Smart Answers

The Entrepreneurs Born of Recession


All over the country, as unemployment rates climb and worries mount about job security, individuals are looking into entrepreneurship.

Many appear to be starting small, looking into businesses they can run in addition to their day jobs, such as direct-selling, pushcart vending, and online ventures that capitalize on recession realities.

You may remember the Fuller Brush man or the Avon lady, but these days direct-sales firms tend to operate on the "party-plan" model, where sales consultants pitch their wares at neighborhood potlucks or dessert parties. Inquiries from potential independent contractors are way up at direct-seller Shure Pets, a Chicago firm that pushes pet accessories at "pupperware" parties.

CEO Andrew Shure says recruitment of new contractors went up threefold from December 2008 to January 2009, and leads for prospective consultants went up 61% over the same period. The five-year-old firm, which employs fewer than a dozen people full-time, has 2,000 independent sales consultants, 96% of whom are women. In the past, prospective consultants were mothers looking for a side income from a part-time venture with flexible hours, Shure says. These days, calls from prospective sales consultants sometimes carry a tinge of desperation. "Initially people contacted us and said that we had a cute idea, or they were primarily interested in our products. Now, they want to know how can they make money, and how much," he says.

Expect Hard Work

Shure instructs callers to be realistic about income prospects from direct selling. "The average take for a party is $400, and the consultant makes 25%," Shure says. "So they have to have a lot of parties to be successful."

Dennis Moore, owner of Little Jimmy's Italian Ice in Elizabeth, N.J., makes the same point to callers interested in purchasing his firm's pushcarts.

"This is not a get-rich-quick scheme. You physically have to go out and work," Moore says he tells them. Still, interest this winter has risen 15% to 20%, he says, with many new owners looking at the pushcart business as a fall-back plan in case of a job layoff.

More than 200 pushcart owners around the country purchase product from the family-owned, 10-employee Italian ice manufacturing firm his immigrant grandfather founded, Moore says, running their carts as independent businesses.

Test Run

Direct selling can be a low-risk way of testing out full-blown entrepreneurship, giving individuals an idea of how they like selling, whether they are good at it, and how they must manage their time and inventory in order to maximize profit. Another benefit to direct selling, particularly for the unemployed, is that it gets you out in the community.

"If you're out of work, you can become out of touch. Direct selling gives you another point of contact with people," Shure says. "You never know what's going to land in your lap if you're out there meeting people."

Some business ideas involve finding a silver lining among the dark economic clouds. Matt Simmons, a Los Angeles real estate broker, founded LiquidationMob.com last fall after seeing his income fall along with Southern California home sales. The idea came to him after he read about great deals at store closings but couldn't find an online list of local liquidations.

His site, which is in the proof-of-concept stage, posts information on the growing number of retail liquidations in Los Angeles and Orange counties and sells ads to firms going out of business. "I made my first sale within 10 days of the site going live," Simmons says. He gets information on store-closings from his own research and travels, as well as from friends, colleagues, a Twitter feed, and visitors to the site, where about five new subscribers sign up each day. "When someone I don't know sends me some information on a store closing, that's really neat," he says.

Reality Check

Retailers going broke are often reluctant to advertise, both because they're short of cash and they're emotionally attached to their inventory, Simmons says. "I ask them if they have any inventory left and if they'd rather get as much for it as possible, or get pennies on the dollar from a liquidator. That usually erases the common objections," he says.

Simmons says he didn't intend to return to the Internet business—he founded an online I.D. card firm in the 1990s—but he felt the need to "recession-proof" his income with the real estate market falling. "This is a nice way of subsidizing my income: If things are getting tougher, more stores go out of business, and as things get better, then the real estate market goes back up. It's all about diversification," he says.

Rick Probstein didn't have the luxury of looking for supplemental income when he founded TopJobLeads.com in January. His former firm, an employment recruitment agency with five employees, went out of business due to the economy. "Companies no longer were willing to pay money to recruit people," he says. "They're still hiring, but paying a fee became a deal-breaker."

In Business To Help

With increasing numbers of good candidates out of work, he says, he continued to be inundated with job seekers even as his company was closing late last year. He realized that what they most needed was a way to reach those with hiring authority in their chosen fields. "So many unemployed people out there post their rÉsumÉs at all the major job sites, putting in all that effort and energy, but they never hear back. I thought it would be very valuable to give them the direct contact information for the CEO or VP of sales on those jobs," Probstein says.

TopJobLeads interviews job seekers and advises them on where to look for new positions, as well as providing the contacts. Along with starting a new venture, Probstein says, he feels that he's doing some good in a tough time.

"I come from a nonprofit background, so the fact that I'm helping people makes me feel good. When someone was making $125,000 a year and now they're unemployed with two kids, they're in real pain and they don't feel like anybody's in their corner helping them," he says.

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

Karen_klein
Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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