2:17am

Fri December 14, 2012
Business

Farewell, Bosses: A Wave Of Young Entrepreneurs

Originally published on Fri December 14, 2012 4:33 am

Thirty-year-old Alisha Mustafa spent years working at low-paying restaurant jobs. The unemployment rate hovers around 10 percent in her hometown of Bloomington, Ind.

"I've worked it all in this town," she says. "I've worked for so many restaurants, and last year was my year from hell in the industry."

So, she quit and started her own business. Now, she spends most days baking treats like gluten-free strawberry mango pie for her business, Mustafa Pie Co.

More young people like Mustafa are fighting the slow job market by doing exactly what she did: building something of their own. According to a survey from last year, 54 percent of the nation's millennials — ages 18 to 34 — want to start a business or already have.

Don Kuratko, the chairman of entrepreneurship at Indiana University, says that kind of enthusiasm is common when the economy dips and career track jobs dry up. But, the current surge of entrepreneurship seems to be attracting a new kind of business, he says. It's called the lean startup.

"It's become very popular," Kuratko says. "It talks about starting with the very micro-enterprise idea and moving quickly into your market and testing it and getting customers right away, and trying to generate some revenue and use that revenue to grow on that."

In Columbus, Ind., Steve Riche started his own specialized Web design firm. He says he hated his human resources job at a big auto parts manufacturer and decided to work out of his house instead. His desk is now covered in action figures, and miniature superhero models spill out of his drawer.

"Since leaving my respectable day job, I've kind of embraced my inner child again," Riche says.

He works mostly from his couch, which he says is crucial to his business plan.

"We've been able to run the business and not have any kind of loan hanging over our head with the idea that if things don't pan out, then OK, we'll walk away scot-free and find jobs elsewhere and not be indebted to anyone," he says.

Even if Riche ever did decide to work outside a living room, getting a business loan would be tough. According to a recent Federal Reserve report, small businesses are facing some of the strictest loan requirements in almost two decades.

Riche seems to be doing just fine for now. His company currently has major contracts with several area banks and the city's hospital.

Amber Fischvogt, director of the Columbus Area Chamber of Commerce, helped Riche's business grow from a client base of few friends into an established firm. She says the idea of starting a couch-based business has exploded because it's easy to find the resources.

"If you look at barriers to entry maybe 20 years ago and think about computers, technology, access to resources and then you look at it today — the barriers are dropped tremendously," Fischvogt says.

But before you start calling this uptick in millennial entrepreneurship an economic victory, consider that it's still very risky to start a business from scratch. Studies show that about 80 percent of all startups fail within the first few years.

Now, add that sobering statistic to the findings of a University of Tennessee study. The No. 1 reason new businesses fall short? Inexperience.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

RENEE MONTAGNE, HOST:

For decades much of the entrepreneurship in the U.S. has been dominated by the over 50 crowd, except, of course, for the young leaders of the computer and social networking revolutions. These days, young entrepreneurs are among the millennials, those between the ages of 18 and 30. And it turns out they often rely on a different business model in a market where credit for startups can be hard to find. Reporter Ben Skirvin sent this story from Bloomington, Indiana.

BEN SKIRVIN, BYLINE: According to the Indiana Department of Workforce Development, unemployment here in the Bloomington area hovers around 10 percent. What postings there are are often for low paying restaurant jobs. It's an industry 30-year-old Alisha Mustafa knows all too well.

ALISHA MUSTAFA: I have worked it all her in this town. I have worked for so many restaurants and last year was my year from hell in the industry, and it's why I started my own business.

SKIRVIN: Today, Mustafa is in her kitchen preparing a gluten free strawberry mango pie. She now runs the Mustafa Pie Company, a business she started last year at age 29. Like a growing number of young entrepreneurs, she dealt with the slow job market by circumventing it.

Don Kuratko teaches entrepreneurship at Indiana University. He says that happens every time the economy dips. When career track jobs dry up, more people strike out on their own. But he says this current surge of entrepreneurship seems to be attracting a new kind of business.

DON KURATKO: A lean start-up. It's become very popular. We actually teach it to some of our students now. It talks about starting from the very micro-enterprise idea and moving quickly into your market and, you know, testing it and getting customers right away and trying to generate some revenue and use that revenue to grow on that.

SKIRVIN: In Columbus, Indiana, about an hour's drive from Mustafa's Bloomington-based pie business, Steve Riche started a very different type of company - a specialized Web design firm. He says he hated his HR job at a big auto parts manufacturer and decided to work here out of his house instead. His desk is now covered in action figures and miniature super hero models spill out of his drawers.

STEVE RICHE: Since leaving my respectable day job to start my own business, I've kind of embraced the inner child again.

SKIRVIN: He mostly works from his couch and says that's a key to his business plan.

RICHE: We've been able to run the business and not have any kind of loan hanging over our head with the idea, you know, if things don't pan out, then, you know, OK, we'll walk away scot-free and find jobs elsewhere. We won't be indebted to anybody.

SKIRVIN: It seems unlikely he'll need to walk away anytime soon. His company currently has major contracts with several area banks and the city's hospital. Amber Fischvogt is with the local chamber of commerce here and helped Riche's business grow from a client base of a few friends into an established firm. She says this idea of starting a couch-based business has exploded, in large part because the Internet has made resources far more available.

AMBER FISCHVOGT: If you look at barriers to entry maybe 20 years ago and think about computers, technology, access to resources, and then you look at it today, the barriers are dropped tremendously.

SKIRVIN: But this lean start-up idea isn't just sensible planning on the part these entrepreneurs. In many cases credit just isn't there. According to a recent Federal Reserve report, small businesses are facing some of the strictest loan requirements in almost two decades.

But before you start calling this uptick in millennial entrepreneurship an economic victory, consider that it's still very risky to start a business from scratch. Studies show about 80 percent of all startups fail within the first few years. Add to that sobering statistic the finding of a University of Tennessee study, the number one reason new businesses fail? Inexperience.

For NPR News, I'm Ben Skirvin. Transcript provided by NPR, Copyright NPR.