How to Start Your Own Business and Keep Your Sanity

Although the economy is in recession, the army of self-employed people is on the rise. According to an annual index published by the Kauffman foundation, a small-business research and education group, a slightly higher percentage of Americans started their own businesses each month in 2008 than they did in 2007. So what are these people doing to make money? The Kauffman Index indicates that most of these startups are not high-profit, capital-intensive firms—they're more humble outfits. Molly Gordon, an author and business coach for professionals trying to break out on their own, says business "quadrupled" between January and March. Many of her new clients—who were recently laid off—are now consultants for large businesses. "In a recession, there are companies and individuals who may be trimming back their investments in higher cost resources, and who may be laying off internal staff," says Gordon. Low-cost, single-person operations can fill that gap.

In some ways, a recession can actually make life easier for entrepreneurs because it thins out competition. "When the market goes down, that separates out people that were just chasing short-term opportunities," says Pamela Slim, author of Escape F rom Cubicle Nation. But making the transition to a self-employed lifestyle is a big step that can put strains on everyday life. But it can be done. Here are five ways to make the switch without letting it destroy your wallet or your family life:

Be yourself. How do you choose what kind of business to start? Experts warn against picking what seems most profitable or "hot." Instead, choose something that you have some experience with and truly enjoy. "You need to do something that matches your natural traits," says Slim. That way, "you're going to have so much more energy in the long run."

Sam Fischer is in that boat. In April, he was laid off from his job as a vice president at a large software sales firm in Dallas. For a few years, he'd been thinking about striking out on his own. "Everybody desires to have their own business and be in control of their destiny," he says. When his position was eliminated, that dream became a reality. "I kind of look at this as a perfect storm," he says. Fischer spent much of Aprilgetting in touch with his network of contacts. However, the big challenge is convincing these potential clients to spend money on his operation, Route To Market Partners, when many of them are tightening their budgets.

But there's a bright side, Fischer points out. The need for large companies to cut back can create business opportunities for entrepreneurs. "In a recession, there are companies and individuals who may be trimming back their investments in higher cost resources, who may be laying off internal staff," says Gordon. Fischer hopes to fill that newly-created vacuum at a lower cost to companies hurt by the recession. "This is an opportunity for my company to deliver value for these companies in a more cost-effective manner," Fischer says.

Don't panic. One problem with diving into your own business venture is the determining how to support yourself while you're trying to get the money flowing. Gordon says it's normal for a first-time entrepreneur to spend months without making any money. She recommends not looking at these lean times as problematic, but as a necessary step. "The biggest danger is that they're worrying about money they're not bringing in. If you don't have clients, you have time to develop content. The income they're not making is income they're investing in the future," she says.

[See more on how to promote a small business.]

Don't bite off more than you can chew. While you shouldn't panic during the early months, you also should make sure your lifestyle is sustainable. Most first-time entrepreneurs depend on friends and family for initial support. If necessary, make sure you know exactly how much support is forthcoming and how long it will last. Doing this can make the initial stages of building your business easier. "It is so much more useful to deliberately call on those sources, than to go scurrying around trying to make money fast and not having that foundation," says Gordon.

Take small steps. What if your friends and family think you're crazy for abandoning the security of a steady job for the uncertainty of a personal venture?  "Don't totally stress everybody out in your family by working six months straight," says Slim. Think of it like trying to eat healthier, she says.  You don't overhaul your entire diet at once—you make little changes. For example, even if being self-employed is your dream, don't leave your job immediately. Ease into it by doing freelance projects on the side.

Meet like-minded people. Just because you are working for yourself does not mean you don't need advice. "Get three to five people who are doing something similar to help you set goals and compare notes," says Gordon. Finding fellow entrepreneurs may require looking outside your normal professional circles. If you're in marketing, for example, "don't just go to your marketing workshops," says Slim. Go somewhere you can meet other entrepreneurs from a broad range of fields.

[See more about partnering with someone to run a business.]