While serving in the U.S. Air Force, Michael J. Brooks Esq., studied business at the University of New Hampshire and Pennsylvania State University, ultimately receiving his undergraduate degree in economics from Rutgers University in New Jersey and his law degree from Ohio Northern University. Today he’s an attorney who advises entrepreneurs how to form and successfully operate small-business models that are powering the nation’s current economic recovery. Having studied economics at three universities—and also having three children, Michael, Megan and Joey, at three different colleges at once—he appreciates the financial challenges currently facing the nation.
His clients range from startups seeking guidance on business formation, to established companies exploring innovations to fuel their growth, to mature family-owned companies planning to transfer the business to the next generation. He also provides advice on buying a business for those starting out or expanding their existing operations and counsels others on selling their business or pursuing other exit strategies.
“It might seem counterintuitive to start a new business during an economic downturn,” says Brooks, who now practices business law in both the state and federal courts of Pennsylvania and New Jersey. “But a slow recovery can be the ideal time for launching a company. In fact, many well-known and successful business ventures were formed in times of economic turbulence.”
This means that even during today’s economic slowdown, it is likely that some of tomorrow’s biggest employers are just getting their start.
“Since 1851, the U.S. economy has been in periods of contraction roughly one-third of the time, says Brooks. “Yet 16 of the blue-chip companies that comprise the Dow 30, including Disney, Alcoa and Johnson & Johnson, were founded during recessions.”
In fact, almost 60 percent of Fortune 500 companies began business in a bear market. Proctor & Gamble survived the panic of 1837, which then was the worst recession in our young nation’s history, while General Electric came out of the economic chaos of 1872, according to Brooks. And just as the United States was slowly pulling itself out of the Great Depression, restaurant owner Ruth Wakefield invented what would eventually become one of the most popular cookies in the world: the Toll House Chocolate Crunch Cookie.
Clearly, there is no shortage of examples of strong companies that defied a weakened economy. McDonald’s Corp. sold its first burger just before the onset of World War II, and Charles Schwab sprouted out of the early 1970s as rampant inflation threatened to get out of control.
“Frederick Smith, while he was a student, wrote an assignment advocating the use of airline routes for package delivery,” Brooks says. “He recognized a growing demand for business documents to be delivered overnight. Surprisingly, he didn’t get high marks for his assignment but stuck with his idea. Years after graduating, in 1973, his idea came to fruition in the midst of a recession. Smith began Federal Express with only 14 planes and did not make a profit until 1975. FedEx now delivers 7.5 million shipments every business day.”
He suggests many more examples from the late 1970s, namely Home Depot and Apple Inc., both of which emerged from the depressive post-Watergate era, when stagflation was choking the U.S. economy. Also, Verizon (which was originally known as Bell Atlantic), Adobe, Compaq and Lotus all withstood the recession of 1982, while the dot-com bust in the early part of this decade did not keep MySpace, Facebook, Twitter and a host of other social-media companies from achieving valuations of more than $1 billion in the span of a few years.
The technology sector is a particularly rich source of inspiration. Bill Hewlett and Dave Packard started their business from a simple garage in Palo Alto, Calif., at the height of the Great Depression in 1939. Steve Wozniak, an electronic hacker, and Steve Jobs were college dropouts when they formed Apple. They developed an idea for a new type of computer and started their business in the dark economic times of 1976 by selling the Apple I to a retailer called The Byte Shop. Apple has since grown into a multibillion-dollar business.
“Successful startups like these evade the cyclical downturns arrayed against startups and turn tidy profits,” Brooks says. “It is not merely innovation; it is viewing the business landscape from the economic vantage point. High unemployment means it is cheaper to attract and retain top talent. Office rents are lower, which lessens overhead, and negotiation with suppliers brings about more favorable terms. Investment money is used more efficiently; there’s much more of an emphasis on operating lean and mean.”
Many businesses that were in their infancy during tough economic times are tremendously successful today. This is because the entrepreneurs who began these businesses started with small companies based on big ideas—and they likely had plenty of help. Brooks suggests every entrepreneur early into his business plan will need assistance from two key professionals: an accountant and an attorney. The reasons for hiring an accountant are fairly obvious—having a professional to help organize a “chart of accounts,” review financials periodically and prepare all necessary federal, state and local tax returns. The reason for hiring a business attorney, however, might not be so apparent.
“Successful business ventures require perspective, from all vantage points,” Brooks says. “We offer you a clear view of the surrounding business landscape from the legal vantage point. This outlook provides insight into legal strategies for business formation, drafting contracts, the hiring process and protection of intellectual property. That amounts to more than just sound legal counsel; it gives our business clients perspective from the legal vantage point.”
Another generation of exceptional high-growth companies will not only emerge from the recent economic meltdown but also perhaps because of it. But you’d better get started now if you want to be among them; the economy just might be recovering.
Jennifer Updike is a freelance writer from New Hope.
