The Entrepreneurs Born of Recession

From direct selling to online ventures, the downturn is spurring Americans to find creative ways to supplement or replace their incomes

By Karen E. Klein

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.