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Some jobless don't look for jobs. They start a business.

New business starts hit a 14-year high in 2009. But succeeding is a challenge.

(Page 2 of 2)

One trend evident among Amer­ica's newest entrepreneurs: They're reducing risk. Recessions tend to generate lots of new one- and two-employee companies, according to the Ewing Marion Kauffman Foundation, based in Kansas City. Mo., which funds research on entrepreneurship. In 2009, new business starts reached a 14-year high but created fewer jobs than start-ups had in prior years.

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"These could be profitable young businesses that are just going to try to grow responsibly and slowly, rather than risk everything," says Tim Kane, a senior fellow at the Kauffman Foundation. "It's all rational, but it does tell you that this time is different."

Some groups are adapting more easily to self-employment than others. Recent college graduates, especially in industries such as media that use lots of contractors, often assume they'll make their living by freelancing and cope with the labor market's vagaries, according to Sara Horowitz, executive director of Freelancers Union, a New York-based association that supports independent workers.

Men over age 50, however, often struggle because self-employment doesn't fit their long-held concept of what work is supposed to be.

For those who are self-employed by necessity rather than by choice, experts have a few survival tips. Remember "cash is king," Mr. Kane says. Plan conservatively and keep your overhead low to prevent indebtedness.

Mr. Fairbrother and Halpern recommend setting time aside regularly for business administration, such as planning expenses and following up on invoices, in order to make sure the numbers are working. And be selective about networking. Focus on people who really like you, Halpern says, because they'll want to help you succeed.

Self-employment is not for every­one, consultants say, and workers should think twice before hanging out a shingle. Fair­brother says to steer clear of self-employment if you need someone to lay out your day's work for you. And if you aren't passionate enough about the enterprise to crunch numbers at odd hours, then you probably won't do very well.

Halpern is one of those self-employed people who has absorbed the lessons of how to solo successfully in a tough business environment.

She prioritizes high margins by keeping costs down. She lives in the Bronx, where housing is less expensive than Manhattan, and runs her business from her living room. She doesn't use business software, but sticks with Excel spreadsheets and an American Express card to track cash flow. When a client needs her after 7 p.m. or on weekends, she's available because she's motivated by what self-employment offers her: ample time with her 15-year-old son.

"I love my son, and he's going to be gone soon," Halpern says. "This is the time I have for him. I know I'll look back and say, 'I wasn't a perfect parent and I made mistakes, but I was present in a way that I could not have been if I had not done this.' "


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