When tough economic times hit, the tough start their own businesses

January 09, 1994|By John E. Woodruff | John E. Woodruff,Staff Writer

Jack Coppley and Greg Smith could not have been more different -- until Maryland plunged into deep recession.

Mr. Coppley, a 44-year-old from the suburbs of Washington, seemed to have no worries. He had a good-paying white-collar job as an engineer and project manager with Bell Atlantic. And with 21 years with the firm, he knew his job was secure.

For Mr. Smith, things were finally starting to look up. The 25-year-old resident of West Baltimore was getting intermittent work as a pipefitter, after serving 13 months in jail and at the Herman L. Toulson Boot Camp on a drug conviction.

But both men became victims of the economy's free fall. And rather than settle for what the economy was doing to him, each started his own company.

Economists are counting on people like these to help propel the recovery.

"One thing that makes this recession different is that so many of the people who got hurt didn't just wait for the phone to ring, but went out and created their own jobs instead," said Michael A. Conte, director of regional economic studies at the University of Baltimore.

Although those companies all are small, and most probably are struggling, economists believe the larger-than-usual number of them means they will be part of Maryland's recovery by providing employment to others, even if on a small scale.

Mr. Coppley, for instance, hired five people when he opened Thinx, his computer software company. And Mr. Smith employed a mechanic and a body repairman when he started his firm, AutoGlo, a car repair shop.

Nobody keeps figures on new business starts, but many economists believe there are thousands more like Mr. Smith and Mr. Coppley in the state. Combined, they have added thousands of positions to Maryland's job rolls this year, economists believe.

"The start-up businesses don't get into the regular monthly job statistics, because those are based on surveys of existing firms," says Mahlon Straszheim, the University of Maryland professor who is Gov. William Donald Schaefer's chief economic adviser. But they will show up in the second quarter of this year, when 1993 data are revised.

Indeed, Mr. Straszheim and other economists now believe those numbers will show there was such a surge in the creation of small businesses that they helped Maryland's economic recovery begin sooner than often thought.

There already is preliminary confirmation of that theory. In the first hard figures on employment, covering the first three months last year, more Marylanders had work covered by unemployment compensation insurance than during the same period of 1992 -- the first year-on-year improvement since the recession started in 1990. And new corporate charters set a record of 14,704 in Maryland in the first 10 months of 1993, the latest period for which the state Department of Corporations and Taxation has complete figures. That was 151 more than during the same period in 1992, which also set a record.

Corporate charters provide some indication of how many new firms are being established, and thus can be some guidepost on future employment.

"New business formations, usually by people driven to set out on their own when they get hurt, are the good news of many recessions, and especially of this one," the University of Baltimore's Mr. Conte said.

"The bad news is that it's extremely difficult to make a new business succeed under the best circumstances, and I think in ** this recession, with its very slow recovery, it is going to be even harder," he added.

Starting a new business is so hard that barely 50 percent survive the first five years, and only about one in three last 10 years after opening, said James Goeden of the National Federation of Independent Businesses.

Greg Smith found out how tough it can be.

"As a pipefitter, I was laid off more days than I worked, but that's not enough to be an incentive to go in business for yourself," he said. "You have to really want it, or you'll never make it through the tough times."

Getting open was the easy part. What was hard was getting customers.

"The first few months after we opened last February were the roughest -- you know, you open up, but nobody in the neighborhood knows you're there, and sometimes you start to feel like a ghost, like nobody can see you," Mr. Smith said.

Jack Coppley miscalculated as well.

His company offers software that enables an ordinary personal computer to diagram an agency as big as the U.S. Postal Service, including work flows and organization charts from top to bottom and from corner to corner, in ways that make reorganization infinitely faster.

Created over five years by a team he headed at Bell Atlantic, his software was chosen as a property to spin off when the recession began to bite into Bell Atlantic's profits.

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