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Starting at the Bottom

Starting at the Bottom

Aug. 1, 2001, was not an auspicious date to launch a business. But Kevin Dowd did start QuantumGraphix, a printing company in Louisville, little more than a month before September 11. As some of his local competitors went out of business in the economic slowdown that followed, Dowd snatched up their customer lists. He trumpeted his technological advantage, a computerized prepress procedure that was faster than older ones most of his competitors used. And he insisted on great customer service. "We were the new kid on the block, and the benefit is you have nothing to lose as long as you put yourself out there," Dowd says. Quantum took two years to turn a profit, but it did survive, and today the 32-person, $5 million company is growing about 20% a year.

Dowd is among those entrepreneurs who've discovered a little secret: An economic downturn can be a great time to start a company. Competitors may go out of business, and the cost of labor may fall as more people are laid off and look for work. Commercial rents may decline, allowing you to score office space at a discount, and marketing and advertising expenses also tend to slide. Moreover, companies that get going in recessions often are in better financial shape than those starting during flush times. "In tougher times, it's harder to get into business," says James Schrager, clinical professor of entrepreneurship and strategic management at University of Chicago School of Business. "Those that do tend to be a little more solid, with perhaps smaller and less volatile capital structures that enable them to weather downturns."