Is the recession killing or reviving entrepreneurship?

Recessions have historically enlivened entrepreneurship, but the cascade of failing companies in the last two quarters has some would-be risk-takers wondering if the time is right to start a business.

While there's no way yet to know whether the destabilized economy has done more to damage entrepreneurial efforts or stimulate startups, those who decide to become their own bosses may seek assistance to improve their chances of success. But today's economic realities do present at least a few unique challenges.

Weak consumer spending and restricted access to capital are among the obstacles first-time entrepreneurs will likely encounter, but innovators shouldn't let that stop them, said Dawn Hiles, CEO of the Edward Jones Center for Entrepreneurship and Innovation at Drury University.

"Those are not good things for an entrepreneur; however, a good idea is a good idea," she said. "And we've seen a number of people who've gotten capital for entrepreneurial adventures they're wanting to start or expand right now. So the money is out there. It's not flowing as freely as it was before, but it is there."

Some of the country's largest and more successful businesses were born in recessions or bear markets, according to the Ewing Marion Kauffman Foundation, a Kansas City-based private nonprofit organization devoted to entrepreneurship. The list includes hometown company O'Reilly Auto Parts and St. Louis-based corporations Scottrade and Enterprise Rent-A-Car.

"In certain metrics of the economy, you have to go back to the (Great) Depression," said Thom Ruhe, the Kauffman Foundation's director of entrepreneurship. "So if you can launch something now and survive, chances are you're far more bulletproof than you might be when times are fat and sassy."

Up, down or steady?

The number of new Missouri businesses in 2008 was down just slightly compared to 2007, according to the Missouri Economic Research and Information Center.

Missouri had 14,259 new business formations last year, compared to 14,842 the year before, according to recently released MERIC data. The last time new business formations dipped was in 2006, when the number dropped to 14,513 from nearly 16,000 in 2005.

New businesses were created in all of Missouri's 114 counties in 2008, but the five counties with the highest number of new business formations were St. Louis with 2,068, Jackson with 1,429, St. Charles with 632, Greene with 605 and Clay with 363. St. Louis City saw the arrival of 621 new businesses in 2008.

Greene County had 2.3 new businesses for every 1,000 people in 2008, as did neighboring Christian County.

Taney County was the most entrepreneurial in the region with 3.9 businesses per 1,000 people, which is well above the statewide average of 2.4 businesses for every 1,000 people.

According to MERIC, business formation tends to be highest in densely populated urban areas.

U.S. Bureau of Labor Statistics data suggest self-employment levels during the past decade have remained steady at about 10 percent of the nonagricultural work force; more than 6 percent are unincorporated companies while about 4 percent are incorporated, according to BLS.

SCORE counselor John Fleming said the level of interest in entrepreneurship hasn't changed significantly in the past year, although he noted January was a particularly busy month for the Springfield chapter, which is affiliated with the U.S. Small Business Administration. He said there continues to be a steady stream of independent personalities tired of working for someone else.

"I think the interest in starting a business is about normal," Fleming said. "You would think it would be more connected to economy, but I don't see that. It's as good a time as any to start a business right now."

Anecdotally speaking

Dan Vega doesn't think he'll have any problem filling classes for his newly formed Blue Star Business Institute, which this month began offering five-day courses aimed at assisting aspiring entrepreneurs able to afford the $5,000 tuition.

Vega, CEO of Springfield-based Vega Group International, recently returned to the Ozarks from Los Angeles to launch Blue Star, which he said aims to get its services into employee-severance packages offered by downsizing corporations on the coasts. He's pitching the idea to large human resource departments as well as locals looking to strike out on their own.

"In chaos, there's always opportunity," Vega said of the economic landscape. "But I think there are a lot of people suffering from what I call paralysis by over-analysis."

Upfront costs associated with launching a new business can be daunting, but there's always money available for moneymaking ideas, Vega said, pointing to angel investors and grants as viable options.

Hiles at Drury's Edward Jones Center said a women's entrepreneurship symposium at the university in January was well attended, and that more people - many of them jobless or worried about job security - seem to be contemplating entrepreneurial endeavors.

And while economic conditions may have changed, the fundamentals of forming a business and running it well remain the same, starting with a feasibility study, Hiles said.

"Ask yourself difficult questions," she said. "What is it going to take to run this business? And what can I expect to get as a return?"

If the business is a go, Hiles offered one more bit of advice for guarding against the next inevitable economic trough.

"The companies that are doing well are companies that didn't expect the market to continue to grow at 10 percent indefinitely," she said. "They were planning for contingencies. ... It's something that isn't fun to do, but it's certainly necessary."[[In-content Ad]]