Recession, layoffs fuel many to start small businesses

SAN DIEGO -- Inside a freshly renovated building, 27 restaurant trainees scurry around sweeping, shaping dough and cutting 12-inch practice pizza crusts into eight slightly misshapen slices.

"Keep your elbow up" and "Turn your wrist ⅛-inch at the end" are among the slicing tips practicing pizza cutters hear from scrutinizing store managers.

It's 9 a.m. on a Friday in August. The recession that started in December 2007 plods along as businesses continually fold, jobless claims tick up and millions of families desperately try to make mortgage payments and curtail spending.

Yet in this eastern San Diego strip mall, hopes abound.

Here, in three days, the first CiCi's Pizza buffet in California will open. The chain is known for cheap prices, peppy workers and a variety of pizza toppings.

For CiCi's Enterprises and its nearly 650 other restaurants in 32 states, this is an entree into a potentially lucrative market at a time when many of CiCi's expansion plans had to be scuttled because of the economic crisis.

For franchise owners Melissa and Andre Carter, it's a new beginning.

When the restaurant opened to a long line of CiCi's lovers on Aug. 10, the Carters' venture became one of nearly 30 million U.S. small businesses.

In this recession, starting a business from scratch or buying a franchise has been the way out for many. Of job seekers who gained employment in the second quarter of 2009, nearly one in 10 — 8.7% — did so by launching their own businesses, according to outplacement firm Challenger Gray & Christmas' quarterly Job Market Index. That start-up pace is up from 6.4% in the first quarter and is twice the rate reported in Challenger's 2008 second-quarter update.

The business owners nearly all believe they have enough energy and ambition to succeed — but statistics for success aren't on their side. Even in non-recessionary periods, about half will fail in their first five years, according to the Small Business Administration's Office of Advocacy.

From laid off to start-up

Many have become entrepreneurs by force. With 6.9 million jobs lost since December 2007, and work difficult to find, laid-off employees have created consulting firms, launched eBay businesses and signed on with direct-sales firms such as Avon to earn money.

"These are people that two years ago did not aspire to own a business, but circumstances have dictated that they look at freelance opportunities" and other business ventures, says Ken Yancey, CEO of non-profit entrepreneur mentoring group Score.

Not everyone, of course.

Austin-based Tom Nall, 66, had a retirement party from his job as a chili marketer on a Friday, took Saturday and Sunday off and was back working Monday on a new liquor business.

Nall was asked to be a consultant on the early stages of the launch of a tequila company. But instead of just advising, he thought the concept of an all-organic liquor was so enticing that he became a partner and the point person for raising capital. Now CEO, he says he has invested more than $100,000 in the Republic Tequila venture and has raised money from about 25 other investors.

"I think entrepreneurs are going to play a big part into bringing the United States back to economic stability," Nall says.

Small businesses employ a little more than half of all private-sector workers, pay 44% of total U.S. private payroll and have generated 64% of net new jobs over the past 15 years, according to the SBA's Office of Advocacy.