Bad Economy, Good Timing: After Downturn Is A Good Time To Start A Business

WASHINGTON (AP) – The best time to start a business may be right after companies crash and burn.

         That's the finding of a researcher at the University of Chicago's Booth School of Business.

         Companies founded from 2009 to 2011 had a nearly 51 percent chance of still being in business five years later, almost 3 percent higher than the average survival of a company for the previous 15 years, according to Waverly Deutsch, a professor of entrepreneurship at Booth. During that same three-year period, which followed the crash of the global financial system and included the worst of the recession, the number of company failures surpassed the number of startups, Deutsch said, relying on census statistics. A total of 211,496 companies shut down.

         "This seems to have left a gap in the market," Deutsch wrote, adding, "So it would seem that right after a market downturn is a good time for entrepreneurs to start new ventures."

         Deutsch noted that the only other period from 2001 to 2016 when businesses' five-year survival rates reached 50 percent was in 2002 and 2003, after the dot-com bust in which thousands of tech and other companies failed.

         Even companies in industries hard-hit by the Great Recession had good five-year survival rates, Deutsch said. Retail companies started in 2011 had a 56.1 percent survival rate, and construction firms had a 50.4 percent rate.

         – by AP Reporter Joyce M. Rosenberg

 

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