneurs aren't waiting for today's economy to improve either: Of the approximately 3,000 job seekers—mostly managers and executives—surveyed by outplacement firm Challenger, Gray & Christmas, 7.2 percent said they were starting their own business in the first quarter of 2008. Last year's annual average was 8.1 percent. "The bottom line is anytime is the right time [to launch a venture] if the opportunity is correct and if you as the entrepreneur have correctly assessed and shaped the opportunity," says Dennis Ceru, who teaches graduate courses in entrepreneurship and business strategy at Boston University and Babson College.

But depending on your kind of business and location, you could find reductions in costs. Suppliers may cut better deals, rents could be lower, and workers may be more willing to sign on for less. "When times are tough, people don't hold out for higher salaries," says Scott Shane, a professor at Case Western Reserve University and author of The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By. "You could probably hire better people more cheaply starting out now than you could when things were booming."