Change your life: Meet the austerity entrepreneurs

If there are no jobs...then make up your own. That's what this intrepid band of entrepreneurs did – and the benefits are clear to see on their balance sheets, asthey tell Robin Barton

For 18 months up to the end of 2009, Sam Alison – owner, designer, salesman and postboy of Singular Cycles – would get up at 4am to deliver bike-frames to a TNT depot in Luton before driving to Watford and taking the train into the City of London to work a full day as a marketing manager. He then spent the night in his shed, preparing more frames for dispatch.

Alison founded Singular Cycles in 2007, designing steel bike-frames that were then manufactured in Taiwan. But it was only a sideline, stemming from his love of cycling, and he was reluctant to give up his day job in finance. Then, as repercussions from the financial crisis rippled through his firm, the decision was made for him: Alison accepted redundancy and Singular went full-time. "It wasn't something that ran deeply through me," he says now of being an entrepreneur. "But good business is about doing the right thing when opportunities present themselves."

Alison is not alone in becoming his own boss: one recent survey of Companies House data revealed that more than 200,000 new businesses were registered in the first half of 2010. Entrepreneurs have traditionally viewed recessions much as magpies view roadkill: an opportunity amid misfortune. Interest rates can be low, skilled people are hungry for work and the government of the day often offers a financial leg-up to start-ups. In the 1980s, under Margaret Thatcher, this was the Enterprise Allowance Scheme, which guaranteed a year's worth of dole money to unemployed workers with a bright idea for a business if they could match it – somehow, anyhow. A quarter of a million new businesses (such as Alan McGee's Creation Records, the indie label that discovered Oasis) were formed in the first 18 months of the scheme, according to its architect David (now Lord) Young.

This time, however, banks aren't lending, people aren't spending and public-sector cuts are destined to bite hard. Arguably, then, today's entrepreneurs have higher hurdles to clear than previous generations. But politicians still summon up the spirit of British entrepreneurialism: David Willetts, Minister for Universities and Science, last summer suggested unemployed graduates should consider starting their own businesses. In September, Business Secretary Vince Cable made the same case when visiting Sheffield, calling for private investment to fill the space left by a retreating public sector and claiming that most employment growth would come from "micro-companies". He later announced the ' formation of an Entrepreneurs' Forum, offering, well, advice. All the while, Regional Development Agencies are being wound down, and, according to a survey of small businesses by eBay in the autumn, a third of SMEs (small and medium-sized enterprises) are refused finance by their banks.

As Niklas Zennstrom, co-founder of the internet-communications company Skype, commented in Wired magazine, there's also a cultural barrier to break through: "You have a lot of people with great ideas who have what it takes to be great entrepreneurs, but their friends and families are not encouraging them."

Like Sam Alison, Sue Acton worked in the financial sector until her job disappeared. She set about seeking finance for her ethical bodycare business Bubble & Balm, with The Body Shop an obvious role model. "Even though I'd worked in finance, I had no background in the industry to offer, no sales figures. 'We don't lend to start-ups,' was the message. I can see both sides: a bank's job is not to take risks with savers' money. But the criteria they apply don't leave room for spotting potential successes."

Acton was fortunate in winning a £15,000 grant and having a redundancy payout. Unemployed students Rob and Mart Drake-Knight didn't have that luxury. Their clothing business, Rapanui, was started on a shoestring. "After leaving university, we struggled to find work," says Rob. "We decided that if we couldn't find a job, why not make one? Mart and I started the business with £200 of our savings each. We bought a box of T-shirts and sold them to friends, then we bought two boxes, then four and eight..."

Based on the Isle of Wight, which has one of the highest rates of youth unemployment in the UK, Rapanui is debt-free and, like the cotton used for its T-shirts, has grown organically. Rob Drake-Knight feels that grant culture is ill-considered: "Grants are available for ideas and 'getting the business off the ground', yet support for businesses already trading is slim pickings. When we needed money a couple of years after we launched to fund the growth of our business, there was none available. Our advice to entrepreneurs is, instead of wasting time in the spaghetti of red tape for funding, pick up the phone and sell some more stuff.

