With the national unemployment rate climbing to a five-year high of 6.1 percent, more than 600,000 fewer jobs in the workforce today than at the beginning of the year, and job security becoming more uncertain, some people are thinking about going into business for themselves ­ particularly those who recently lost their jobs.

But now may not be the best time, according to ClearRock, an executive coaching and outplacement firm headquartered in Boston.

To be sure, starting a business is not for everyone ­ especially if your prime motivation is because you have no other way of earning a living, ClearRock says. Although more than 12 percent of the labor force engages in some new entrepreneurial activity annually, only just one in 10 people started a business because they had no other choice for work, reports the Global Entrepreneurship Monitor of U.S. entrepreneurial activity.

“Most people who become self-employed are motivated by the possible benefits of starting a business, and not because they weren’t able to find other work,” said Annie Stevens, managing partner with ClearRock. “Successful entrepreneurs are people who choose entrepreneurship even when they have good prospects for other employment.”

In addition, about one-third of small businesses fail to make it past the second year, and only about 40 percent are still in existence after four years, according to the U.S. Bureau of Labor Statistics.

Regardless of whether people who are unemployed start a business because it was the only suitable alternative ­ or as the result of a deep desire or interest ­ they need to ask themselves the following questions before launching a business venture, according to ClearRock:

Are you suited for self-employment?  “People who start businesses must be prepared to make personal and financial sacrifices,” says Greg Gostanian, managing partner for ClearRock.  “But those who are unemployed, or have recently been unemployed, must also be certain they have sufficiently recovered emotionally from losing a job before launching a business.”
Does your family or partner support your decision? “Successfully launching a new business requires even more support from your significant others than conducting a job search,” Stevens says.  “Family members and partners will be affected ­ from having less time with you, to a scaled-back standard of living, to being asked to give their time and talent to the venture.”

Exactly why do you want to start a business, instead of getting another job? “People who are most successful as entrepreneurs usually choose a field where their talents excel, and in which they have had a long-term interest. Entrepreneurship is not a good place for on-the-job training, particularly if your livelihood depends on it ­ and especially in a tough economy,” says Gostanian.

Can you sell?  Can you work alone?  “These are two important questions that people considering becoming entrepreneurs need to ask themselves. If the answer is ‘no’ to one or both of these questions, it doesn¹t mean they shouldn¹t go into business, it just means they need to figure out how to shore up those potential challenges,” Stevens says.

What type of business would be best for you to pursue? “People who have a specific expertise in the professional services area ­ such as accounting, finance, marketing, public relations, or human resources ­ may be more suited to launching a consulting practice. Those who are more risk-averse may want to buy a franchise, or purchase an existing business,” Gostanian says.

What does your financial situation look like ­ both short-term and long-term?  “Capital-intensive businesses, such as name-brand franchises, as well as businesses that involve office or store space, are more appropriate for people with adequate finances and/or good severance packages or pension plans.  Self-employment is not recommended for people who expect to be living from sale to sale ­ the entrepreneurial equivalent of paycheck to paycheck,” says Stevens.

What are your strengths and weaknesses?  Since no one is usually good at everything, prospective entrepreneurs must make an objective analysis of the areas in which they will be needing assistance, such as sales, marketing, finance, distribution, etc.  They should also examine whether they will have to hire someone to do these on a full, part-time, or outsourced basis, or whether they can learn some of the necessary skills,” Gostanian says.

Are you prepared to do what it takes to succeed?  “New entrepreneurs generally must work longer hours, and more days per week, than people in the corporate world,” Stevens says. “Another mainstay of a job ­ getting a regular paycheck ­ also isn¹t assured, and new entrepreneurs must be prepared for financial rough spots.”

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