RELATED: Better businesses for worse times

"It's always a good time to start a business as long as it's a good business," said Frank Franzak, chairman of the marketing department at Virginia Commonwealth University.

What businesses are good to start or operate in a slow economy? Debt collectors, employment agencies, security firms and health-care suppliers are among them, according to LegalZoom.com Inc., the California-based online legal documents service that keeps a pulse on a variety of business and consumer topics.

The reason: Those types of businesses offer something that consumers need.

Another good venture to consider in a sluggish economy is a business-to-business consultancy, said Mike Leonard, director of the Small Business Development Center in Richmond.

Entrepreneurs who can go in and make businesses more efficient and help them save costs likely will find success during slow times, he said.

For instance, Inmatrix Inc. sells companies computer software programs that predict the outcome of proposed business decisions before the owner commits time, money and human resources.

That type of consulting is "definitely a good recession business because the financial advisers that we serve on a worldwide basis are constantly helping the clients they serve deal with recessionary times," said Roger Pell, senior vice president of the San Francisco-based company that recently opened an office in Richmond.

Even when the economy hits rock bottom, people still start businesses at the same rate or higher than at other times, Leonard said.

During the roaring economic times of the late 1990s, 21,270 businesses started up in Virginia in 1999 and 22,219 started in 2000, according to statistics from the SBA Office of Advocacy. During the 2001-2002 recession, 21,376 businesses got started in 2001 and 21,438 started in 2002.

Many people remain optimistic about starting or expanding a business now, said Will Vehrs, spokesman for the Virginia Department of Business Assistance.

Interest in the agency's programs, and the people streaming into or calling its business information center have not flagged, he said.

"If anything, people seem to be getting better prepared and asking better questions," he said. "We've been under the impression that it's still a good time to start a business."

The key to success for any small business regardless of when the company begins or what the firm does is planning and having a good business plan, said Scott Dailey, assistant district director for lender relations at the U.S. Small Business Administration in Richmond.

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Starting a business in a slow economy has its challenges and advantages.

Banks and other financial institutions have tightened up their lending requirements.

Banks want to see a good, strong credit history, a sound business model and a business plan that's been tested in the local market, said David Camden, regional president for Wachovia Bank's Central Virginia region.

They also want to know that loan applicants have a clear sense of how much capital they are going to need and that they've sought advice from professional advisers including a lawyer, certified public accountant and banker.

If new-business owners plan on tapping the equity in their home to help finance the company, they must take into consideration that the value of their home may be lower in this market, Camden said. They may have to find other sources of capital.

"Starting a business in tough times like these, you've got to have some dollars to throw at it," said Leonard from the Small Business Development Center. "It's not the time to take a high-risk endeavor and expect to get it funded. You've got to start with some good financial backing."

When times are tough, start-up costs are often cheaper, said Brad Sugars, chairman and chief executive officer of ActionCOACH in Las Vegas, an international coaching business.

Someone going into business can negotiate a better deal on office furniture, for example, because retailers are hurting for sales.

A few years ago, getting good employees may have meant stealing them from someone else, paying a lot of money for them, or looking for talent far away, he said.

In this economy, with its many corporate downsizings, "better employees are available right now."

Office space may cost less to buy or lease, too.

"A soft real estate market can provide opportunities that would not be there in a good market," SBA's Dailey said.
Contact Iris Taylor at (804) 649-6349 or itaylor@timesdispatch.com.