Economists frequently note that people usually do not know they are in a recession until it is over — a trend caused by the lag in measuring economic growth or the lack of it.
Donna Gagnon still needs to be reminded that she launched her corporate meeting setup firm during the eight-month recession of 2001. Perhaps that is why the Queensbury entrepreneur is not hesitating in starting another small business as the nation sinks into what increasingly looks like a recession.
“It’s got nothing to do with the economy. It’s just a matter in which we’re ready as a company,” said Gagnon, a 44-year-old Cohoes native.
Since Gagnon was 15, she has engaged in various forms of theatrical design work, including at Proctors in Schenectady. She last worked as an employee at Adirondack Scenic Studios, then in Glens Falls and now in Argyle. In July 2001, as the nation was reeling from the dot-com bust, Gagnon opened Infotainment Services, whose clients include General Electric Co., Walt Disney Co. and the Rensselaer Polytechnic Institute. As its name suggests, Infotainment helps set up entertaining meetings, utilizing her theatrical background to enliven corporate meetings.
Gagnon believes she has found a near recession-proof business because many clients are required to hold meetings despite the economic climate. And as the current economic downturn topples corporate giants such as investment bank Bear Stearns, other area entrepreneurs are not backing away from enterprises they consider adequately recession-proof.
“There’s not as much to spend, but the events or meetings still have to happen,” said Gagnon.
Gagnon is preparing to launch in the fall an Infotainment spinoff company that will sell a type of do-it-yourself product that will enable companies to better run their own meetings. She declined to reveal the spinoff’s name or further detail its product offerings.
“It’s a good time to get in the market and create a competitive advantage while other people might not because of the increased risk,” said William Brigham, director of the Small Business Development Center at the University at Albany.
Although it is too early to tell whether the United States is in a recession, which technically is a period when the nation experiences two consecutive quarters of negative gross domestic product growth, many economists believe that outcome is inevitable. Federal Reserve Chairman Ben Bernanke two weeks ago told Congress, “A recession is possible.” He added: “We’re slightly growing at the moment, but we think there’s a chance that for the first half as a whole there might be a slight contraction.”
The gloomy economic climate led U.S. companies to cut a quarter of a million jobs during the first quarter of this year. Consumers have been squirming too as gasoline prices edge to near $3.50 per gallon and grocery bills enter their own upward swing.
William “BJ” Johnson, executive director of Union College’s U-Start Business incubator, said, “I haven’t heard anyone say it’s not the right time to get started.” But he acknowledges the economic downturn will make new small businesses’ survival rate even slimmer.
By rule of thumb, Johnson said nine out of 10 startups fail in their first year and for every 10 that survive that first year, only two remain open after five years.
Area entrepreneurial consultants’ optimism has not extended to Main Street. The National Federation of Independent Businesses last week issued its Index of Small Business Optimism, which fell 3.3 points to 89.6. That drop marked the monthly survey’s lowest level since it started in 1986 and the lowest quarterly reading since 1980. The NFIB’s headline for the report was “Recession clouds over Main Street.”
But Robert Remillard sees a silver lining. In 2004, he lost his job at a Schenectady software engineering firm. For three years, he earned a living by repairing computers, doing Web design work and odd jobs, such as grading standardized high school tests. But by July, the Watervliet man had a broad enough customer base to support his White Wolf Computer Repair business full time.
“Even though the economy isn’t that good, people still need their computers fixed,” he said.
He sees White Wolf as by-product of the dot-com bubble’s burst in 2000. He remembers how when he graduated from Siena College in 1999, the local labor market was awash with openings for computer programmers like himself. But demand for that work had largely dried up by the time he got laid off, forcing him to turn to computer repair.
“It was supposed to be temporary, but I found out I had a knack for it,” he said.
White Wolf is based in Remillard’s home, but he plans to move into an office in about two months. Within a year, he plans to employ up to five people. Although he considers his services recession-proof, he is worried how customers will respond if he is forced to raise prices this summer, with gasoline projected to reach $4 per gallon.
“I’ve seen [businesses] going ahead. Maybe not with as much vigor as we’ve seen in the past,” said Janet Tanguay, the program coordinator for the Albany-Colonie Regional Chamber of Commerce’s Entrepreneurial Program.
The economic downturn is forcing entrepreneurs to handle their operations more creatively, either by sharing office space or by honing their sales efforts through market research, Tanguay said. But as entrepreneurs tap the brakes on their business plans, a host of financial institutions and business groups are cheering them forward. This year has seen the start of several startup support initiatives in the Capital Region. The Southern Saratoga Chamber of Commerce and Chamber of Schenectady County have also recently launched startup series.
The Clifton Park-based chamber has long held individual forums on subjects such as how to write a business plan or New York legal requirements for startups. But in January it started a bimonthly seminar series intended to attract people who have been downsized or who are worried about their current employment situation.
“We said, ‘what a great time to focus on these folks and get the word out’, ” Southern Saratoga Chamber President Peter Aust said of the StartupSmart series.
For a second year, Sunmark Federal Credit Union in Schenectady sponsored a Lunch and Learn lecture series, during which Johnson at U-Start offers business advice and insights. Sunmark is expanding its entrepreneurial support efforts by sponsoring a networking series for RPI’s incubator.
KeyBank also joined the startup chorus two weeks ago by opening its first women business owners resource center at a newly renovated branch on Wolf Road in Colonie.
The Key4Women Resource Center provides female entrepreneurs with comfortable spaces where they can meet with bank officials or women advisors from the Small Business Development Center. A second Key4Women Resource Center is scheduled to open at KeyBank’s regional headquarters in downtown Albany.
KeyBank chose Colonie for the first Key4Women center because the region has the nation’s second-highest percentage of women-owned businesses and it ranks fifth in growth among that demographic, said Key Community Bank Chief Administrative Officer Maria Coyne.
When asked whether entrepreneurs should be concerned about starting a business during a recession, Coyne said startups can react quicker to economic downturns than more established companies. She also noted that 16 of the 30 companies listed on the Dow Jones Industrial Average were launched during recessions, include Microsoft Corp. Hewltt-Packard Co. and Walt Disney Co.
“A recession doesn’t help, but it shouldn’t be a factor for not starting it either,” said Schenectady entrepreneur Richard Korszun.
The nation’s 1990-1991 recession did not prevent Korszun, 41, from launching a vending machine supply company. For a dozen years, he stocked area vending machines with snacks, candy and drinks. Poor sales prompted him to close the business in 2003.
In December, he launched a Web site for his latest business pursuit: an online gourmet coffee company that roasts and ships customer’s orders within 24 hours. He has put a private label on the coffee made by the vendor who used to supply his vending machine business. The entrepreneur is waiting for sales to pick up as his Korszun’s Coffee develops a stronger presence on the Internet.
“If you start a business at a bad time, you’re going to reap the positive gains when the economy turns around,” said Korszun.