Why are Americans leaving good jobs to go solo?
Andrea Tovar quit a job in the fashion industry in New York to pursue her dream of baking dog cookies for a living
Unwilling to put their careers in the hands of others, some Americans are quitting good jobs to start their own businesses - despite the high unemployment rate. In the first in a new series about creating jobs, the spotlight is on this surprising trend.
Ryan Wertman was one of the lucky ones.
A 2007 law school graduate, he had landed a job with a corporate firm in Philadelphia. At a time when unemployment numbers remained high, he was making good money, earning solid benefits, and on track for a partner position.
Then the economy crashed, and everything changed.
He wasn't fired, or downsized, or otherwise forced to start his own shop. Instead, disillusioned with corporate culture, he left his cushy job to start out on his own practice - a one-man firm offering legal services to other small businesses.
"Working for a big company and moving up the ranks didn't seem like an attractive prize anymore," Mr Wertman says. "Having lived through the 2007, 2008, 2009 era, you realise that working for the big company wasn't the most stable option or the least risky one."
He's not the only one who feels this way.
Seeking stability
As the Senate prepares to vote on President Obama's jobs act, the US unemployment rate remains high at 9.1%.
Little and loving it: the truth about small businesses
- 97% - proportion of new businesses that added 10 employees or fewer from 2004-2008
- 19.2% offer something completely new to the marketplace
- 10% plan to develop proprietary technologies, processes, or procedures
- 80% have no plans for research and development
- 72% of profitable small businesses after five years that wish to keep their businesses small
Source: Erik Hurst and Benjamin Wild Pugsley at the University of Chicago
Meanwhile, the number of new businesses is growing at the fastest rate in 15 years, according to the entrepreneurial and educational research group the Kauffman Foundation.
Unemployment, however, has never been a huge motivator for entrepreneurship. Only a quarter of small business creators come from "some period of unemployment," says Erik Hurst, a professor of economics at the University of Chicago.
"When you ask people whether they started their business because they couldn't find any other jobs, you don't see a lot of that in the US," he says.
Throughout the 2000s, only 4% of new business owners listed "lack of employment options" as a motivator. While that number can fluctuate depending on the economy, it still represents just a small portion of new businesses created.
In many cases, those with good jobs who are concerned about the future or eager to leave the corporate world are the ones motivated to start their own venture.
While the possibility of leaving a proper job in this economy sounds risky, it's often anything but.
“Start Quote
Ryan Wertman Lawyer, small business ownerIt's the lifestyle and freedom that's most appealing. There's not really a comparable path working for a big firm”
For one, those who already have somewhat stable jobs are more likely to have the skills, the education, the connections, and the resources needed to start their own business.
More importantly, being one's own boss creates a measure of security currently lacking in the corporate world.
"People who start businesses look at all their options and they say they would be crazy to take any option besides this one," says Penelope Trunk, founder of the Brazen Careerist, a career management site for young professionals.
"There are no stable jobs anymore. Entrepreneurship is like creating a safety net."
'Midnight CEOs'Because most job-starters are security-minded, it makes sense that they would plan their new company while logging time at the old one.
"It's a good way to start," says Amy Cosper, editor-in-chief of Entrepreneur Magazine, which devoted its October cover to starting a business during the recession. "You have a little bit of your own protection and a little bit of your own cover. There are a lot of midnight CEOs."
Starting Out: Tara's Story
I was the VP and creative director of an ad agency here in Oklahoma City. I worked there my whole life. I was very loyal, and rewarded justly for what I did, creatively and otherwise.
But in the past one or two years, I started recognising that my talent wasn't just a commodity, it wasn't a thing separate from me. I want to hitch my own star to my own wagon.
Another eye-opener for me was my sister, who is also my business partner. She was [self-employed], and I had seen her use her blog to cultivate a following that respected her work but related to her as a person. Seeing how she was able to do it, I was saying, Why don't I?
She really said: "Come on in, the water's fine," so I took the plunge - knowing that when we work together, it's more than one plus one equals two. It equals six.
-Tara Street, co-founder, Braid Creative
That also explains another trend analysts are seeing: the new companies created aren't based around wildly new ideas or products.
They're filling a need that already exists, just on a smaller scale. In other words, people are leaving their current jobs to do the same work they already do - but are doing it on their own terms.
Michael Pazyniak, a corporate events planner, started his own company this month after working in the field for over a decade. "I had been doing something very similar, but I wanted to align all the best practices I had learned over the past 10 years," he says.
He was finally motivated to break away when he realised his career was safer in his own hands than those of his bosses.
"Between 2007 and 2008, when things first really took a downturn, the current leadership of the company reacted differently than younger people would react, clung to more traditional ways of generating business," he says.
Ideas for innovation and growth were stifled by a corporate structure that feared change during the uncertain economy, a reaction Mr Pazyniak considered shortsighted and dangerous.
His new company, Lighthouse Creative Works, is incredibly similar to his old job - including working with some of the same clients. But now he calls the shots.
Modest goalsMr Pazyniak also has an employee, which makes him a rarity in today's age of new business creation. Most of the business creation of late has been what the Kauffman Foundation calls "jobless entrepreneurship", meaning new businesses aren't hiring.
That, combined with the fact that these jobs aren't innovating, are bad news to politicians and wonks who are pushing small-business stimulation as a way to create more jobs. While these jobless entrepreneurs are creating one new job (the one that their employers need to fill once they leave), they don't tend to have a multiplier effect.
These entrepreneurs aren't looking to be the next Google or Groupon. They just want to earn a living and have some job security.
"My goal is to hit a certain income level and stay there - to make the same as a corporate lawyer for less work," says Mr Wertman.
For economists, that sounds like a nightmare. But for Ryan Wertman, it's a dream come true.
"I can go for a run or play golf and no one will look at me funny," says Mr Wertman. "To me, it's the lifestyle and freedom that's most appealing. There's not really a comparable path working for a big firm."
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