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Being your own boss

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By Emily Maltby, CNNMoney.com staff writer

Severance packages are a traditional wellspring for start-up capital - and right now, many corporate refugees are eyeing their final paychecks. Matthew Sarrel used his as a launching pad five years ago: When he was laid off, he hung out his shingle and opened the Sarrel Group, a New York City consulting and development firm for tech companies.

"Between severance and money I'd saved for an apartment, I realized I could really do this," he says. "I was scared to use my severance and savings. But I accepted the risk because I felt that it would be more emotionally and financially rewarding than taking the safe job and working for someone else."

Even when the economy was good, Sarrel had to cut close to the bone - he quips that he "pulled computers from garbage" to provision his fledging business. He went in prepared to weather a slow start, with several months of living expenses socked away in the bank. Even with that, Sarrel recognizes the hazards of having no employer to fall back on.

"I'm not married and have no children. I do think if I had to put food on the table for my children, I might not have been able to do this," he says. "But being alone, no matter how bad it gets, I could always just move somewhere cheaper or save money another way - it was just me."

If the business fails, "there's no safety net in this economy," says Kane of the Kauffman Foundation. "You put yourself at risk."

Metalworker Ken Kash has been off to a rough start. The economy has only grown worse since Ken Kash Designs opened for business this summer. The company is still running in the red, and Kash is having trouble pulling together the $50,000 he'll need to secure his own shop and machinery. But he's determined to get his business off the ground.

"I'm optimistic," he says. "I have the knowledge and the talent to do it - I just need to broaden my client base and find a place to do the work."

That kind of single-mindedness is critical. The key to making it as an entrepreneur in this economy is personal passion, says Charlie O'Donnell, a former venture-capital analyst whose Web site Path101.com is poised to launch later this month.

"The people who say they want to have their own company for flexibility and to be able to call the shots - they have no idea," he says. "It's not as if I have my feet up as a business owner. You're always under the gun. Starting a company sucks - it's all about contracts and incorporating and cash flows and hiring and stress. But if you can solve a problem and you're passionate about solving that problem, it's awesome." To top of page

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QMy dream is to launch my own business someday. Now that it's time to choose a major, I'm debating if I should major in entrepreneurial studies or major in engineering to acquire a set of skills first. Is majoring in entrepreneurship a good choice? More
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- Spate, Orange, Calif.

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