REBECCA ROBERTS, host: This is TALK OF THE NATION. I'm Rebecca Roberts, in Washington. Neal Conan is away. As we heard in the newscast, rebels in Libya continue to claim more ground in the capital of Tripoli. There's still no sign of Moammar Gadhafi. If there's more news, we will update you as it happens. And later in the hour, we'll talk with NPR senior foreign editor Loren Jenkins about what's changed in Libya in the past few hours.
But first, millions of Americans are out of work, from baby boomers laid off as they neared retirement to young graduates who can't land that first job in their field. Losing a job, or not being able to find one, is almost always a blow. But over the past several years, some have seen that pink slip as an opportunity to try out being their own boss - starting that food stall, or launching the online start-up they've always dreamed about.
Even in boom times, starting a new business is risky, and new business owners with the best-laid plans can stumble on unexpected pitfalls along the way. But for those who succeed, creating your own job can be the best revenge for losing one.
If you have started a new business in the past few years, what lessons did you learn, and what didn't you expect? Tell us your story. Our number is 800-989-8255. Our email address is email@example.com. And you can join the conversation at our website. Go to npr.org, and click on TALK OF THE NATION.
Later in the program, we'll talk with longtime Atlanta Journal-Constitution columnist, and frequent TALK OF THE NATION guest, Cynthia Tucker about her new career path. But first, entrepreneurship in tough economic times.
Joining us now is Sarah Needleman. She's editor and reporter for the Wall Street Journal's small-business section, and writes the column "The Accidental Entrepreneur." She's with us today from her office in New York. Welcome to TALK OF THE NATION.
SARAH NEEDLEMAN: Hi, how are you?
ROBERTS: So in very broad strokes, what sort of people are starting businesses in this environment?
NEEDLEMAN: Well, I mean, there are a lot of folks who have been laid off, naturally, finding the need to start a business because they can't find another job. There are folks whose jobs were downsized, meaning they saw the number of hours they were allowed to work has diminished, or their salaries were reduced.
And then there are folks who maybe had been retired but are coming out of retirement because their savings maybe suffered losses during the stock market crash. They may just have had a lot of investments in stocks, and saw that dwindle. So they're coming out of retirement.
Or they're putting off retirement. And it's very hard for older folks, in particular, to land jobs. So they're finding that starting a business is the best alternative.
ROBERTS: And are there common themes of the types of businesses they're starting?
NEEDLEMAN: I'd say we hear a lot about folks starting businesses they could do from home. I apologize for that sound in the background. We are getting some news reports here about the earthquake in the city.
ROBERTS: Yeah, we are certainly feeling it here in Washington, too, and if the studio starts shaking again, you'll be hearing it from our end as well.
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ROBERTS: It's a reported 5.8 magnitude earthquake that - the epicenter was in Mineral, Virginia, 90 miles south of D.C. If there are aftershakes or continued news about that, we will update it as you go along. But in the meantime, we'll try to muscle on through here. I'm sure our listeners on the West Coast think we're complete amateurs about a little 5.8.
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ROBERTS: So when these people are starting new businesses of various kinds, are there sort of regular pitfalls that people run into? Are there common stumbling blocks?
NEEDLEMAN: Sure. Well, some of the common ones would be just not planning ahead, and they find out that they're entering a market that perhaps is already crowded. They don't anticipate the amount of start-up costs they'll need, or they invest money in areas that maybe aren't that important in the beginning but may seem as such.
So they may go out and first thing is build a website or get business cards, and you don't necessarily need to do those things right off the bat, and that could put you in a position where you're short on cash for things you might really need, such as marketing or advertising funds.
So you really need to prioritize if you have limited capital, and a lot of folks go out there and quickly spend money on things that they don't necessarily need right in the beginning, or they go after a target market that's already crowded, or they spend too much time futzing on things like the name of their business, and they really need to focus on building clientele.
So there are a number of different pitfalls or poor choices that people make early on because they don't have experience in this area, and they're eager to get up and running. And it's certainly important to get moving quickly, but some of the decisions you make early on can be vital to your success down the road. So you need to be very careful, and think about how you spend every penny.
