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From Layoffs to Startups: Launching a Business After Being Laid Off

Updated Aug 24, 2023

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Layoffs can cause distress and leave professionals wondering about their next career steps. However, many laid-off workers are bypassing traditional job searches and career paths, and instead, opting to start their own businesses. While entrepreneurship presents risks and challenges, owning your own business means never being at the mercy of another company’s layoff decisions. 

We’ll examine how layoffs are fueling entrepreneurship and share tips for starting a business after being laid off. 

How layoffs are fueling entrepreneurship

As the U.S. economic output continues to fall short of pre-pandemic numbers, many professionals are experiencing layoffs. In fact, data from BizReport shows that layoffs in 2022 and 2023 contributed to the loss of roughly 200,000 jobs — and many businesses are struggling to stay afloat financially. 

The shadow of layoffs and budget cuts is prompting many laid-off professionals to rethink traditional job searches and try entrepreneurship. In fact, according to the BizReport data, for every 100 people who lost their jobs, 13 started their own businesses.

While starting a business brings financial insecurity and instability, layoffs and economic conditions demonstrate that W-2 employment isn’t a risk-free proposition either. 

“I would say the first and most prominent reason behind layoff-triggered entrepreneurship is the realization that employment isn’t a secure financial option,” explained Young Pham, a financial advisor, investment analyst and BizReport project manager. “After being laid off, most employees realize they were pawns in somebody else’s game, so they look for something to do that gives them more control over their life outcomes, and entrepreneurship is often the choice.”

What professionals are more likely to become entrepreneurs? 

With 13 percent of laid-off employees launching their own companies, it’s clear that more professionals than ever are motivated to leave the corporate world behind. This is especially true for the following workers: 

  • Software engineers: Software engineers are the most likely to pursue entrepreneurship after layoffs. In fact, nine out of 100 startups are established by former software engineers, according to BizReport.
  • Managers: People in management-level positions are also more likely to launch a business after a layoff than personnel at other levels. Former managers and directors account for 44.4 percent of companies started by laid-off workers. Their leadership experience likely equips them to handle a new business.

Layoffs may motivate professionals to follow their dreams.

Layoffs present a fresh start for many would-be entrepreneurs — a chance to act on a great business idea

“There’s also the fact that certain people perceive being laid off as a chance to prove that they can do better than a nine-to-five that doesn’t value them,” Pham explained. “Some laid-off employees feel the need to redeem themselves from the devastation of a layoff. This need pushes them to think of impressive ideas and invest all the effort they can; in the process, a business is born.”

More workers are trying to find meaning in their careers and follow their passions to success. After being let go from a company they were loyal to for years, many professionals decide it’s time to chase their dreams.

Key TakeawayKey takeaway

A traditional job doesn’t offer much more security than a business venture. Create your own stability using your previous work experiences and in-demand career skills to start a business after being laid off.

How to start a business after being laid off

If you’ve been laid off recently, here are some tips for taking ownership of your career and starting a business. 

1. Choose the right business type and industry.

When you decide to start a business, you must first identify an ideal company type and industry. Here’s some advice for choosing the right entrepreneurial arena: 

  • Tap your experience and skill set. Your startup idea may relate to your career experience and skill set. “Your skills and experience in employment are a great starting point for a business,” Pham advised. “You simply need to identify your strengths and expertise and consider how you can apply them to a new venture.” For example, if you worked as head of the marketing department at your previous company, consider launching an email or content marketing business that helps clients improve their marketing efforts.
  • Find businesses with low startup costs. Some businesses are easier to start than others. After a layoff, consider focusing on profitable businesses with low startup costs. “There are several business ideas to consider after a layoff,” Pham noted. “The first would be niche consulting and coaching or virtual services, which are easier to start, require less initial capital investment, and allow you to use the skills you obtained in your former role.”
  • Consider your passions. Consider creative business ideas born from your passions. For example, if you enjoy making sustainable and eco-friendly products, you can personalize and customize those products for buyers and make an entire brand based on that.
  • Look to digital entrepreneurial endeavors. Tech startups and online business ideas can often align with your previous experience and passions. “There’s [also] digital content creation, and for those with more technical skills, there’s the option to develop and monetize software and other digital assets,” Pham suggested.

If your entrepreneurial venture involves selling products online, use an e-commerce platform. You could also consider selling online via Amazon or a marketplace like Etsy.

2. Use your existing contacts when starting a post-layoff business.

Succeeding in business is all about who you know — and how you make use of your contacts. When starting a post-layoff business, it’s time to use past connections to grow your professional network

Pham recommends leveraging the contacts and networks you’ve built over time in your previous roles.

“Turn those former colleagues or clients into potential clients, ask them for ideas on how to handle certain business aspects, ride on their influence to boost your brand’s growth, find mentors among former employers, and while you’re at it, make new networks and join entrepreneurship communities,” Pham advised.

Did You Know?Did you know

Use LinkedIn to access excellent digital communities for various industries and connect with former colleagues and new contacts.

3. Turn your anxiety and instability into entrepreneurial motivation.

After you’re laid off from a job, you’ll likely experience an array of emotions, including grief, anger, insecurity and fear. However, a simple mindset shift can actually trigger relief — and excitement.

“Layoffs can be a blessing in disguise for most people if they are willing to see them in that light,” Pham noted. “Getting fired can give you time to reevaluate your life choices and aspirations and find new ideas and perspectives that can turn into successful businesses.

Also, layoffs give you more time to pursue your passions and find your purpose — then turn it into a business you love. 

“Tap into the emotions that come with a layoff and the lessons learned, and use them as a driving force for your next venture,” Pham advised.


If you’re launching a business during tough economic times, grow slowly and steadily, and don’t be afraid to pivot your focus as you uncover new insights about your target audience.

4. Take your time when launching a post-layoff business.

While you might want to launch your new business immediately after you’re laid off, you’ll be more likely to fail if you don’t do your due diligence.

“Entrepreneurs need to think through and plan their business before launching it,” Pham cautioned. “There’s often the temptation to just dive in, especially when starting a business after being laid off, and although this may work for some entrepreneurs, it is mostly a recipe for disaster.”

Pham recommends slowing down to conduct market research, identify industry gaps, analyze the competition, understand your audience, and develop a sustainable business plan.

Additionally, not everyone is cut out for entrepreneurship. If you’re hesitant to start a business due to a lack of interest or passion, don’t commit to the endeavor too soon. Taking your time will help you adjust to the idea of being a business owner. That way, you can understand whether it’s the right choice for you before going all in.

“Entrepreneurship isn’t always a walk in the park; it will sometimes throw you curveballs, so you need mental resilience and a mindset that embraces change and uncertainty,” said Pham.

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