"If you've been unemployed for many months and there are no companies hiring, you may feel compelled to give that business idea you've had a try. What do you have to lose?" says entrepreneur Geri Westphal, who founded and runs a day spa while continuing to work as an assistant treasurer at an engineering firm (see "A Calculated Risk" at the end of this article). As Robert Litan, vice president of research and policy at the Kauffman Foundation, puts it, "You see a lot of people in a recession saying, 'To hell with the job market.'"

Many of those who are currently jobless are highly educated, highly skilled workers: the professional and business-services sector, which includes accountants, lawyers, and consultants of all stripes, has lost 1.5 million jobs since the recession began, according to the Bureau of Labor Statistics. "When an accounting firm or a law firm lays off 20% of its workforce, those are very well-trained people they're letting go. They're either going to get another job or open up their own business," says Louis Katz.

Service businesses also require little start-up capital beyond the cost of a phone line and a laptop, making them well suited to today's market. Katz has noticed start-up activity in the financial-services sector, as newly unemployed investment bankers launch financial-advisory businesses. O'Brien says he's seeing a lot of management consultants trying to start their own practices.

At Harvard Business School, Sahlman says some 50 members of the class of 2009 are involved with start-ups. "If you were working at Bain or McKinsey or a financial firm [and left to pursue an MBA], they might say, 'We can't use you now; come [back] in January or March.' A lot of those people are working on business plans or with buddies who are starting companies," he says. "There's a surfeit of talent out there." Of 889 June graduates, just 83% of those who sought employment got a job offer, compared with 95% in 2008.

Ready to Pitch
It's too soon to tell whether the pool of available talent will overcome the lack of capital to produce lots of new businesses. Start-ups are notoriously hard to track, given that many companies may not leave any paper trail of permit applications, tax returns, or other corporate filings in their earliest stages.

"The good news is that, in the deepest recession that we've had in my lifetime, so far the pattern of business creation hasn't been broken," says Litan. The Kauffman Foundation found that entrepreneurship rose modestly in 2008, the latest full year of data. Recent numbers from the Bureau of Labor Statistics show that the rate of self-employment has increased slightly, to 6.6% of the population in June, up from 6.2% in January.

Anecdotally, there are some promising signs of new business formation. "We see lots of evidence among our graduates that the level of early entrepreneurship is up substantially," says Sahlman, adding that 150 people entered HBS's business-plan competition this year, a marked increase from 2008. When O'Brien's Business Catapult helped sponsor the annual Colorado Capital Conference in May, it had more than twice as many entrants as in the previous year. The 90 entrepreneurs who applied also submitted stronger business plans than in the past, says O'Brien.

In fact, it may be an ideal time for someone with finance skills to bring his or her experience to a nascent business. "Companies are putting together plans that say they understand we're in a recession," O'Brien says. "The amounts they're asking for are a little bit less, and their pitches are sharper."

He has also noticed that companies looking for money today have already proved their concept or have lined up a customer. "They're showing investors that they're trying to mitigate their risk," he says.

Some of these businesses will make it — and maybe prove stronger and better managed for having grown up in a particularly challenging recession. Some, according to Kauffman's research, will eventually end up on the Fortune 500. Launching a business in a recession, in fact, may be one form of market timing that you can truly bank on, even if banks don't think so.

Kate O'Sullivan is a senior writer at CFO.

A Calculated Risk
One aspiring entrepreneur anticipated almost everything — except the Great Recession.

After a 20-year career in treasury at big companies including Oracle, Geri Westphal decided to launch her own small business last year because she wanted to build something with her family. "I wanted to ensure that we would always have a place to work. I wanted a business that my whole family could grow together," she says. "This decision was made well before the economic meltdown, and not because I saw anything dangerous on the horizon."

With her daughter graduating from cosmetology school, Westphal drew up a business plan for a day spa in Littleton, Colorado, where she continues to work full-time as an assistant treasurer at CH2M Hill, an engineering firm. She researched the industry, studied local demographics, and secured a prime location, financing the start-up phase with personal savings. "As a finance person, I felt confident that we had done the proper homework to launch a business that had a very good chance of survival," says Westphal. "We worked hard on our business plan, but the unknown ended up taking over." Ciao Bella Day Spa opened its doors on September 1, 2008, just weeks before the financial markets collapsed.

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