ROBERTS: Well, speaking of capital, it's one thing if you've got sort of a severance package from a well-funded company, and you decide this is my, you know, nest egg, this is what I'm going to spend in starting my dream business.
It's another if you've been out of work for a while. You may be down to the end of your savings already, and you need some capital to get this idea off the ground. What are your options?
NEEDLEMAN: Well, for a lot of people, friends and family are the first stop. So they'll borrow money from people they know, but of course there are pitfalls that come with that. Certainly, well, people get funny about money, and if you're borrowing money from relatives, and then you see them at the holiday dinner table and your business isn't going so well and you don't think you can pay them back, that could - at least not when you anticipated - that could run into some problems.
ROBERTS: Right, pass the gravy and my $5,000, please.
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NEEDLEMAN: Right. So that can be tricky. Some folks, you know, seek out bank loans but in this economy, that's become very difficult because the banks are being very cautious about who they lend to. They're requiring more collateral up front, and people don't have home equity to turn to anymore, in many cases.
So there are - banks are still lending money. They are doing it, but it is much harder to get a loan than it used to be. Some other folks are turning to credit cards, and they're funding their businesses that way. And then some are doing alternative resources like merchant cash advances or factoring. And these are all, you know, viable options that could work.
You really need to research it. It depends on your financial situation. It depends on the type of business you're looking to start up and of course, how much money you need to start up. Some folks are buying established businesses, and instead of taking out loans from the bank, they're actually borrowing money from the seller. So the seller has agreed to finance part of the deal. And that's helped a lot of folks get started.
And also prices - businesses are selling for a lot less than they used to. So some folks are actually finding it easier to buy an established business rather than start something from scratch. But again, it all depends on your financial situation. It may depend on your location and the different options available to you.
ROBERTS: Let's hear from Gaye(ph) in Dayton, Ohio. Welcome to TALK OF THE NATION, Gaye.
GAYE: Hi, thanks for letting me talk. I appreciate that. Yeah, I actually have had kind of a unique experience with this, where I was laid off from my job two years ago. And then what I decided to do, I'd been essentially working as an administrative assistant, and, you know, after two years of not finding a job and not getting responses and - you know, in Dayton jobs are in real bad - we're in desperate need of them here - I got to a point where I was not valuing the skills that I have.
And I happened into a networking group called Women In Business Networking, here in Dayton. And all of a sudden, I was surrounded by women who thought what I did was fantastic. They appreciated what I could do. I started kind of helping out with different things. And then I threw out the idea: Well, what if - would you be willing to hire someone part time? You know, these - a lot of women that own their own businesses, you know, it's a one- or a two-person shop, and they don't have the need for a full-time assistant. But they have big projects, they have PowerPoint presentations, database work that needs done.
And so what I'm doing now is, I'm contracting my services out in a whole new way than I ever thought I could ever do, and it started because I found a group of people - a group of women, it happened to be - that were supportive and said yeah, we'll - that's great. And then they have hired me, started helping me out with doing that. So that's kind of helped me get my foundation out there.
But the problem has been, again, you were just talking about the money. You know, there's - you know, to do the marketing, to join the Chambers of Commerce, to get out into those networking groups is ridiculously expensive.
ROBERTS: And presumably, Gaye, you've also given up benefits and some other things...
GAYE: Oh, absolutely, absolutely. And you know, the unemployment's run out, all of those things. So you know, you - I mean, I'm very, very - unbelievably fortunate to have the family that I do, that are kind of helping me out, giving me a place to stay. I have a cousin who's giving me office space, and I helped him out with occasional projects. But I have very low overhead. I have a laptop and a printer, and pretty much I go where I need to go.
ROBERTS: Yeah. Gaye, thank you for your call.
GAYE: So that's made it easier.
ROBERTS: Yeah. So this is the idea of taking the skills you used in your previous job and sort of becoming a freelancer with them, which can work if you get enough work. Sarah Needleman?
