Laid-Off Workers Turn to Entrepreneurship

When Lehman Brothers collapsed, Lynn Gray, 60, who had worked at the investment bank as a manager for 11 years, faced a dilemma. Despite her wealth of experience, she could not find another job on Wall Street.

Having severance pay and an idea born from her side job — teaching at New York University — she decided to go out on her own and do on-campus recruiting for companies. She enrolled in a New York City entrepreneurship program, and then launched Campus Scout, an on-campus recruitment and career development company.

“Starting to think on my own was the biggest challenge,” – Gray said.

Like Gray, some of the millions of Americans who lost their jobs in the past three years and have not been able to find new ones have decided to take the initiative and go out on their own. In the first half of 2010, more than one-fourth of newly unemployed workers considered starting their own business, according to CareerBuilder, an online human resources management company.

Tom Hodge, 34, learned about the closing of the General Motors assembly plant in Moraine, Ohio, in which he had worked for 12 years. When the toolmaker realized GM was heading for bankruptcy, he gave up on the possibility of a transfer to another job with the automaker, took a buyout and, with the help of a small-business counselor, started his own business, Absolute CNC Machining. (His counselor was part of SCORE, a nonprofit association that helps Americans start and expand their own businesses.)

“I jumped in full force,” Hodge said. “It was scary.”

With no business history or equipment of his own, he had to plead with potential customers to “give me a chance” and relied on subcontracting to fill orders. Now, he owns a machining shop in Germantown, Ohio, employs three people and plans to hire more to fulfill an increasing number of orders.

Hodge and Gray are “necessity entrepreneurs,” former company employees who had thought about their own business, but had been afraid or reluctant to act on their dreams. They, like other necessity entrepreneurs, may have resorted to entrepreneurship due to a lack of better options.

Experts differ on the prudence of starting a business during tough economic times. Financing, which has been difficult for start-up companies to obtain in normal economic conditions, has gotten even scarcer during the recent financial crisis and recession. Decreases in consumer spending have made it more difficult for new businesses to capture even a small market share.

But others argue that, in tough times, starting a small business, however risky, may offer a better chance of personal success than seeking a regular job. As evidence, they point to such companies as Burger King Corporation, FedEx Corporation, Microsoft Corporation and Starbucks Corporation, which were launched during economic downturns. Many laid-off workers seem to subscribe to this view: In 2009, business start-ups in the United States reached their highest level in 14 years, with 340 out of every 100,000 adults launching companies each month, according to the Kauffman Foundation, a group dedicated to promoting entrepreneurship. A 2008 report from the Kauffman Foundation found “some early evidence that ‘necessity’ entrepreneurship is increasing and ‘opportunity’ entrepreneurship is decreasing.”

In America, it is relatively easy for a budding entrepreneur to launch a company. It takes six days on average (according to the World Bank) to register a company in the United States and go through other formalities. Small-business owners can count on a range of expert services. In addition to SCORE, potential entrepreneurs can turn for advice and training to several other organizations, such as local SBDCs hosted by universities, colleges and state economic development agencies.

Christian Conroy said the number of potential entrepreneurs seeking assistance at 18 development centers in Pennsylvania under his supervision has held relatively steady over the past three years — around 10,000 a year. But because the resources offered by these centers were cut significantly, he sees a trend of increased demand for advice and training.

No matter how helpful SBDC or SCORE counselors are, the entrepreneur himself or herself makes the business a success or failure. That is why Diana Green, 37, a week before the opening of her bakery in West Reading, Pennsylvania, was so busy making marketing calls that she slept barely three hours a night.

Green said she conceived the idea for a bakery when she lost her job at a small wedding-cake shop. Previously, the pastries and cakes she had baked for family and friends had been popular.

Green, Hodge, Gray and some other necessity entrepreneurs say they struggle to keep their businesses afloat. Yet most enjoy the challenges that come with owning a business.

“It’s an amazing experience,” Gray said. “You get up every morning and say to yourself: What can I do differently? What can I do better?”

That is why few think about re-joining the work force when the economy improves and an opportunity arrives.

“I enjoy the freedom to work 18 hours a day or five hours a day,” Green said. “It’s my call, my place, and I can do whatever the heck I want.”

(This is a product of the Bureau of International Information Programs, U.S. Department of State.)

Remote Publishing: Andrzej Zwaniecki Staff Writer

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