Far from being deterred when the financial chips are down, entrepreneurs thrive finding opportunity amid the doom and gloom of recessionary times.

World economic history is replete with examples of entrepreneurs born out of recessions and entrepreneurs who thrived in the toughest of financial times. These would include the famed inventor Thomas Edison, who established General Electric in 1873, amid a recession; Bill Hewlett and Dave Packard, founders of the IT giant, who started selling products out of a garage in 1939 in the Great Depression; and media powerhouses Disney and CNN, which came to life in that era too. The fledgling Wikipedia managed to thrive immediately after 9/11. Apple products have never been so sought-after in the current period when there is a global financial crisis. 

The entrepreneurs behind these companies have something in common: they identified what new needs arose from the ashes of a previous financial era. A well-known example is the creation of many health insurance companies after the Great Depression, and the formation of offshoot industries. If you do a Google search on sunglasses, bubble gum, ballpoint pens and board games, you will notice their success stories began when everybody else had succumbed to doom and gloom.

It seems entrepreneurs are natural problem solvers, whose senses are honed to find opportunity in crises. In recessionary times, conditions are conducive to entrepreneurial ventures excelling, according to Dr Larry Cox, of the Graziado School of Business and Management in California. “Aiding the success of (these) companies are things like cheaper resources and the fact that because entrepreneurial businesses are generally smaller, they have the capacity to adjust quicker to financial pitfalls,” he says. “Often they will learn to leverage what they already have instead of waiting for the economy to turn…”

The success of entrepreneurial ventures in recessionary times can be observed in South Africa too. In his address to the South African Chamber of Commerce and Industry at the end of 2011, Minister of Finance Pravin Gordhan said total early-stage entrepreneurial activity grew from 5.9% in 2009 to 8.9% in 2010. This is despite Gordhan’s assertion that the global economy was in a “dangerous new phase”.

Last year’s winner of the South African Ernst & Young World Entrepreneur Awards, Braam van Huyssteen, founder of affordable-shoe company Tekkie Town, is an example of resilience and resourcefulness in recessionary times. The retail company has 164 outlets, but it was during the period 2008 to 2011 that it thrived, recording a 40% year-on-year growth in sales. Van Huyssteen concurs that the tougher economic conditions provided significant opportunities for his company. “The property development market’s decline (which began) towards the end of 2007, resulted in an oversupply of retail space. Cheaper rentals meant that Tekkie Town could expand its footprint by 80 stores,” he says.

Van Huyssteen notes that South Africa’s tighter credit regulations played in Tekkie Town’s favour: “Our show prices are extremely affordable and customers are able to pay in cash. Moreover, the shoes we sell are considered necessities, so our business remains secure.

“There are other things that meant we thrived during the recession. No matter how big we grow, we hold onto the essence of personal service and customer care. We see every customer who walks through our doors as the only one,” Van Huyssteen says.

He believes that his ambition, passion and the ability to work very hard also contributed to Tekkie Town’s success. “I made sure I surrounded myself with a team of entrepreneurial thinkers. We think business, not business hours!”

Another South African entrepreneurial venture that has made significant strides, despite the economic meltdown, is Bean There Coffee Company. This fair-trade company sources single-origin African coffee directly from small farmers in Ethiopia, Kenya, Rwanda, Tanzania and Burundi. The company recently expanded, launching its Cape Town branch (the original store is in Johannesburg) in what part-owner Hein Koen describes as a “suffering hospitality industry”. “We are doing extremely well, despite the number of local specialty coffee roasters doubling in 2010,” says Koen. So what makes Bean There different, especially as its coffee could be perceived as a luxury product in times of belt tightening?

“I think that the world has had to reassess the way it does business. There is a revived consciousness towards environmentally friendly and ethical business processes. People are starting to ask where their coffee is coming from. The market’s awareness around what constitutes ‘great‘ coffee is growing. We have observed the trend that people will drive a different route to work to make sure they pass a shop selling good coffee. In their homes, they drink fresh locally roasted coffee. That said, you still need a good product at a good price with the service to match to make sure you are successful,” Koen says.

He adds that Bean There’s entrepreneurial success can also be attributed to selling a quality product designed to meet people’s daily needs. “If you sell aspirational waffle and get-rich-quick schemes, you will be found out in the long run. If you sell products that you know people don’t really need, you will be found out in the long run. If you fulfil daily needs or add real value to your clients, you have the ability to keep on selling to the same clients, even during the tough times.”   

Koen advises other potential entrepreneurs to get involved in simple businesses that offer a straightforward product. He also suggests remaining close to the product’s source: “Our coffee beans are ethically and directly sourced in Africa. We travel there, we meet the farmers and we make a positive impact in their lives.  I never want to be involved in businesses that make poor people poorer.”  

Expert in entrepreneurial incubation, Pavlo Phitidis of Aurik, believes that when the going gets tough, it’s the entrepreneurial businesses that tend to survive and thrive. “Larger companies are simply not flexible enough in harsh economic climates. Entrepreneurs seem to be more fluid and passionate about innovation. What’s more, entrepreneurs are savvy when it comes to social networking and staying abreast of trends, whereas larger companies are more conservative in this way, which ultimately hinders their growth,” he says.

Phitidis believes that out of the recession, IT and ‘green’ revolutions have started that will be the main drivers of entrepreneurial activity. As history has revealed, something creative and important always arises out of crises.