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Starting a Business in a Recession

Topics:Personal Finance

By: Vanessa Richardson, Bankrate.com | 30 Jun 2009 | 12:06 PM ET

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Businessman
Frustrated, recession-battered job hunters are throwing up their hands in despair and saying, "Maybe I should just start my own business."

That last resort may be a great idea.

"Many people think (a) recession is the wrong time to start a business, but that's not always correct," says Edward D. Hess, professor of business administration at the University of Virginia and co-author of "So, You Want to Start a Business? 8 Steps to Take Before Making the Leap."

Don't despair over the news about the bad economy. Plenty of companies started during bad times, including General Electric, Walt Disney, Microsoft and Google. These behemoths were originally started by a few people wondering how to turn a concept into a business.

Here are some tips to help you overcome today's economic obstacles and join these successful ventures.

Do you have what it takes?
According to the Small Business Administration, or SBA, interest in entrepreneurship has spiked, with a 25 percent increase in the number of visits to its Web site so far this year over the same time last year. Before you create that business letterhead, make sure you're cut out to run a business. While entrepreneurship is a great way to work at something you love, it also can be marked by long hours and uncertain paychecks.

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"The biggest question to ask yourself is, 'Can I really commit to doing this?'" says Amy Cosper, editor in chief of Entrepreneur magazine. "Running a business is all-consuming, so you must be honest and determine whether you've got the business plan, the money, the mettle and your family's support."

You also need structure and discipline, says Mark Volchek, co-founder of Higher One, a company in New Haven, Conn., that creates online banking tools for college students. He started the company as a college student 10 years ago, just as the dot-com bubble popped.

"You need to be motivated to work independently. When you're employed, you're given an agenda and guidance but when working for yourself, you must be well-organized," Volchek says.

A good first step is to sign up for small-business training and counseling. The SBA offers courses nationwide through its centers and other business partners, teaching accounting, tax rules, customer service, and public relations. You also can assess your skills beforehand with its readiness assessment tool and online training courses.

A second stop on the entrepreneur-training route is FastTrac, a program financed by the Kauffman Foundation that offers sessions in more than 300 locations nationwide. Like the SBA, FastTrac has revamped courses to help entrepreneurs withstand the recession by teaching them survival skills like creating a solid business plan, understanding market needs and bootstrapping a startup.

"(There's) less of a casual attitude of people coming into our program now," says Monica Doss, FastTrac program director. "They want to see if their idea works, then run with it."

Next: What Do You Have to Offer?

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