It’s no surprise that lots of people have been starting their own businesses while waiting for the recession to subside. They’ve had to; they needed a job. But the new businesses aren’t helping that much. Here’s a story by Darrell Smith of the Sacramento Bee about a Kauffman Foundation report on the issue:
Georgia and Nevada are the nation’s leaders in startup businesses, followed by California, Louisiana and Colorado, according to a new report released this week.
The news is outwardly encouraging. More people hung their shingles and started businesses in 2010 than at any time in more than a decade. But analysts nationwide cautioned that high unemployment numbers are driving the trend, and that it is doing little to improve the jobless rate.
A Kauffman Foundation report released Monday showed that Georgia and Nevada tied for first, with 510 adults per 100,000 creating businesses monthly last year. Louisiana and Colorado completed the top five, the report showed.
The report also showed that 470 of every 100,000 California adults started businesses each month in 2010.
Nationally, the startup rate was the highest in 15 years. Americans created 565,000 businesses a month, according to the Kansas City-based foundation’s annual Index of Entrepreneurial Activity.
Behind the numbers were thousands of out-of-work residents of job-starved states who started businesses to create their own jobs.
Not surprisingly, two of the hardest-hit states in the recession – California and Nevada — sat atop the list.
“They’re trying their hand because they lost their jobs,” Paula Lee, president of the Sacramento Valley chapter of the National Association of Women Business Owners, said of those who started businesses. “It’s re-creating yourself. Unemployment brings that up one more step.”
But startup owners are not bringing new employees into the fold, choosing to fly solo rather than open businesses that employ others.
“Far too many founders are choosing jobless entrepreneurship, preferring to remain self-employed or to avoid assuming the economic responsibility of hiring employees,” said Kauffman Foundation Chief Executive Officer Carl Schramm, in announcing the report.
In a Sacramento area battered by double-digit unemployment, governmental budget woes and the lingering effects of the burst housing bubble, some who’ve lost jobs are choosing self-employment.
“What we’ve typically seen is that the more the recession drags on, more people are looking to other options,” said Kathy Masera, chief executive officer of California Job Journal. Masera has booked franchisers and business counselors for Job Journal’s career events to meet demand from those looking to become self-employed.
She said she’s not surprised that California and Nevada lead Kauffman’s list of business startups, citing both states’ economic struggles.
“They’re so hard-hit that they start thinking of new directions,” Masera said. “They think they can become masters of their own destiny.”
That’s what drives would-be business owners in good times and bad, but at the Sacramento chapter of volunteer business counselors SCORE, chairman Jeff Hendy sees more than entrepreneurial spirit at work.
His counselors are seeing more first-time clients than in past years, but since September, follow-up visits have doubled from about 30 a month to 60 visits, including state and local government workers wearied by furloughs, laid off outright or planning their next moves.
“We’ve seen a tremendous increase in follow-up visits,” Hendy said. “Things aren’t what they used to be, and they’ve determined that this is what they’re going to do.”
With job prospects scarce, some are more willing to venture into the small-business arena, but opening a business comes with its own risks. Seven of every 10 businesses survive two years, but just half last five years, according to the U.S. Census Bureau.
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