Strategies: It's a good time to start a business. Really

ByABC News
October 17, 2008, 4:28 AM

— -- OK, you're going to think I'm nuts, but listen up. Because right now is a terrific time to start a new business.

Yes, I am very much aware of what's going on in the economy and the stock market. Yes, I know credit is tight, customers are cautious, the equity in your home is plummeting, and your 401(k) is more like a 201(k). Doesn't seem promising for starting a business, does it? But it is.

History bears me out. When times are bad for the economy, it can be a great time to start a business. In fact, 16 of the 30 companies that make up the Dow industrial average were started during a recession or depression. These include Procter & Gamble, Disney, Alcoa, McDonald's, General Electric and Johnson & Johnson.

Let's take a look at the years 1973-1975. At the time, the United States had an unpopular president, was in the midst of the Watergate scandal and was at the tail end of an extremely costly war that had divided the country. Gas prices jumped by nearly 50% in two years. Consumer confidence dropped to an all-time low.

It was a terrible time to start a business, right? Well, here are just a few of the companies started in those awful years of the early 1970's: Supercuts, Chilis, Cablevision, Industrial Light & Magic, Famous Amos cookies, Oakley and, oh, yes, a small company called Microsoft.

Why? What makes it possible for new companies to thrive when times are so bad? Why can it be a good time to launch out on your own?

First, there's a lower "opportunity cost." In good times, if you already have a safe job or the company down the street is hiring, starting your own business means giving up the opportunity of a good job. There's a cost to that: a salary, health insurance, other benefits.

Of course, if you have a good job or are offered a good job, I'm not telling you to quit to start your business now. But what happens if you lose your job or you're just finishing school and no one's hiring? There's little opportunity cost in hanging up your own shingle rather than staying home and watching a rerun of "The Simpsons" or Oprah.