"The Isle of Wight economy relies on tourism and there is a real lack of support for enterprise," he adds. "As a result, young people move off the island to find work, there is less new business, less growth and fewer jobs. It's a downward spiral that can only be solved by entrepreneurs ' starting new businesses, creating jobs and building a robust economy – but banks don't lend youths money."

John Abbott and Simon Weatherall both had full-time jobs – as well as young families – when they started Oobafit, a website offering tailored fitness programmes and nutrition. It was finding the time to develop the idea that was hard. But they had an incalculable advantage over entrepreneurs in previous recessions: technology. "We wouldn't have been able to do this five years ago," says Abbott. "The internet enables you to reach a huge number of people across the globe. You don't need to have an interview or even pay much money to start a website, you just need an idea. Our website is based on open-source software that's free to use, connects with Tesco supermarket and is run from the same computers Amazon use, which we rent on a monthly basis."

So things are very different this time round: the internet has opened the door to any would-be entrepreneur wanting to start a business on a shoestring – though it must be pointed out that while the companies here have outsourced some work to others (web designers, for example), Bubble & Balm, Oobafit and Singular remain solo operators. Only Rapanui has actually created any new jobs.

Still, against adversity – redundancy, unemployment, working a full-time job while raising toddlers – the four young businesses on these pages, each at different stages of growth, share their recession success stories. They are not venture capital-funded hi-tech start-ups or Apprentice-style chancers. They're "kitchen-table" entrepreneurs with two things in common: a good idea and hard work.

The moonlighters

John Abbott, 33, and Simon Weatherall, 29, Oobafit

Post-natal fitness classes brought Abbott, an IT specialist, and Weatherall together. The latter, a former Royal Marine who served in Sierra Leone and Iraq and is now a fitness instructor, ran classes for new mothers. "We talked about how you could replicate a personal trainer and a nutritionist online and combine it with a social network to help people stay motivated as they trained," says Abbott. "We wanted to build a website that could reach as many people as possible, that was free, fun and simple to use. Oobafit has been a response to the recession, giving people a cheaper way to get healthy than paying a gym £50 a month."

Oobafit launched a few weeks ago, but with both men having young children and full-time jobs, it has been a challenge to get this far. "There've been a lot of late nights and weekends given up," says Abbott. "In an ideal world we'd have done this earlier in our lives." Weatherall has worked 18-hour days: "Some days I run 30 miles with clients before getting home to see my little boy and wife. They go to bed and I start on Oobafit. Then I'm up at 5.30am to do it all again. I think my wife understands that I want to give us all a better life."

The pair spent less than £1,000 on building the prototype website, which won them seed-funding from an investor. "The most valuable lesson we've learnt," says Abbott, "is that if you have an idea, just get on and do it. Get it out there in front of people so they can tell you whether or not it's good."

The former marketing man

Sam Alison, 34, Singular Cycles

After leaving his management job in January 2010, Alison focused full-time on Singular Cycles, which supplies bike-frames he himself has designed to online customers and bike shops. "My fears were less about the economic environment than my ability to turn what had been a hobby into a viable company. I'd always had the safety net of a regular paycheck to fall back on; what I'd been doing had been well-received but staking your whole livelihood on that is a big step."

Alison's time has clearly been well spent; turnover in Singular's first year of full-time business is around £300,000. "The extra time has made a massive difference: I've spent it developing a dealer network, pursuing marketing opportunities and catching up with bookkeeping."

"Where we are now, in a global economy, you can have a very lean business model with few overheads. Everything can be outsourced." But importing bike-frames incurs high costs for Alison: "The biggest drain is the process by which VAT is assessed and collected. As soon as the frames arrive in the UK, I'm thousands of pounds out of pocket at once.

"I try to focus on factors that are in my control. Singular has been very satisfying, but I still have goals to grow further and develop new products. So it seems premature to call it a 'success' just yet. But the signs are good and no matter how big the company may get, the best thing about it will always be seeing people enjoying riding my bikes."

The redundant City worker

Sue Acton, 38, Bubble & Balm

With the goal of creating Britain's first Fairtrade-certified bodycare products, Acton spent hours at her kitchen stove, mixing ingredients. "I had no business angels, just a £15,000 grant and some redundancy money, so I couldn't afford to pay for someone to test the products. The only way to do it was to learn to make them myself. Getting up at 8am to work on Saturday is now the new normal."

