Cover Story
Luisa Kroll and Emily Lambert, 05.12.03
You're a middle-age middle manager who gets laid off. You send out 100 resumés and get absolutely nowhere. Now what? Some people in this bind start their own businesses. A lucky few end up doing much better than they did while toiling for other companies. Richard Sheridan spent 18 years at Interface Systems, an Ann Arbor, Mich. company that translated documents to the Web. As vice president of software development, managing 36 software engineers, he was bringing home a six-figure salary. "It was a very comfortable existence with great vacation and benefits and loads of stock [options] that were going to pay off big someday," recalls Sheridan, now 45.
In January 2001 Sheridan's luck swiftly turned. He was ordered to fire half his staff. "You might as well have told me to go out and shoot some of my friends," he says. Three months later he took a bullet himself; his boss delivered the bad news over the phone.
Sheridan contacted headhunters and prospective employers and got what he expected: no bites. Getting in touch with Thomas Meloche, a onetime colleague, Sheridan decided to start his own business. Along with two other software consultants, they met for 12 hours at a stretch in Sheridan's basement, hashing out how much each would invest ($25,000 apiece from savings) and how long they could afford to work without an income (up to a year).
They called the business Menlo Innovations, to evoke both the heart of Silicon Valley and the "invention factory" in Menlo Park, N.J. set up by Thomas Edison in 1876. Sheridan's company would specialize in troubleshooting projects with an anthropological approach: Place a "scout" inside the client to study its employees' tech habits and shortcomings, develop software to solve a particular problem and bring the customer's data-processing department to Menlo for training.
Bad timing, everyone told Sheridan. With the Nasdaq off 60% from its high, funding from traditional sources like venture capital was out of the question. But not every new venture needs capital. Some of the ones that sell talent rather than goods need only enough startup capital for a desk, a phone and a month's rent.
Sheridan's group used a little more money than that, but found it could survive on a few clients, like the University of Michigan Health System, which needed a medical information database, and Domino's Pizza, for which it designed a Web-based store locator. Menlo broke even on revenue of $200,000 in 2001. A year later it earned $600,000 pretax on $2 million in sales; Sheridan says the company is on track to net 30% on revenues of $3 million in 2003.
Moral: If you get laid off, don't bother to look for another job--create one.
Easier said than done. In a protracted downturn, launching a new business can be even rougher. But what are the choices for many of the 8.4 million people who are out of work? A grim vista stretches across virtually all service industries, as well as manufacturing; new positions just aren't opening up at old businesses. Job search times surged in the first quarter to a 17-year high of 4.2 months. Tougher still for people who are older--particularly in their 50s and 60s--to find work and those who, like Sheridan, are experienced and were making good money as middle managers. The number of unemployed people age 45 and older has ballooned to 2.3 million. White-collar workers represent 46% of all people who were without work for 27 weeks or more in 2002, reports Challenger, Gray & Christmas, the outplacement firm. Many will never again find work at existing companies.
Out of such dreary statistics comes a new class of self-starter, the accidental entrepreneur--someone who never considered owning a business until there was no other option. These entrepreneurs are making tough choices for themselves and their families, living in reduced circumstances, doing without the corporate comforts and resources they once took for granted, sometimes succeeding, very often failing, invariably struggling. But at least they're not waiting for the phone to ring.
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From Forbes.com
http://www.forbes.com/forbes/2003/0512/090.html
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