Laid-off workers start businesses

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UnemploymentWhen Darren Drewitz was laid off in February, his first move was to start looking for another advertising agency job.

He couldn’t find one. Instead, Drewitz began getting offers for freelance work. Four months later, he has become something he didn’t plan to be: a small business owner.

Laid-off workers across the country are finding themselves in similar situations. Instead of full-time work, they’re getting jobs as freelancers or independent contractors, and in the process have the role of entrepreneur thrust onto them. They suddenly have to deal not only with a change in status, but also details like choosing a business entity and paying self-employment taxes, the sort of minutiae that’s someone else’s problem when you’re an employee.

Here is a look at the issues that Drewitz and Kerry McManama, another unintentional employee-turned-entrepreneur, have had to deal with:

FROM JOB-SEEKER TO COMPANY FOUNDER
Drewitz, who had worked for an ad agency in Austin, Texas, describes himself as “another statistic” of the recession, having been let go because of the weak advertising market. With 18 years of experience he had hopes of finding another position. But the salaries he was offered were too low. Or, he was told, “you’re overqualified.”
While he was looking, freelance work started coming his way. Former clients, colleagues, friends and relatives asked Drewitz for marketing help. So Drewitz had some income coming in while he continued to look for a job.
At some point, he realized there might be enough business for him to work for himself.

“It’s like swimming in the ocean with a fishbowl and saying, ‘I’m looking for sea water,'” Drewitz said. Right now, he’s doing market research work, but in time hopes to have a full-service advertising business.

McManama was laid off from her job as a copywriter at a Boston design firm in March 2009. She also started looking for full-time work, and found nothing. Like Drewitz, though, McManama was approached with offers of freelance work.

“I was hesitant, but three full days of work was better than zero days of work,” McManama said.

But it turned out that she was making more during those three days of work than she had made full-time before. And McManama realized that the thing to do was find work to fill the other two days of the work week.

She found plenty of work, enough that McManama decided to turn down two full-time job offers and continue working for herself as a copywriter. She’s also getting more time to work on the children’s book series she co-writes, “The No Biggie Bunch.”

GETTING YOUR MIND AROUND IT
It’s only been in the past few weeks that Drewitz made the decision to give up his job search and keep building a business. It wasn’t a decision he took lightly. Over the Memorial Day weekend, he spent time doing some soul-searching and talking to his parents. He asked himself, “do I have the gumption and the business acumen to make this happen?”

“I got kicked out of momma’s nest,” Drewitz said of being laid off. “It really is a fly or fall-to-the-ground situation.”

Like other unintentional entrepreneurs, Drewitz found there’s a psychic adjustment to be made. He quickly realized that as an employee, he was paid no matter what he did, but that’s not necessarily the case as a business owner.

“You’ve got to get used to the fact that every day, you’re not going to make money,” he said.
McManama said she loves the different lifestyle she has as a freelancer. But she’s also aware that “the nature of freelance work is it ends” and that she will continually need to bring in more business. So she has decided to form a limited liability company and create a website, two signs to the world that she’s serious about being in business.

HANDLING THE DETAILS
As Drewitz evolved into a business owner, he quickly learned that being a marketing expert is only part of his work. He has to do the paperwork to create a limited liability company, keep the books and pay self-employment taxes ? chores that Drewitz called tedious.

“I am a writer. I am not a numbers person,” he said.

Along with the details, there’s a decision to be made. Do it yourself, or hire someone to do it?
Right now, Drewitz can’t afford to pay for help. But his goal is to someday be making enough money that he can focus completely on finding clients and doing work for them.

Without a regular paycheck coming in, McManama has had to develop an entirely different approach to money. After getting some good advice from mentors, she systematically saves most of what she brings in. McManama has learned that 30 percent of every check she gets needs to go into a tax account. And she’s putting 40 percent into what she calls a “rainy day” account.

“I know it’s going great today,” she said of her business. “I’m trying to save for that rainy day.”
Before she started her own business, McManama said she wasn’t “a money person.”
“Now,” she said, “I know where every dollar in my life is.”

Source: The Associated Press.