The result, Bubble & Balm, was launched in June 2009. "At 3am I was stirring products then later that day meeting journalists. Launching a premium bodycare brand is difficult at the best of times, never mind when everyone is cutting back. But I think the crisis, with its focus on whether greed was the cause, has had a positive impact on ethical spending."

Acton made, marketed, sold and dispatched her products on her own: "I started out selling online and quickly went wholesale. I met that demand just by working harder: I went from getting orders for 1,000 units to orders for 20,000... and it takes three hours to make a batch of 100." Rolling out in Waitrose in June 2010, Acton had just a month to find the right manufacturer. "I'm told that Bubble & Balm has achieved more in 18 months than many companies achieve in 10 years," she says. "But I'd be lying if I said I didn't lie awake worrying about it. I knew the risks when I started. My parents would say that I was always stubborn. I suspect that that, coupled with a naturally optimistic personality, helps."

The unemployed graduates

Rob Drake-Knight, 25, and Mart Drake-Knight, 24, Rapanui

"Mart and I were always entrepreneurial," says business-degree graduate Rob Drake-Knight. "Our first venture was a wooden go-kart business. Most children just make them and go down hills; we did that, too, but we also sold them to friends and started a mini-craze on the Isle of Wight. At university, I ran a speed-dating business and Mart worked as an eco-consultant selling on what he learnt in lectures."

Jobless and back on the Isle of Wight in 2008, the brothers spotted a gap in the market for fashionable eco-friendly clothing. "You don't need a big idea to be an entrepreneur," says Rob, "but a can-do attitude is essential. We were buoyed up by the wild possibility of actually making money by ourselves. You've just got to believe."

In two years of trading, Rapanui has grown dramatically and now employs 12 people. "We broke even after our first year and have grown at a steady 300 per cent year on year since, and hope to reach a turnover of £1m by 2012."

The golden rules

'Have cash, do deals, be cheeky'

Earlier this year, the pair won at the Sustainable Business Awards, in part thanks to the "traceability" tool on their website that lets customers see where and how each item is made: "Every order from us is one less sweatshop T-shirt being bought," says Rob. "There's no chance of putting our feet up anytime soon," adds Mart. " Last year we would have been stoked to have 10 people at the office, but the hunger to improve is exactly the same as it was on day one."

George Freeman started his bio-tech consultancy in the teeth of the 1992 recession. He gave up his job in November with just a promise of interest from a potential client and £7,000 cash – enough to keep him going on cheese sandwiches for three months. "Everybody told me I was mad but I knew I had to do it then or never," he says.

By December, Freeman had snared the client, taken his first fee and three months later had four clients and the business was flying. And Freeman, who spent the next 14 years advising bio-tech companies on their own start-ups, has three basic golden rules for every budding entrepreneur: cash, cash and more cash; do deals with everyone; and show a bit of cheek.

"You need a strategy, yes. You need a business plan, yes. But most of all you need to sell something, anything, to keep you going to give you cash and cash-flow," he explains. "But you also have to be cheeky and do deals. Get 10 per cent off the fax machine by offering cash, or ask people who maybe don't have jobs to work for you for nothing other than expenses and a cut if the business does well. That way you share the risk."

It worked for Freeman, who, after five years, saw turnover top £1m. And it's a mantra that you hear from every self-made, successful businessman, whether it's the smoothy Peter Jones of Dragons' Den or the more bloody-minded Sir Alan Sugar. All of them say entrepreneurs are not born but made through sheer hard work.

More than half the young people in this country say they want to start a business – but only one in 20 actually does. We need more to have a go; all new jobs are going to come from the private sector and small companies provide most new jobs.

Ironically, taking a risk during hard times can lead to great rewards. Most visionaries, from Steve Jobs of Apple (left) to Bill Gates of Microsoft, started out without money, in their case in the depths of depression in the 1970s and early 1980s. Austerity forces you to pay as little as you can for goods and suppliers – and borrow as little as possible.

As Freeman says, if you can make it during these tough times, the only way is up. He's now in government as MP for Mid-Norfolk, so will be helping government and us on how best to help new technology start-ups. What cheek.

Margareta Pagano, business editor of The Independent on Sunday