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You are fired. Now what?
Angus Loten,
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July 19, 2007

When Charlotte Dulaney was five months pregnant with her third child, the furthest thing on her mind was launching a business. It was the late 1980s, and Dulaney, a 31-year-old IT manager for an electric subcontractor in Arvada, Colo., was busy enough juggling work and a growing family.

To make matters worse, her daughter had recently suffered a burst appendix, forcing Dulaney to take a month off. Then, weeks before her maternity leave started, she was called into the boss's office -- and was fired for missing too much work.

"I honestly didn't know what I was going to do," Dulaney says. Too pregnant to start looking for a new job, she decided instead to try launching a business at home -- something to do with computers, she figured. "Computers were what I knew, so I thought I'd look into that."

The result was, an early online retailer specializing in gifts for baby showers. The business has since expanding into a 4,000-square-foot warehouse with four full-time employees and was once featured on HBO's Sex in the City.

"It never even dawned on me to run my own business," Dulaney says. "I was out of a job and knew I needed money coming in."

Dulaney's path to success puts her in good company. From Home Depot's Bernie Marcus and Arthur Blank, to media mogul-turned-New York mayor Michael Bloomberg, some of today's most successful entrepreneurs launched their breakthrough businesses only after finding themselves out of work.

And whether it's that extra nudge needed to pursue a long-formulating business idea, or simply the trigger of some latent survival mechanism, pink slips appear to be jump-starting the careers of more and more reluctant entrepreneurs in recent years.

This year alone, the number of job seekers turning to self-employment has climbed by 10.6 percent -- a 29 percent jump from a year ago, according to Challenger, Gray & Christmas, a Chicago-based outplacement firm.

At least part of this sudden increase is the result of a wave of early corporate buyouts, mergers, and acquisitions by private-equity firms, says John Challenger, the firm's CEO. According to the Labor Department, 965 businesses reported layoffs resulting in 139,269 displaced workers during the first quarter of the year. At the same time, 24,865 workers lost their jobs completely to permanent business closures.

The inevitable job shuffling that follows buyouts, mergers, and acquisitions is leaving a high number of skilled employees by the wayside and increasingly wary of corporate job security. Consider that more than 80 percent of first-quarter start-ups this year were led by experienced workers in their 40s, according to Challenger.

"It makes sense that these seasoned veterans might be more jaded about the corporate employment experience and are therefore more likely to turn to self-employment," Challenger says.

Another big driver of self-employment is the underlying strength of the economy.

"The economy, while showing some chinks in its armor, has not slowed to the point of discouraging start-up activity," Challenger says, pointing to weaknesses in the housing market and the automotive sector. "Other areas of the economy appear to be relatively healthy, a fact which has boosted the confidence of would-be entrepreneurs."

For Sastry Rachakonda, the director of Discover's business-card division, these entrepreneurs fall into two camps. The first is made up of highly skilled employees in a particular field -- usually technology -- who want to keep doing what they do best after getting fired or laid off from an employer. Many of today's successful Web 2.0 firms were started by creative young employees who lost their jobs in the late 1990s tech meltdown.

Yet, for all their technical knowledge, many new entrepreneurs in this group don't have the slightest clue about the nuts and bolts of running a business. "The biggest pitfall I've seen with this group is a lack of business skills," Rachakonda says. "They think that because they're great designers, or engineers, or developers, the business will run itself." Usually, these entrepreneurs end up hiring a business manager or going out of business, he adds.

The second group Rachakonda refers to as the dreamers. These are less-skilled employees who either want to pursue a bold business idea or simply want to be their own boss. "People in this group often suffer from a lack of appreciation for the amount of work involved in the day-to-day operations of running a business," he says.

Surprisingly, the failure rates among the first group -- those that have marketable skills -- tend to be higher, he says. "In the end, it comes down to a combination of experience, education, and hard work," Rachakonda says.

Two years ago, Tonya Thomas was an administrative assistant at a bank in Jefferson, Ala., when a merger collectively forced up to 4,000 employees out of work, including herself.

For years, Thomas had long considered the idea of launching an online service that helped smaller businesses with everything from planning special events to creating newsletters and calendars. Using the six months notice given to her and her co-workers by their new corporate bosses, she started putting her plan into action -- from securing a Web domain name to printing business cards.

Today, she runs her site, The Small Office Assistant, from her home, while taking care of her two young children. Despite the extra work involved in being her own boss, she says, it's also allowed her to be more flexible with her time.

"That layoff was a blessing in disguise," Thomas says. "If that had not happened, I would still be working in that bank today. It turned out to be a great opportunity."

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