Making their own path: Nevada leads country in startups in 2010

Brian Duggan/Nevada AppealSusan Shott, co-owner of Mama's Got A Brand New Bag in the Carson Mall, organizes her merchandise on Thursday.

Brian Duggan/Nevada AppealSusan Shott, co-owner of Mama's Got A Brand New Bag in the Carson Mall, organizes her merchandise on Thursday.

Mario Benitez has spent more than a year scouring online job boards and sending out resumes for a chance to snag one of the precious few construction jobs in the region, so far to no avail.

So about a month ago, Benitez decided to do what more and more Nevadans are doing in this time of double-digit unemployment: He decided to make a job for himself.

"I can't find full-time employment," said Benitez, who has plans to start a handyman business in Carson City that would offer home repairs. "Now I'm in a position where I'm unemployed and the construction trade is doing nothing here in Nevada."

He's not alone.

The Silver State had the highest rate of business startups in 2010, at 510 per 100,000 people, according to a Kauffman Foundation report released last month. And one of the driving factors behind the growth in new businesses is the anemic job market.

"The conclusion that I'm coming to, because unemployment is so high, is people are creating all kinds of home-based businesses," said Rod Jorgensen, the director of counseling at the Nevada Small Business Development Center at the University of Nevada, Reno.

And given the severity of the recession in Nevada, Jorgensen said he expects the trend to continue for some time.

"My normal brick and mortar business opportunity that I would have seen a plethora of a half decade ago has diminished significantly because no one has equity in their homes anymore," he said. "Access to bank loans for startups is so difficult to come by. The alternatives left are creation of a little home-based business that tries to service products door to door."

While it's not a home-based business, Susan Shott and her business partner Colleen Hillman, are financing Mama's Got A Brand New Bag, a retail outlet that offers bohemian-style clothing, purses and accessories in the Carson Mall. It opened in February.

"We brought it in to a regular store so people can find us all year round," said Shott, who had been making crafts from home for 15 years. "So we have a really good following actually."

Shott said she had been thinking about opening a small business for years, but could never afford the costs to start one near her home in South Lake Tahoe, Calif. Her reason to do it now?

"Stability," Shott said. "Because having a stationary store and having people know that you're there all the time was very important. They need a place to go to shop that has unique clothing."

The entrepreneurial trend has played out nationwide, too.

In 2010, about 565,000 businesses were started in the United States, more than anytime in the past 15 years, according to the Kauffman Index of Entrepreneurial Activity.

The only problem? They're not creating more jobs.

"Since it began, the recession has triggered annual declines in the rate of employer enterprise births," said Carl Scramm, president and CEO of the Kauffman Foundation. "Far too many founders are choosing jobless entrepreneurship, preferring to remain self-employed or to avoid assuming the economic responsibility of hiring employees."

Brent Buscay, the vice president of Laughlin Associates, a Carson City-based corporate formation and resident agent firm, said he's seeing more individuals go into business for themselves compared to the go-go days in the mid-aughts.

"We have seen an increase in new startups," Buscay said. "New people without any existing businesses. Before, the trend would be people expanding upon or using Nevada to hold safe assets."

And while painful, the recession could create the next big thing in Nevada, said Mark Pingle, an economics professor at UNR and the faculty chair of the UNR Entrepreneurship Initiative, which offers classes in how to be an entrepreneur and seeking funding amid state budget cuts.

Afterall, more than half of the Fortune 500 companies were created during a recession or bear market, according to a 2009 Kauffman Foundation report.

"When a young engineer graduates from UNR, in normal times they can go out and start making $50,000 a year without all the headaches of a startup," Pingle said. "You have to have a special passion for what you're doing to do that. It's hard to overcome the $50,000 job if you're highly trained. Right now, if they're unemployed young people, in normal times they go off to a bigger company."

And after decades of being the fastest growing state in the country, Nevada now finds itself at something of a crossroads, Pingle said.

"If we can turn Nevada into a more entrepreneurial place that generates not just one industry, a variety of things, I think it's actually very possible (to increase the standard of living) mainly because, especially, Northern Nevada is just a great place to live," he said.

Benitez spent most of his career as a roofer in California until moving to Carson City 13 years ago to be closer to his daughters.

He eventually found work as a repairman for a local strip mall and then at a construction company until he was laid off as the recession's grip on the local economy grew tighter.

Now that he's thinking about starting his own business - he filed for his business license last month - he's thinking about going back to school, too.

"What are you going to do if there's nothing else," he said.

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