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STEVE INSKEEP, host:

Okay, the economy may be tough, but some small-business owners say they are tougher.

Peter O'Dowd of member station KJZZ in Phoenix profiles a few hardy entrepreneurs.

PETER O'DOWD: All through the recession, this strip mall in Central Phoenix collected cobwebs. And except for a nail salon and two restaurants, it stood almost entirely empty. Then, this summer, things were looking up. A gym took over as the anchor tenant, but then promptly shut down a month later.

Ms. CLAUDINE DIMITRIOU (Owner, The Beach): That day I had a heart attack.

(Soundbite of laughter)

Ms. DIMITRIOU: That was when I said, oh, my God. That's not positive.

O'DOWD: Claudine Dimitriou had staked her own expanding business on the gym's success. Despite the economy, she's opening her second tanning salon, called The Beach, literally right next door. Her business model revolved around collecting the gym's body-conscience clientele. Dimitriou and the construction crew are forging ahead, anyway.

(Soundbite of construction)

O'DOWD: Dimitriou is picking the salon's color scheme with a paint consultant named Merrilou Peek.

Ms. MERRILOU PEEK (Paint Consultant): You know, for a while everything I saw was closing and closing. And there weren't many people that were actually looking forward to, you know, opening up new businesses. So now that's kind of changing - slowly, but it is changing.

O'DOWD: Opening day at The Beach is October 1st. The good news: another gym is scheduled to move in to replace the failed one. Less comforting, though, is the fact that Dimitriou staked everything on this business - $80,000 for tanning beds, computers and furniture.

Ms. DIMITRIOU: I've taken probably my last bit of what I call my, you know, my safety net and putting it all into this.

O'DOWD: Why take such a risk with the country's unemployment rate near 10 percent, and the economy growing slower than expected? Dimitriou says her existing salon is doing well enough to expand. And as a business owner with 17 years of experience, she says she thrives in difficult situations.

Ms. DIMITRIOU: I'm a very gut-check kind of person. So if I feel it, I do it.

O'DOWD: Dimitriou is not the only one who senses opportunity. According to the Kauffman Foundation, a group that tracks entrepreneurship, Arizona ranked third in 2009 for the highest rate of entrepreneurial activity in the U.S., behind Oklahoma and Montana.

The foundation's Dane Stangler cites Department of Labor statistics that show a slight uptick at the end of last year in the number of newly formed American businesses.

Mr. DANE STANGLER (Research Manager, Kauffman Foundation): Whether you see them as an optimist or wildly deluded, a lot of those business will be the ones that sort of forge our economic future or sort of build the recovery out of this recession.

O'DOWD: Of course, even more businesses are shutting down. Government data show the number of failed firms in March 2009 was 24 percent higher than the same month two years prior.

William Dunkelberg is an economist with the National Federation of Independent Business. His group published a study in August, which tracks the confidence of existing small businesses. The index has never been so low for so long.

Mr. WILLIAM DUNKELBERG (Economist, National Federation of Independent Business): They're pretty pessimistic about the way things look, and they're not about to spend their capital on hiring or on expansion until they're more certain about what the future looks like.

O'DOWD: But don't talk about pessimism with Valarie Shaw and her business partner Holly Hunt.

Ms. HOLLY HUNT (Co-owner, Fleur de Teas): My goodness. That, for desert, is amazing.

Unidentified Man: Oh, that smells wonderful.

Ms. HUNT: Yes.

Unidentified Man: It smells like coco.

O'DOWD: The women are among the new business owners in Arizona that have risked their livelihoods despite the economy.

(Soundbite of scanner and bag rustling)

O'DOWD: Hunt says she raided her entire 401(k) to open this small tea shop in the same complex as the tanning salon. Her family and friends doubted the decision. Shaw took out a second mortgage on her home, and Fleur de Teas opened August 4th.

Ms. VALARIE SHAW (Co-owner, Fleur de Teas): You know, I think people need to have a little courage, because if everybody goes around moaning about the economy, it sort of becomes a self-fulfilling prophecy.

O'DOWD: Shaw admits she's been scared along the way, but to her surprise, business has exceeded expectations. Hunt expects to replenish her 401(k) after just one year in business. And these entrepreneurs have optimistic neighbors. Just across the street, a wine bar is under construction. And next to that, a cupcake store just opened its doors.

For NPR News, I'm Peter O'Dowd, in Phoenix.

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