Entrepreneurs try to survive recession

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It used to be that entrepreneurs were mainly eager opportunists, spying their chance to make money in a growing economy. No more.

During this recession, many start-up business owners say they have been pushed into their ventures — because it’s the only way to survive a layoff or job insecurity.

Among them is Joey Escobedo, whose career as a real-estate agent sputtered as home sales plummeted amid a market freefall. So he opened a shaved-ice stand to support his growing family.

“Definitely with the baby coming, I have to get busy and get events going,” said Escobedo, 33, whose girlfriend is pregnant with their third child.

Escobedo had been a mortgage broker for three years before he became a real-estate agent just as the housing market crashed. At first, his deals brought in commissions of $4,000 to $5,000 each month, but when buying slowed, he was earning that much every three or four months.

He pulled from his 401(k) account to support his family. The family also drew on his girlfriend’s income from her job as a cell phone company sales rep.

It wasn’t enough.

So Escobedo spent about $4,000 to launch his own business. Now he’s doing his best to grow, rushing to sign up for events before other similar vendors.

He pays up-front for supplies and stall space — from about $100 to $1,000 for large, multi-day events — without any guarantee of a profit. Some events bring in $700 in profit in one day. He’s lost money on others.

He doesn’t want to do it forever. This reluctant entrepreneur says he hopes to return someday to a full-time job, possibly in real estate.

EXPERT: IT’S EASIER NOW

Recession-driven entrepreneurs face different realities than those who leap into business during good times.

In some respects, they have things easier, said Tim Stearns, director of the Lyles Center for Innovation and Entrepreneurship at California State University, Fresno.

For example, there typically are fewer competitors during recessions, Stearns said. And businesses that do compete are more likely to be focused on survival, rather than investing money to make them more competitive, he said.

Some businesses that started in hard times have been remarkably successful. Microsoft is a notable example. Bill Gates dropped out of Harvard to found his company in 1975, when national unemployment rates were on par with today’s.

But entrepreneurs face extra challenges during recessions, too — particularly as people spend less across the board.

Stearns said that in his experience, the entrepreneurs who do best are those who go into business because they want to, not because they have to.

“They have a stronger commitment,” he said. “They tend to have more passion about their idea. They will last longer in the trials and tribulations of getting the business up.”

But any entrepreneur must be undaunted by the pitfalls and the naysayers, Stearns said.

DRIVEN BY FAMILY
Marty Verhoeven of Hanford, Calif., isn’t about to back down from the challenges of nurturing his new business, Verhoeven Dairy Farm Consulting, which he opened last month. He hopes to pass it down to his children one day.

Verhoeven’s troubles started when he was laid off from a construction job in April 2008. He dabbled in starting his own business, but was hired in June at a small dairy consulting company doing work similar to the business he would start.

By spring his boss was telling him he wasn’t sure how long he could employ him, and the stress was unbearable.

“It just came down to not knowing if I had a job next week, next month,” the 49-year-old said.

Rather than wait to be laid off, he sat down with his family to talk about starting the consulting business.

The Verhoevens knew they’d need to cut back on spending until the business thrived. So with “a lot of prayer” and “a lot of positive attitude,” they decided to go for it, he said.

Now he helps seven dairies obey federal, state and county laws regarding water, air and other environmental concerns. He assists them in filing yearly reports with several agencies and does weekly inspections of the farms.

The business provides the only income for himself, his wife and four children, ages 17, 12, 8 and a 9-month-old baby.

It hasn’t been easy. The family stopped eating fast food, cut back on their car insurance and satellite TV and switched to cheaper cell phone plans. He said his 17-year-old daughter paid for most of her own prom expenses and doesn’t go out as much with friends because it costs money, instead inviting them over or eating just a salad when she dines out with friends.

“It’s a battle,” Verhoeven said. “Competition is tough. But my intent is to hopefully turn this over to the kids when I’m old enough to get away.”

UNEXPECTED NEW ORDER
Even folks who worked for employers that many regarded as stable have now found fresh motivation to try doing something new.

Ayde Mendibles of Clovis, Calif., had worked for Pelco for nearly eight years. The company, one of the central San Joaquin Valley’s largest employers, makes video surveillance and security equipment.

As a wireless communications administrator, she worked 10- to 14-hour days, sometimes taking phone calls at 2 a.m.

She said she thought to herself: “If I’m going to work this hard, I’m going to work this hard for myself, because at any given time they could just lay me off.”

So Mendibles started working on a business idea with her daughter for a medical spa that would be certified “green” and feature everything from laser wrinkle treatments to manicures. She took classes in the evenings and weekends to learn how to write a business plan and got her aesthetician’s license.

She was laid off in December.

“I just had to, out of necessity, go full force with it,” she said.

She’s trying to find a job. But despite her bachelor’s and master’s degrees, Mendibles, 49, says competing against so many other people is difficult.

Opening her own business seems easier, she said. She is getting a lease for a space in Clovis and applying for a microloan to get started. If all goes as planned, she should be open within four months.

For her, the recession has been the kick in the pants she needed to do what she actually wanted to do.

“When do you have time to really follow your dreams?” she said. “Now I’m in a position to do what I want to do.”

(c) 2009, The Fresno Bee (Fresno, Calif.). Source: McClatchy-Tribune Information Services.