Small Business

Laid Off? Start a Business

Be your own boss and thrive -- even in a recession.

By Anne Kates Smith, Senior Associate Editor, Kiplinger's Personal Finance

Jonathan N. Crawford, Researcher-Reporter, the Kiplinger letters

March 4, 2009

Wayne Salk was already thinking that what he'd saved for retirement wasn't enough. But at age 64, he wasn't sure how much longer he wanted to keep his job as a distribution manager for a real estate magazine. "I wanted something of my own," says Salk, who lives in Sebastopol, Cal., near San Francisco. "I had some money set aside, and I'd been looking for a business for some time."

Then, like so many other workers these days, Salk got a nudge in the form of a pink slip. "The door opened and I was pushed out," he says. Now Salk, an avid birder, is scouting a location for a Wild Bird Center franchise. The stores sell seed, feeders and other accessories for backyard bird buffs.

He likes the proven formula of a franchise: He can draw on expertise from the main office and enjoy bulk-buying discounts in exchange for a percentage of his sales. Salk estimates the store will cost $140,000 to $150,000 to set up -- most of his retirement savings and a small inheritance.

Bucking the economy

The midst of a nasty recession may seem like the worst time to start your own business. But history shows plenty of corporate legends, including Microsoft, Genentech and Southwest Airlines, were founded during economic downturns.

By one measure of success -- eventually selling shares to the public -- it makes no difference whether a company is born when the economy is healthy or when it's ailing. And while the credit crunch is making it harder for those without severance or savings to strike out on their own, the recently passed economic stimulus legislation includes a number of measures to loosen the financing logjam.

The odds favor some businesses over others. In its outlook for franchises in 2009, PricewaterhouseCoopers forecasts that the number of establishments will contract by 1.2%, while the number of jobs will shrink 2.1% overall. The jobs outlook is bleakest for automotive businesses, retail food operations, and retail products and services --- each is predicted to lose more than 5% of workers. But fast- food and full-service restaurants will grow in number and log a net increase in employment, and personal services won't suffer much.

Within those broad categories, variations make all the difference. Retailers of luxury goods might struggle, but those that sell necessities or affordable extras -- like, say, a bird feeder for the backyard -- might fare better. George Petrides Jr., vice-president of franchise development for Wild Bird Centers of America, says sales at 80 franchises were up 4% overall last year, and up nearly 20% in January versus January 2008. "That's a minor miracle in retail these days," says Petrides.

Some franchisors are reaching out with incentives. Orlando-based SKYShades, which makes sun shades for homes and businesses, will refund its $75,000 fee if store sales fall short of $1.5 million over three years. Texas-based CiCi's Pizza waives a $25,000 fee for existing CiCi's franchisees who buy another franchise. Wild Bird Centers will take $10,000 off the $23,000 franchise fee and provide $10,000 in financing for store build out in selected markets, including Dallas, Atlanta and the Washington, D.C., metro area.

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