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In the worst of times, more entrepreneurs launch dreams, report shows

SACRAMENTO, Calif. — Starting a business is a risky proposition at the best of times. Census figures show that three of 10 new businesses never reach the two-year mark, and half never turn 5 years old.

During a recession, it might seem almost foolhardy. But as unemployment hovers at nearly 9 percent nationwide, more and more people are deciding that the recession is exactly the time to roll the dice and create their own jobs.

Leigh Mastrantonio of Granite Bay, Calif., had been contemplating the idea for some time. She returned to Northern California last fall from Las Vegas — where she had been working in the devastated construction market — and started her home-based management consulting firm, In2Focus.

"I found it was time to strike out on my own," she said. "If not now, when?"

In 2010, Americans created 565,000 businesses a month, according to the Kansas City-based Kauffman Foundation's annual Index of Entrepreneurial Activity, released in March. That was the highest startup rate in 15 years.

The foundation even coined a phrase for the phenomenon: "jobless entrepreneurship."

Hard-hit areas like California and Nevada are among the leaders. For every 100,000 California adults, 470 started businesses last year, trailing only Georgia and Nevada, according to the report.

Sacramento's U.S. Small Business Administration offices are "getting a lot of interest from startups," said district director Jim O'Neal. "We're getting a phenomenal response. Out of necessity, a lot of people are looking to start businesses."

Lynn Armitage, owner of Rockin' Cupcake Cafe in Folsom, Calif., moved back to the Sacramento area in August 2009 after being laid off from an Orange County-based lifestyle magazine.

"You're dispensable. The motivating factor for me was that I was tired of making rich people richer," she said. "I decided I was going to be responsible for my own wealth creation."

She began crafting a business plan in October 2009, working with small-business counselors to polish the idea.

"I had to completely reinvent myself," Armitage said. "There weren't any cupcake shops in Folsom. The cupcake business was growing and I felt the time was right for Folsom to have a cupcake business."

Armitage concedes that entrepreneurship is a stressful enterprise.

"I'm at a physical location, there's a lease I'm paying. It's scary. You hope you're making a product that people will come back for," she said.

In its March index, the Kauffman Foundation noted startups were proliferating, but were not doing much to improve the jobless rate because so many were one-person operations.

Grant Easton, a Folsom adviser for volunteer business counselors SCORE, said that's to be expected in a recession.

"Typically, when you're starting a business, labor is one of the biggest risks you take. Their livelihood becomes your responsibility," he said.

New business owner Jocelyn Munroe said she's likely to fly solo for some time.

Last year, Munroe founded e-Handoff — the firm develops software to help coordinate the care of critically ill patients — after a foray into print publishing in 2007 was waylaid by the recession.

When Munroe received a 2008 request from a doctor at former employer University of California at Davis to rewrite medical software, an idea and a business were born of a familiar theme.

Munroe used her own cash to finance her venture. Today, UC Davis is a main e-Handoff client, and Munroe contracts with a small cadre of programmers locally and overseas.

"I'm looking forward to — and dreading — the time when I have to pay wages," she said.

In the worst of times, more entrepreneurs launch dreams, report shows 04/24/11 [Last modified: Sunday, April 24, 2011 5:30am]

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