NEEDLEMAN: Right. Well, there are a number of sites, websites out there that cater to folks in a similar situation. So you've got Elance, you've got oDesk, and these are sites that help match freelancers with employers that need temporary work done or contract And a lot of freelancers who are running their own one-person business do find opportunities this way. And networking, as the caller said, is indeed - just like who you know helps you get a job, who you know helps you get business for your start-up.
A good way, also, to get some of those first few clients is to do some volunteer work because if you don't have any past experience to point to, if you don't have a website or business card that says I've done work before, if you don't have any testimonials, offering to do some work for a nonprofit, or for another type of start-up, might be a good way to get started.
And if you do find a networking group - like, a meetup.com is a free way to create your own networking group, as an example - you may be able to swap services with another person starting out. And then this way, each of you can serve as a referral for the other. So what you really need to do is be creative in finding ways to get those first few clients, and get your business up and running, when you have very little money to work with.
ROBERTS: Sarah Needleman is an editor and reporter for the small-business section of the Wall Street Journal. She joined us today from her office in New York. Thank you so much for your time.
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ROBERTS: This is TALK OF THE NATION, from NPR News. I'm Rebecca Roberts, in Washington. A couple of stories we're following, continuing here, the latest in Libya, where rebels say they have taken over Gadhafi's compound. We will talk with NPR's senior foreign editor Loren Jenkins about that.
And if you are - sounds like pretty much anywhere on the East Coast, you might have just felt an earthquake, which they're now saying was a 5.9 magnitude earthquake centered in Virginia, about 90 miles south here of Washington, D.C. We certainly felt it here in the studio. And we will continue to monitor that situation, and talk a little bit later about details on that earthquake.
But in the meantime, we are talking about starting a business in tough economic times, and maybe taking a layoff as an opportunity to try to be the entrepreneur you've always wanted to be. If you have started a business, what has surprised you about trying to get it up and running? If you have an idea for a business that you've always wanted to start, what is stopping you? What are the hurdles that you think you can't quite overcome?
Our number is 800-989-8255. Our email is firstname.lastname@example.org. With us now to share a bit of his own experience is Kwame Kuadey. He was laid off from his job as a compliance manager at Citigroup in late 2008, and he launched an online business called giftcardrescue.com in 2009. He joins me now by phone from his home in Ellicott City, Maryland. Thanks so much for joining us today.
KWAME KUADEY: Thank you for having me.
ROBERTS: Is the ground shaking there in Ellicott City?
KUADEY: It did. It was very scary. Yes, it is.
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ROBERTS: So you launched an online business. Tell me exactly what giftcardrescue.com does.
KUADEY: Basically, we buy unwanted gift cards. People who have gift cards that they don't want, we will buy it at a percentage of the value and give them cash, and then we sell the card on our website at a discount. So we have a place for people to buy discounted gift cards, and we make money on the spread between what we buy them for and what we sell them for.
ROBERTS: And what made you decide to launch this when you were laid off from Citigroup instead of trying to get another investment bank job?
KUADEY: Well, I have had this idea on my mind for a while, but you know, I didn't have, you know, you could call it the courage to quit my job and go do it full time. So when I got laid off, I took that as an opportunity - as a signal, actually, to actually go on my own and do this.
ROBERTS: And it sounds like you work from home. It sounds like there are some little Kuadeys in the background there.
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KUADEY: Yes, I do.
ROBERTS: So was a website the first thing you built?
KUADEY: Yes. Actually, what happened was that I outsourced the development of the website, which looking back, was actually a mistake because if you are in the kind of stage that I'm in, it's never done; your website is never done. It's an ongoing project. So I should have hired somebody locally to handle that.
ROBERTS: Why did you choose to outsource it, just cost?
KUADEY: Because I wanted to save money. I mean, I was getting quotes in the United States for $20,000, $30,000 to get a whole system done. So I found somebody in India that could do it for about one-third of the cost. So I figured I should go for that. But that became a big lesson that I would never repeat again.
ROBERTS: And I imagine there were also some logistical and commerce things to work out, in terms of buying something that has a face value at a discount, selling it at a discount. Had you cleared all that before you started the business?
