Recession tales: Entrepreneurs shoot up when economy dives
Enter recession, pink slips and voila your ticket to be your own boss.
Unemployed folks are taking the leap of faith and investing their time, energy and resources into entrepreneurial ventures. Yes, believe it or not, new entrepreneurs are on the upswing in this downward spiraling economy. While some took that layoff as an excuse, many are jump starting new ventures out of necessity.
Last year, the hemorrhaging economy cost 2.6 -million jobs, the highest tally in more than six decades. The bloodletting hasn't stopped yet. But laid off employees are moving on. They are providing that silver lining to an otherwise gloomy environment.
When the economy struggles the number of employer firms decline, but the churning rate for firms with no paid employees climb up, said Brian Headd, an Office of Advocacy economist in a phone interview. Those numbers though never go through the roof or through the floor, Headd said.
The Office of Advocacy estimates that the number of non-employer firms jumped 8.1% over 2007 in 2008, compared to the 2% to 3% increases in the late 1990s when the economy was brimming with optimism.
The phenomenon is not surprising, experts say. In the last two recessions, more small businesses sprang up than shut down, according to data from the Small Business Administration. During the difficult period of 1990 to 1992, 1,599,524 small businesses closed shop, while 1,670,629 sprang up -- a gain of 71,105 businesses. The same trend repeated in 2001.
A July report by Challenger, Gray & Christmas Inc. show that 8.7% of job seekers in the second quarter found employment by starting their own gig. Those numbers are remarkable considering that credit is hard to come by. But that's not bogging down budding entrepreneurs.
In 2002, 12% of employer firms and 34% of non employee businesses started without using any start up capital, Headd from the SBA said. Only 27% of employee firms and 9% of non employee firm started with a bank loan.
Christie Belle, a 37-year-old Indianapolis native, decided to start out on her own recently. In July, Belle lost her job as a full-time massage therapist at a chiropractor's office, and started a massage business at home, while stitching costumes in her spare time.
Although marketing is still by word of mouth she is already shipping burlesque costumes to Ohio and Illinois. As of now she is showing no signs of seeking employment when the economy comes back on track.
"I really hope the business does well," she said in a phone interview. "I never had any luck working for other people."