Recession is a scary word for most people. But if you’re an entrepreneur, recessions can be some of the most lucrative periods in time.
Not everyone hunkers down and starts stockpiling non-perishables. Some people sense opportunity knocking and they find their way to the right doors. Then they capitalize.
The question then is what must you do to be the latter and not the former? When businesses start pinching pennies, how do you make money during a recession?
Here are 6 people who—with either entrepreneurial spirit or investment savvy—have created wealth during major economic downturns and how they’ve done it:
1. Michael J. Cullen, Founder, King Kullen Grocery
Cullen saw the future of groceries in the idea of the supermarket roughly a year after the stock market crashed in 1929.
Cullen began piecing together the idea for what became the first supermarket as early as 1913, but no one would listen to his idea. He pictured a self-service grocery outside of city centers with low prices where customers could find everything they needed in one place.
In a pitch via letter to then Kroger CEO William Albers, Cullen said stores would be able to make $10,000 in sales at a net profit of 2.5%, with some items sold at cost and others sold from 5-15% above cost to generate profit.
But Albers never saw the letter.
Cullen moved to New York and opened the first King Kullen on Aug. 4, 1930, in a vacant garage in Queens. Within seven years, there were 17 King Kullen locations in New York City and Long Island.
2. Scott Boilen, Allstar Products, Snuggie Creator
“One theory is that the Snuggie has caught on because it’s comforting—as if, in these recessionary times, we have become a nation of Linuses,” read a 2009 New York Times Magazine feature on the Snuggie, which began selling like wildfire as an As Seen on TV product.
“There’s been this idea for many years that the As Seen on TV industry was recession-proof. And 2008 was a great year even though the economy took a downturn,” said Thomas Haire, who was then the editor-in-chief of Response Magazine, to Yahoo! Finance.
“The recession has impacted our business in a very positive way,” All-Star Products CEO Scott Boilen also told Yahoo! Finance in 2013.
In its first five years after release, 30 million snuggies had sold for a total of more than $500 million. Not bad for comfort in a recession.
3. Charles Darrow, Inventor of Monopoly Board Game
Charles Darrow became a wealthy man during the worst economic downturn in American history because of the famous game that bankrupts people to the delight of one.
Whether or not Darrow created the game that became Monopoly is definitely up for debate. Lizzie Magie’s Landlord’s Game is relatively similar to Monopoly with a few sobering themes. And it’s likely that Darrow stumbled upon Magie’s version of the game at a friend’s house.
No matter, Monopoly is the game so many know and love because of Darrow’s business acumen.
After the 1929 stock market crash, Darrow was struggling to make ends meet. He developed the game in his spare time and played it with friends, who loved it so much that they asked him to make them versions of it.
He soon was selling copies for $4. Next, he was selling it in Philadelphia department stores. It grew so popular that he tried to sell it to Parker Brothers, who rejected him.
It wasn’t until a friend of the Barton family (which owned Parker Brothers) told them how great the game was that the well-known gaming company saw the potential.
They bought the game from Darrow and offered him royalties. By 1936, 20,000 units were being produced a week.
4. Michael Burry and John Paulson, Hedge Fund Managers
The Big Short, the New York Times bestseller and Academy Award-winning film, focused on several players in the credit default swap market that developed in this century’s first decade.
Michael Burry is a central figure in the film and book. He was one of the first investors to notice that the subprime housing market was a house of cards.
He talked investment firms into selling him credit default swaps against subprime deals. Once the deals failed, Burry’s bets came due.
He personally made $100 million. His firm, Scion Capital, made roughly $700 million.
John Paulson, with more capital at his disposal, caught on to the trend nearly a year later. He made nearly $5 billion in a similar fashion, but for some reason or another, he or a character like him didn’t make it into the Adam McKay film.
5. Warren Buffett, Business Magnate and Investor
“Be fearful when others are greedy. Be greedy when others are fearful.”
Buffett did what you would expect him to do during the Great Recession: He bought stock when everyone was sprinting away from it.
He purchased $8 million in preferred stock from Goldman Sachs and General Electric combined at 10% interest rates. He also bought convertible preferred shares in Swiss Re and Dow Chemical.
By 2011, Buffett had made $10 million from the 2008 financial crisis.
6. David Royce, Owner of Aptive Environmental
David Royce founded Aptive Environmental, an environmentally conscious pest control company, in 2009 amid the American economic downturn. In its first year, Aptive made $3 million.
How? By leaning in while others were fearful, as Buffett suggested. When companies started cutting costs, Royce told Business Insider that he beefed up his marketing, training and recruiting efforts.
“In my case, I found our marketing investment brought in sales numbers that were just as good or even better, likely because other companies panicked and took their foot off the gas. That meant there were more customers for the taking—and more revenues to help us grow our organization while others floundered,” Royce wrote in a Business Insider op-ed in August 2019.
Specific to hiring, Royce wrote: “We picked up some of our very best and brightest managers shortly after the 2008 downturn, so remember to keep your eyes open and invest in new talent to ensure you pick up some of your future all-stars.”
He also got quite flexible with payments for vendors and customers, allowing his business to thrive at a time when many were flailing. By the time the recession ended, Aptive had made $23 million.
Here a few lessons from what these entrepreneurs and business leaders did to increase their wealth during downtimes.
Entrepreneurs should ponder on what consumers need, but also how they can enhance access to goods and lower costs that will directly impact consumers.
In that same respect, be inventive with an eye toward attention-grabbing distractions and comfort items like Monopoly and the Snuggie.
But more than anything, when you sense that businesses and their operators are fearful, move in inverse ways, as Warren Buffett suggests. Invest in the markets. Invest in marketing. And invest in your business itself.