KUADEY: Yeah, that was one of the things. The secondary gift card industry is a new sector. So there wasn't any precedent out there to follow. So I had to really, you know, get my attorneys involved to try to see what they could figure out in terms of can we do this? Is it legal? What are the merchants going to say about what we are doing?
But we found out that, you know, it was a perfectly legal thing to do. People have cards that they don't know what to do with, and they're either going on eBay or going to Craigslist to get rid of them. So one way to do it was to take the risk involved and bring them all to our website and possibly get that transaction.
ROBERTS: So if there are people listening to this broadcast now and they think, well, you know, he did it, maybe I can too, what's your best advice for them?
KUADEY: I think that it takes longer for business, you know, to get a business up and running than people think. I mean, you know, it took me a year before I could pay myself any salary. So plan for the long haul, and start small. I think that's the biggest lesson I would advise, is start small and begin to get feedback from your customers before you go out there and do something big.
So - and another advice is that, you know, it's a very, very lonely experience. Running a business, once all the buzz from your friends and family initially fades off, you'll be left by yourself. You have to really run your business. So it's important to get a mentor that has been there, done that, understands your industry, or at least has run a business before. And then use that to get the necessary sounding board that you need - which you're going to need because there's going to be many, many scary situations that are going to require you to make some decisions, some tough decisions about your business.
ROBERTS: Kwame Kuadey is the owner of giftcardrescue.com. He joined us by phone from his home in Ellicott City, Maryland. Thank you so much for your time.
KUADEY: Thank you.
ROBERTS: We are going to take a quick, two-minute break to talk with Christopher Joyce, science correspondent here at NPR, about this now 5.9 magnitude quake that we felt here in the studio - and seems to have been centered about 90 miles south of here, in Mineral, Virginia. We will continue with our conversation about entrepreneurship in just a second. But first, Christopher Joyce, welcome to TALK OF THE NATION.
CHRISTOPHER JOYCE: Glad to be here. I'm glad the building's not shaking.
ROBERTS: Yeah, it was shaking a moment ago. What's the latest?
JOYCE: Well, it's a little bit like the stock market was - it was 5.8, then it was a 6; now it's a 5.9. I just got off the phone with a seismologist at the University of Washington who said, you know, it's probably going to be about a 5.9. That's very rare in this part of the country.
It's not unprecedented. There were earthquakes of similar size, even bigger, in the 19th century in Charleston, South Carolina. There was the New Madrid Fault, as it's called, in Arkansas - has experienced 7s.
So nonetheless, this is quite unusual, and you're not likely to feel anything like this in this area except once a decade or two. They felt it as far as Boston. One reason that - there's a difference in the geology in this part of the country. In California, you know, you've got a lot of faults, and so a quake gets dissipated. This one, the geology is such that even a smaller quake can be felt a long way - and quite sharply.
ROBERTS: Well, it sounds like, you know, 450, 500 miles away.
JOYCE: Yeah, yeah, I mean - and you don't get that very often in this area. And it's not totally unlikely that we'll get aftershocks. Normally, the rule of thumb is you do get aftershocks for a while. They're usually a lot smaller. I've yet to feel any, but they're often so small that you don't feel them. But fingers crossed, this hopefully will be the one big event that we can tell our kids about, in the East Coast, for a while.
ROBERTS: Yeah, and meanwhile, the people who are sitting on things like the San Andreas Fault are laughing at us for our puny, little 5.9.
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JOYCE: Well, actually, having been in Japan and felt the aftershocks after the last quake there, you know, I don't think people laugh too much about earthquakes. I mean, they're pretty serious. They're very scary, and it was very scary in the building here. And I'm sure people all over Washington and, you know, as far away as Boston are a little shook up - no pun intended - because, you know, maybe in California and Japan, so what, you know. But it's serious.
ROBERTS: Christopher Joyce, science correspondent here at NPR, thank you so much for giving us an update.
JOYCE: You're welcome.
