The Web as a safety net
Recession-crunched job market is turning people into online entrepreneurs
By STEPHANIE WHITTAKER, Special to the Gazette May 4, 2009
After losing his job in the telecommunications industry three months ago, Eddie Tkalec moved to an online "Plan B." Tkalec, whose most recent position was as a senior manager of a company that specializes in technology for the credit-card and debit industry, got to work creating a Web-based business that would revolve around his leisure time interest in scuba diving.
"My Plan B was to exploit the Internet and figure out ways of making a living from it," he said.
In February, Tkalec enrolled in Building a Successful Business Using the Internet, a course that has been offered at Dawson College since 2006.
"I started the course without knowing what I wanted to do," he said.
Through the brainstorming software used in the course, Tkalec, who took up scuba diving four years ago, decided to create a website that would offer information to fellow divers about dive destinations.
"And it would be devoid of technical terms," he said. "I've noticed a lot of scuba sites are very technical." Tkalec's decision to create work for himself online is not unique. People who have been laid off from jobs in the current recession or who fear layoffs are turning to the World Wide Web as a place to create money-making online businesses.
In fact, David Edey, the man who created the Dawson course and has been teaching it since its inception, says he was surprised that a couple of students enrolled in the most recent semester reported they were trying to create employment following a layoff or in anticipation of one.
"This was the first time we'd seen that kind of student," said Edey, whose day job is as a financial adviser and partner in the Wealth Management Group.
To date, most of the students enrolled in the course wanted to build a retirement business or create a second income stream.
"They were people who had hobbies that they wanted to turn into businesses or who had bricks-and-mortar businesses that they wanted to take global by using the Internet." One of Tkalec's classmates, Sandra Bitton-Manfredi, enrolled in the course because she fear she could be laid off from her job at Air Canada. "I work in an industry that is affected by fluctuations in the economy," she said. "I saw 2,000 people get laid off in November and 500 in January. I was laid off myself in 1996, although I got rehired the next day in a different department. As you get older, it gets more difficult to bounce back." Bitton-Manfredi says she's witnessed people desperately trying to reinvent themselves following layoffs and she wants to ensure that should she lose her job, she'll have another source of income.
Bitton-Manfredi set to work creating a site that shows users how to simplify their lives. She came to realize that she was a go-to person among her friends, who frequently called her for advice about everything from how to organize a children's party to what to pack for a trip abroad.
"I have a reputation among my friends for being able to do things quickly and easily, whether it's organizing a trip fast or assembling a five-course meal," she said.
Once she was exploring possibilities for a business in the Dawson College course, Bitton-Manfredi began building her site, www.simplelifecentral.com.
David Edey, her teacher, said the economy may well drive more people to create virtual businesses. But he warns that it's not a get-rick-quick scheme. He created the course, which uses a software called Site Build It, after setting up a website for his own business (www.the-successful-wealth-approach.com).
"People don't feel safe in their jobs," said Amel Mehenaoui, who teaches the course with Edey and also works as an Internet marketing consultant. "A lot of people are doing this because they want to be independent of employers." Prem Benimadhu, vice-president of governance at the Conference Board of Canada, sees that desire for independence from employers as a failure of the corporate system.
A credibility gap has developed as workers lose their jobs at the same time as top executives receive huge payouts in golden parachutes, he said.
"There's a distrust of corporations and that's leading the behaviour toward entrepreneurship," he said. "This is a new phenomenon, in which people are taking charge of their own employment. When you've worked for a corporation for 25 years and it loses money because of decisions the CEO has made and you end up losing your job, you see a serious gap in leadership and strategy." The Internet, said Benimadhu, has created an unprecedented opportunity for individuals to take control of their earning ability. "A number of entrepreneurs are emerging because they've lost trust in their employers' ability to provide them with a secure future." Bipin Desai, a professor of computer science at Concordia University, said one of the attractions of online businesses is their lower start-up costs. "But you have to have an idea of what the market wants in terms of goods and services," he said. "The success rate is less than one per cent. Some online businesses might pay the bills but they don't turn into Google or anything like that." Online income, he said, generally comes from affiliate advertising.
Another phenomenon that is driving the rapid shift to online storefronts, he said, is payment methods. "In 1993 to 1995, the big question was how to pay for goods online," Desai said. "And then along came PayPal, which guaranteed Internet commerce and soon the credit-card companies jumped on the bandwagon." Darrell MacMullin, general manager of PayPal Canada, agrees that his company has helped stimulate the shift toward online commerce. "The basic premise of PayPal is to connect buyers and sellers for payment. We're an electronic wallet," he said. PayPal has 150 million users globally; some are buyers, some are sellers.
Not all new online entrepreneurs are do-it-yourselfers. Some are turning to companies that create and host e-commerce sites for them. Shopify, an Ottawa-based company that offers such turn-key arrangements has seen an increase in demand for its services, says Dimitri Onistsuk, the company's vice-president of marketing.
In the first quarter of this year, the company saw 5,677 new accounts set up, compared with 4,086 in the corresponding period in 2008. The majority are entrepreneurs who have taken advantage of Shopify's free trial accounts. Nonetheless, the numbers suggest an increasing number of online entrepreneurs.
It's impossible to determine how many people are setting up businesses online. "This is a new industry so it's tough to get data," Onistsuk said. "But we think these data speak volumes. We're seeing more customers coming online. People are exploring how to make supplemental income." Tkalec, the scuba enthusiast, is looking for a job these days but the founder of www.scubadiving fun.com said that even if he finds a salaried position, he'll continue to build his website. "My site is about the passion of scuba diving, where to do it, where to stay and how to get there," he said.
Ultimately, he'll sell books on his site and create affiliations with cruise line companies and scuba equipment manufacturers. "The ultimate plan is to replace my former day job," he said.
Bitton-Manfredi says she's also working on her site. "The whole experience of thinking that you might get laid off and will have to go back to school because your degree is obsolete makes you feel like you're caught in a trap," she said. "I know I won't be stuck if I get laid off."