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For Some Entrepreneurs, It's Back To The Corporate World

Posted by Gayle Kesten Monday, Sep 15, 2008, 11:10 AM ET

When a small person (like me) gains or loses five pounds, the results are noticeable. The same goes for small businesses and the impact of a shifting economy.

As Indiana University professor David B. Audretsch points out to The New York Times, when the economy expands, small businesses gain more than large companies. In an economic downturn, small businesses tend to be hit harder. Well, as you well know, the U.S. unemployment rate just hit a five-year high. The Feds are now in control of Fannie Mae and Freddie Mac. Today's double whammy: Lehman Brothers is filing for bankruptcy, and Bank of America is buying Merrill Lynch.

Clearly, the U.S. economy is not expanding. As such, some small businesses are closing shop (some have gone bankrupt) and heading back to the corporate world.

Anyone with bills to pay, mouths to feed, doctors to visit and retirements to plan for can certainly understand.

That same NYT article shares the stories of handful of entrepreneurs who debated, then decided it made sense to work full-time for a bigger company after they saw their own businesses dry up. Like event planner Bobbi Reed, whose clientele once included the Olympics, and Brian Katz, whose online furniture company felt the effects of rising gas prices passed along by his delivery companies as well as customers' cutting back on spending. Both have since landed on their feet back in corporate after shuttering their businesses.

The article isn't suggesting the end is near for small businesses. In fact, "a tight economy can also provide advantages to independent operators. Companies like independent contractors because they can hire them to run an event or a marketing campaign or provide analysis; then, as soon as the project is done, they can remove them from the payroll."

Bottom line, watch yours and make your decisions accordingly. Head held high.

In a related aside, last week I blogged about a "rise" in small-business owners' economic confidence: In August 60 percent thought the economy was worsening, versus 71 percent in July, according to Discover Small Business Watch. Granted, more optimism is better than less optimism, but you can spin those numbers all the way to Oz and I'd still say 60 percent is lousy.

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