ROBERTS: Appreciate it. I'm Rebecca Roberts. This is TALK OF THE NATION from NPR News, and we are going to continue our conversation about starting a business in economic tough times, especially if you have been laid off from a job and decided to take that opportunity to start the business that you've always wanted to start - give us a call, 800-989-8255. Or send us email, email@example.com.
Or if there's a business you would like to start but are not quite sure how to go about it, what is stopping you? Give us a call. And we are going to take a call now from Kevin(ph) in Denver, Colorado. Kevin, tell us your story. Welcome to TALK OF THE NATION.
KEVIN: Hi. Well, I started a business, actually, about five years ago. The business went really well for three years. We had about three clients, one that was gigantic, and we really focused our business on that client. And when a management change in that customer happened, we lost the account.
ROBERTS: Oh dear.
KEVIN: So yes. So my advice - and we've survived. We've replaced that client with five new clients. But my advice is that if I had to do it over again, I would never be so dependent on one customer.
ROBERTS: Yeah, and so now, how are you doing now?
KEVIN: We're doing good. We've actually replaced about 70 percent of the revenue lost from that particular client, and we're moving forward with a new marketing plan, new marketing people. It's going well. We survived the recession, and we are looking for 20 to 30 percent growth this year.
ROBERTS: Kevin, thank you for your call, and congratulations on your business.
KEVIN: Thank you.
ROBERTS: Let's hear from Katie(ph) in Roanoke Rapids, North Carolina. Katie, welcome to TALK OF THE NATION.
KATIE: Hi, thank you so much for taking my call.
KATIE: I recently started a music school in a very small area of North Carolina, but I found that it's working very well simply because there was nothing like it before. Some of the schools have music programs, but there's not much for young students. So several friends and I who had studied music in various capacities were able to get together.
And also, because so many older buildings in the town were not used before, the rent for businesses is very cheap. So it was a good time for us to get involved. And it was something that, you know, hadn't been there and that we were able to really, you know, bring a lot of people into.
ROBERTS: And how did you get the word out?
KATIE: Well, being in this, you know, small area, you know, basically, you know, everybody knows at least someone in a lot of different career fields and a lot of different locations around. So I was able to put the word out with several key people and get mass emails sent, fliers out to schools, and things that you wouldn't necessarily be able to do in a city.
ROBERTS: Do you think that you're going to be able to sustain it? I mean, is this now your new life?
KATIE: It's kind of transition right now. Most of us working us as instructors also have, you know, what we would consider, like, the day job, but it's certainly something, for me personally, that's going to be, you know, a transition into more of a full-time role. It's taking off incredibly well. We saw campers this summer. We have weekly lessons booked to the brim, and it's just been incredible.
ROBERTS: Katie, thank you so much for your call. We are talking about people who have taken the plunge and started a new business, especially if the opportunity was given to you by a pink slip and you decided that the layoff was a chance to start the business you have always wanted to. Our number, 800-989-8255. Our email, firstname.lastname@example.org.
This is Marie in Trenton, Illinois. Marie, welcome to TALK OF THE NATION.
MARIE: I'm actually wanting to start a bulk food business, and this would be my first business. The biggest hurdle that we've found is doing market research and actually knowing what - the numbers we can expect. That's been the hardest.
ROBERTS: Because you've got perishable items, potentially, and you really need to know what your inventory should look like.
MARIE: Well, and what types of volumes, what people - what we can expect people to buy. I mean, I know that there is a need for this in the area, but I have no idea what to expect, volume-wise, and what to stock. Exactly.
ROBERTS: And you're finding that more of a challenge than, for instance, finding space, and finding suppliers and capital, and all of the traditional small-business needs?
MARIE: We're still in the pretty early stages. Location isn't difficult. In St. Louis, there seems to be a lot of open buildings, just vacant, empty buildings that are pretty ripe for the picking. So that doesn't seem to be a problem. It's just knowing what to expect moneywise - you know, the fixed costs, the sales revenues, all of that, because the competitors, the people who are doing similar work don't like you poking your nose into their business. So they don't want to share, even who their suppliers are, usually.
