Turns out recessions are actually a great time to start a business. People who have been laid off feel like they have nothing to lose so they are more inclined to take a risk and pursue something they always wanted to do. Then there is just the reality that chances are many of the people who have been laid off will probably not find the kind of job they want so they have to create their own. It's the old necessity is the mother of invention concept.

In announcing her new business venture last November on Virtually There, Karen wrote,"Hey Ho, I just decided to open my own little business!"

She created a blog and promised people in her community--Ottawa,Canada that she would deliver to their door. She also said depending on how successful she was during Christmas she'd decide whether to continue the venture.

Christmas went well. From her blog, Sugarplum Fairy Homebaking
she wrote in early December that she couldn't take any additional orders for Christmas. In January she had a post saying she was gearing up for Valentines and Easter but then, no more posts. Doing a little detective work I went back to her original blog and learned she was still in business,baking and making some tough business decisions.

fussiness: I'm a good baker and I don't mind a few steps to get to the end product but if there is a high element of fussiness, the recipe isn't likely to make the final lineup. I can't spend too much time on single recipes in the kitchen. I just don't have the time as a one-person operation and that alone eats into my profit.

Another blogger who started a business recently is B.L.Ochman. A social media strategist and consultant, B.L. just launched Pawfun.com- a custom  photo t-shirt site for pet lovers.

We think of Pawfun as a social-media marketing laboratory -- an opportunity to take what we know works and apply it into a business we own that we can turn on a dime.[...]We're using Twitter (where I already had thousands of followers), and Facebook, Flickr, FriendFeed and other blogs in the pet and marketing communities to meet other entrepreneurs with whom we can do ad exchanges and other co-op marketing. With not one dollar spent on advertising, we used our well-established social networks to generate more traffic in our first three days than some major companies get after years online.

Writing for CNN.com,Stephanie Chen talked to people across the country who decided to become entrepreneurs after they found it impossible to find a job.

Some famous businesses were born in an economic slump. Proctor
& Gamble Co. began selling household products in Cincinnati, Ohio,
during the Panic of 1837. FedEx Corp. started a shipping business out
of Memphis International Airport in Tennessee during the oil crisis of
1973.

The number of small businesses is increasing in the United
States. According to the federal Small Business Administration, the
number of nonemployer firms has risen steadily this decade to 21.1
million in 2007, a jump from 16.5 million in 2000.

As it turns out,I am now one of those statistics.Technically I have been in business for myself for the past 12 years but in my mind, there is a clear distinction between consulting,and running a business with partners and employees.

Been there. Done that. Never ever wanted to do that again. Said I would never ever do that again. Never evers are never a good idea. The truth is I didn't fully understand I was starting a new business until 3-4 weeks ago. Until then I thought I was just talking to a bunch of my colleagues about an idea that we could collaborate on.

When it became obvious "the idea" required significant infrastructure, I started talking about LLC's, Angel funders and compensation plans. I had to ask myself if running a business is really what I want to jump back into.

In floating the idea to business people and attorneys we have gotten very positive reinforcement with the added suggestion. "Go Fast."

The truth is if the current economy wasn't in the tank,I would never have come up with the idea.It was precisely because my calendar has some "utilization opportunities" that I spent some time thinking about new ways to position my services in a recession. If my clients hadn't lost their funding I would have been very content to continue on as an independent consultant. When it was working it was very very good.

Right now we are test piloting the concept for our business. We did a mini launch this week and got some positive feedback. It's now time to think of a name. We are hopeful. But then again,most entrepreneurs are a hopeful bunch.

While it may seem daunting to try to launch a business in the middle of an economic collapse, what are our alternatives? Most of my colleagues are in the same boat as me -- if we didn't come up with a new idea we would have lots of free time and very little billable time. We're a group that needs billable time. 

If you are thinking about starting a business now, here is some additional reading:
Bad economy, do what you love
Business StartUps During A Recession
The Safer Way To Start A Business
Starting A Garage Sale Business In A Recession
Starting A Business During A Recession

Elana writes about Business Culture at FunnyBusiness