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Entrepreneurship as a Safety Net

Posted by: John Tozzi on August 27, 2009

Is entrepreneurship the new safety net? In a viewpoint column this week, Chris Farrell suggests that corporate careers have become more uncertain than ever, and young people are looking to microenterprises for stability.

Corporate loyalty used to work both ways, with loyal employees being rewarded with long-term job security. That model began to fall apart with mass layoffs in the 1970s, Farrell notes. Now that pay cuts and furloughs — once shunned even by corporations laying off workers — have become commonplace, he suggests, workers see less value and stability in corporate careers. Along with bolstering savings, workers are looking to microbusinesses as a hedge against the risk of layoffs or pay cuts:

The other lesson speaks directly to the emerging DIY mindset of the post-meltdown era. Instead of relying on the onetime holy grail of employment—a good-paying job with full benefits—workers may find themselves becoming microentrepreneurs, especially those in creative businesses. For instance, many recent college graduates own their own “independent” music company on a social networking site. Small, entrepreneurial ventures provide another safety net, giving workers a small measure of control over their fate in an increasingly unstable environment.

Adds Dave Ulrich, professor of business at the University of Michigan and a partner at the RBL Group, a consulting firm: “Plan for a career mosaic. Careers used to be linear with stages or steps that people could anticipate. Now they are a mosaic where people move into and out of positions and jobs.”

That mosaic now includes your own microenterprise on the side—just in case.

The barriers to entrepreneurship during this recession are lower than they have been during any prior downturn. If you’re out of work, the opportunity cost of starting a business is diminished. It’s easy to see why some people find entrepreneurship less risky than employment, as counterintuitive as that may sound.

Unfortunately, the country hasn’t caught up with this rising entrepreneurial workforce in a lot of ways. Our tax code and especially our health care system still favor traditional employment over entrepreneurship.

Farrell’s entire column is worth a read.

Reader Comments

Anne Field

August 28, 2009 10:33 AM

Farrell seems to be talking about microentrepreneurship as a sideline, something to fall back on just in case. That sounds like a practical, sound response.

My problem with the accidental entrepreneurship trend is that most people aren't cut out to be entrepreneurs, especially not people who are used to the corporate world. Here's a post I recently wrote:

Domenick Celentano

August 29, 2009 11:39 AM

Reluctant Entrepreneur, Refugee Entrepreneur, Accidental Entrepreneur... they are all terms describing how one finds themselves pointed toward starting their own business due to circumstances beyond their control.

You bring up an very goo point that most people are not cut out to be entrepreneurs... many are Small Business people and many try and fail and go back to being an employee.

The book, The E-Myth, does a great service in outlining the differences between Small Business people and Entrepreneurs.

My take is Entrepreneurs understand the need for Scalability and Replicability of their business model. They also realize that the "technical" skills that may have brought them to their business are NOT what will take them to a larger enterprise... that is understanding finance, marketing and operations. Entrepreneurs generally are abstract thinkers... looking at the big picture, vision and the things that other people cant "see". They are not just in business for a paycheck.

We need both small businesses and entrepreneurs. If more people understood the difference, I believe there would be greater success for both.

Domenick Celentano
Silberman College of Business
Fairleigh Dickinson University

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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