ROBERTS: Marie, thank you for your call. We are talking about entrepreneurship. We are also keeping an eye on two - well, one literally moving story, the earthquake here in the Washington, D.C. area, about 90 miles south of here, as well as the ongoing events in Libya. We'll have an update on that shortly. You're listening to TALK OF THE NATION from NPR News.
Joining me now is Ted Zoller. He's vice president for the entrepreneurship at the Kauffman Foundation, president of the Kauffman Lab for Enterprise Creation. He joins us now from member station WUNC in Chapel Hill. Welcome to TALK OF THE NATION.
TED ZOLLER: Thank you so much, Rebecca. Are you broadcasting from a hardened bunker at National Public Radio?
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ROBERTS: It's just a sort of rocky studio. Did you feel it as far down as Chapel Hill?
ZOLLER: No. In fact, we are uneventful here.
ROBERTS: Well, so that means we can concentrate on entrepreneurship. What do you say is maybe the number one thing that entrepreneurs - budding entrepreneurs are really not prepared for?
ZOLLER: Well, most entrepreneurs, when they start out, if they're not prepared to understand their market and understand their customer intimately, they're really not prepared to initiate their business. And I'd recommend for anyone starting a new business to actually test their market before they actually execute on their business model. What I mean by that is, find a way to engage your customer and understand what they need before actually investing substantially in a business to address that need.
ROBERTS: And what is the best way to go about doing that?
ZOLLER: Well, you know, if you're thinking, for instance, about starting a restaurant, you might actually first start a catering business and try to understand, you know, what appeals to the customer, what is it about their offerings that, you know, is seen as a really great opportunity and what - how do customers respond to that offering? That allows them to get some feedback on their concept before they invest a substantial amount of capital in the opportunity.
ROBERTS: And in terms of getting capital, what are - you know, unless you've got a nice, big savings account - what are the best options there?
ZOLLER: Well, truly challenging in this market, to be honest with you, to - is finding capital because banks are getting much more conservative. And as a matter of fact, I would recommend to any of the listeners who are looking to develop a business to turn to their community banks because in most cases, they're better positioned to help. But honestly, the old bootstrap concept of pulling out your own savings is generally the way people get started. They might turn to their friends and family, as your previous guest, Sarah, had mentioned.
They might also look for angel investors. Angel investors are - there's nothing mysterious about them. These are people who are in a position to help you start your business. They're people that might be engaged by your idea and would be willing to risk some capital alongside your effort, to make that business a reality.
ROBERTS: Let's hear from Bryan(ph) in Central California. Bryan, welcome to TALK OF THE NATION.
BRYAN: Hi. Yeah. I'm calling because I guess - well, the thing I wanted to express that we didn't expect when we started out our first business - actually, our second now - is the incredible costs and issues with red tape.
ROBERTS: What's your business?
BRYAN: We're building a tiny manufacturing facility in California, and it's taken a year to get through the red tape. We're still not completely through it. And $25,000 out of an $80,000 budget in things like - that you don't even realize, starting out, you have to pay - like, to use the roads. There's a negotiated fee that you pay for the right to use a road; to put clean water onto your plants - you know, the - just water you hose down with has a state fee associated with it. And when you're in any kind of a manufacturing facility, you - I mean, we've had to spend an entire year just on red tape. We lost, literally, $25,000.
ROBERTS: Oh, Bryan, thank you for your call. So it seems like the motto here is the Boy Scout motto - be prepared as much as possible. Ted Zoller?
ZOLLER: Right. This is a story we hear again and again - that in many cases, people that are facing the investment period of a new venture face some substantial barriers that are put in front of them by our own government, not to mention the taxes that are attendant with putting together a new business and building a new business from the ground up. So this is a story, unfortunately, we're hearing a lot. If you consider the health and the safety and the environmental considerations that we all are aware of but on top of that, just the root fact of taxes play a substantial role while a business is in its building phase, that negative cash flow period that plagues any new business.
ROBERTS: Ted Zoller, vice president for entrepreneurship at the Kauffman Foundation, thanks so much. Coming up, an update on today's events in Libya. I'm Rebecca Roberts. This is TALK OF THE NATION from NPR News.
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