Harvard Business Publishing

During our interviews with 55 successful business and social entrepreneurs worldwide, we were struck by the fact that many had started their enterprises during a recession or in the wake of one. Prominent examples include Clif Bar, Chipotle, and Hanna Andersson. Several others started their companies (including Cranium and Honest Tea) just before a recession.

Many people assume that entrepreneurs are allergic to recessions. It turns out that downturns can be times of tremendous opportunity--and, yes, profit--for entrepreneurs. But only if they play their cards right.

That's exactly what the founders of Clif Bar, the organic nutrition bar enterprise, and Method, the environmentally friendly cleaning supplies company, did. (Both were recently featured by Inc.com.)

Gary Erickson discovered some real advantages to starting Clif Bar smack in the middle of a recession, like contract manufacturers hungrier for business. As an entrepreneur in start-up mode, Erickson had the luxury of focusing on just a few key things--product development, sales and marketing, packaging, distribution--while his competitors languished in a parade of financial challenges. The result: Clif Bar weathered the storm and this year expects sales of more than $200 million.

Adam Lowry and Eric Ryan launched right into the carnage of the dot-com crash when they started Method. The silver lining was that they received more investor attention after the bubble burst, since competing start-ups were scared off by the economy and Method's business model was decidedly low-tech. According to Ryan, "Starting a business in a recession is like vacationing in the off-season. It's a little less crowded, and everything starts going on sale."

After a while, they racked up $300,000 in debt and were down to their last pennies. Lowry explains: "We had to appeal to the inner entrepreneur of each of our vendors" to float credit. Through aggressive bootstrapping and business development, they managed to raise money, reach their goals, and stay afloat. Today, they're gunning for $100 million in sales. Looking back, they say the recession made Method better. Says Ryan: "The hungriest wolves hunt best."

Of course, the fact that downturns can present opportunities doesn't warrant throwing caution to the wind. Stories in our book reinforce the value of "living lean"--living below our financial means to help us weather the storm when times are tough and to free us up to pursue new opportunities as they arise (good advice for companies and people alike). Telling examples of this practice: Seth Goldman, founder of Honest Tea who drove a beat-up Saturn and shunned cable for years so that he'd be ready when his big idea hit, and Sam Addoms, co-founder of Frontier Airlines who lived lean so he would never face a choice between maintaining his family's lifestyle and cutting corners at work.

The bottom line: a downturn presents many unforeseen opportunities. Entrepreneurs view financial challenges and, instead of wringing their hands, find ways to innovate and spin them into gold (or social transformation). It doesn't hurt that entrepreneurs are used to being nimble, responding quickly to market shifts, and managing cash flow.

It turns out that entrepreneurship doesn't require some magical, risk-seeking personality. In fact, the risk profiles of entrepreneurs vary widely. What sets them apart is that they are willing to take big risks in pursuit of a promising idea or worthy cause--and they're adept at managing risks even with dark clouds overhead.

We've experienced the upside of a recession ourselves. SMARTHINKING, which Christopher co-founded, and K12 Inc., which Gregg helped to launch and build, were both online education companies starting up during the dot-com crash, asking much of their entrepreneurial teams. Both companies are still thriving even in today's downturn.

See the Complete Downturn Survival Guide