CONCORD, Mich. — As Perry Weaver fixes problems beneath the hood of a customer's pearl white 1968 Corvette, his biggest worry is the country's financial engine. Opening the repair shop last year after getting laid off by an auto supplier in late 2005 was Weaver's attempt to gain more control over his employment destiny. But like other entrepreneurs these days, he is discovering that being in the driver's seat in a deepening recession carries significant challenges, not least of which is losing customers as they succumb to layoffs or job insecurity.
As employment options dry up, the number of people becoming self-employed sometimes increases during a prolonged recession, as it did in the early 1980s, according to Labor Department data. But that may not happen this time, experts say, because one of the hallmarks of this downturn is a very tight credit market, making it harder for new businesses to get bank loans.
"I've never seen an economy like this one," said Iris Cooper, director of the Entrepreneurship and Small Business Division in the Ohio Department of Development. "This one is different because of the weakness in the financial market."
The number of self-employed Americans fell 3 percent in 2008, Labor Department data show — evidence that many have been forced to close up shop, while others are reluctant to try going it alone. The number reported as self-employed, now slightly more than 10 million, began to drop in late 2007.
At the Weaver Pro Tech auto repair shop, the main challenge lately has been customer retention.
Weaver, who committed his severance package from Lear Corp. and much of his savings to open the business, spent the summer courting potential customers at classic car shows in Michigan, Ohio and Indiana.
But three repair jobs scheduled for this winter have been canceled. One car owner lost his job; two others simply got nervous because of the tumbling stock market and rising unemployment.
"It's a big hit on us guys trying to get started," Weaver said.
New small businesses may fail even in the best economies. To survive in tough times, entrepreneurs must pay closer attention to planning, inventory, budgeting and marketing, the U.S. Small Business Administration says. It says startup businesses fail most often because of insufficient capital, lack of management experience, poor inventory management and lack of initial planning.