We were attracted by the smell. As my husband and I recently wandered through Main Beach Park in Laguna Beach, Calif., we sniffed something flowery and romantic, something definitely not from the waves crashing nearby. The Laguna Craft Guild was sponsoring a fair and, there, among the beaded jewelry and kitsch, we found a booth filled with shimmering slices of handmade soap.

"What do you do, make it in your kitchen?" my husband joked. "Yes," says Michael Lipchitz, 45. "And it's the best soap you'll ever find." Not to mention the most expensive -- individually wrapped slices are $7, a gift box of three is $18.

Kristina Lipchitz, 39, had indeed started making soap from glycerin, coconut and other oils in bread pans in their kitchen as a hobby six years ago, back when her career as a technical writer was flourishing. As writing jobs dried up and more friends asked for more soap, she increased her output, now stirring up 50 to 100 pans a week of colorful Cranberry Raspberry, Jamaican Vanilla or Jasmine Gardenia.

Her young business, Sophisticated Soap, has a newsletter, "The Latest Lather," an itinerary of upcoming arts festivals, and sometimes a profit. In a good week, she can earn several hundred dollars. Mr. Lipchitz, a marketing consultant who's become his wife's weekend pitchman, says, "We won't do this forever. Ingredients are expensive, going through the jury process for craft fairs takes a lot of time, and our kitchen's getting really slippery. But right now, we're having fun, and Kristina's supplementing her income during these tight times."

Welcome to the shadow economy. According to the U.S. Bureau of Labor Statistics' latest survey of the country's "contingent" work force, published in February 2001, 8.6 million people are independent contractors, earning money on a free-lance, or per-job basis. In 2002, the U.S. Small Business Administration reports that 550,000 new small firms (employing fewer than 500 people) opened their doors. But no one's keeping tabs on the number of people who earn money from walking dogs, watching their neighbors' kids, selling items on eBay, or making cakes, candles or soap in their kitchens.

And their numbers are growing. When Deborah Jacobson, 37, of Stamford, Conn., was a struggling actress in Los Angeles in the early 1990s, she and her friends were always looking for unconventional, flexible ways to supplement their incomes. She walked dogs -- Charge $15 for 30 minutes, take two at a time, and you're making $60 an hour, she says -- and sold factory seconds from her home before deciding to self-publish a book, "Survival Jobs," on the subject. Last year, Broadway Books, a division of Random House, asked her to update and expand that effort and last month published "150 Jobs You Can Start Today -- Creative Ways to Make Money Now."

The book details positions that require little experience, like professional companion or auto detailer (get your own car detailed and watch how they do it); examines the benefits and pitfalls of providing services like painting houses or overseeing real-estate open houses (the pitfall of both is boredom, by the way); and tells what talents and credentials you need (not many) to be a party planner, personal shopper, or apartment manager.

"I'm hearing from many people who bought the book because they're in debt, between jobs or are stay-at-home moms who need to earn some money," Ms. Jacobson says. Besides paying the rent, managing to earn money from your own talents can help you be less afraid of a downsizing, she says, or raise your self-esteem for future job interviews.

Or you can start a simple business and stick with it, like actress Kim Starzyk, 39, of Hollywood, who began pet sitting after she met Ms. Jacobson several years ago and now brings in $300 to $500 a week. "I papered the neighborhood with fliers," she said, "and walked dogs while carrying my first baby in a sling." She still charges $15 for a short walk, $20 for a romp in the dog park (a pitfall: a really smelly car), and $50 a day or more to pet sit in clients' homes -- "and in Hollywood, that means living in some pretty great houses," she says.

New mother Drena Moothart, 39, has a great house herself, in Lakeside, Mont., from which she earns $2,100 to $3,000 a month as a virtual assistant to very real clients, including a storyteller in Chicago, a leadership coach in Boston and the chief executive officer of I-Advertising.com, who lives somewhere in Oregon. Ms. Moothart says she'd been an in-the-flesh executive assistant in San Francisco for more than 10 years when she first heard of people using the Internet to work for clients they've never even seen.

"I took an online [virtual assistant] course that costs more than $2,000 now," she said, "but it was mostly a waste of money. You can easily find [virtual assistant] coaches online and pay one of them to help you get started."

Virtual assistants need up-to-date computer equipment, a DSL line, great organizing skills and the ability to say no. "I'm meticulous about screening new clients," Ms. Moothart says. "I'm here doing Web edits for one client today and can't afford to have another one who calls constantly and requires a lot of handholding."

Sometimes it's the new entrepreneur who needs the handholding. Each Wednesday evening, 20 students attend Janet Tabin's NxLevel Business Startup Class at the College of Lake County in Grayslake, Ill. Ms. Tabin, 57, walks her students through everything from business plans to personality assessments -- "to help people determine whether they have the makeup and marketing ability to be in business for themselves," she says.

Student Katherine Pietranek, 23, of Mundelein, Ill., for instance, dreamt of being a free-lance floral designer, but felt she needed grounding in practical business skills first. "I've registered my business name, Blooming Elegance," she says, "and I'm passing out fliers and business cards to everyone I meet. In January, the course will be over, and I'm going to jump in and start doing it."

Few people make that leap. Ms. Tabin says that each semester only one student on average actually starts a business, although many do test out their ideas. Which is one reason those odd jobs and hobby-businesses belong to a shadow economy. Many of them come and go so quickly, they're not around long enough to get counted.

The other reason is that many of the people doing them -- Shhh! -- don't pay taxes. Jay Dahl, 46, a tax partner with the accounting firm Edwin C. Sigel Ltd. in Northbrook, Ill., says, "All income is taxable, and you are supposed to report everything you earn, whether it's $10 from selling a candle or $20 for babysitting." Mr. Dahl says the Internal Revenue Service audits only 1% of returns, but is more likely to audit a self-employed person than someone working for a salary. An odd-jobs worker or crafter whose spouse is employed might escape scrutiny, but anyone who lists a meager income, then tries to deduct the interest on, say, a $3,000 a month mortgage payment "will never pass the smell test," he says.

Keeping the books for a home-based business isn't easy. Rebecca Wheeler, 29, of Chicago, has an undergraduate business degree and a master's degree in social sciences, but says she still "doesn't have a good grasp" on how to keep track of income and expenses for her personal-chef and cooking-class business. She charges each personal-chef client $125 a week, plus the cost of the food, to spend a full day in his or her home, preparing five fresh gourmet meals, and $50 for each two-hour cooking class. Does declaring that mean she can deduct all the expenses for the two weeks she just spent on a farm in Umbria, learning about the local cheeses? "I'm turning it all over to accountants," she says.

Other sole-proprietors solve that problem by expanding into a full-fledged business or taking a full-time job. Ms. Jacobson says one of the party organizers she interviewed for her book now has a thriving business, earning as much as $10,000 for a single event.

After she stopped walking dogs, Ms. Jacobson started doing what she called "varied musical work" in her book. At first, she and her husband volunteered their talent, singing and guitar playing for nonprofit organizations, but soon were earning $200 to $500 a gig for their repertoire of Hebrew and Yiddish songs. Ms. Jacobson also went back to school and is now the cantor at her synagogue in Connecticut. "I turned what I love to do into an incredible career," she says.

But Mr. Lipchitz and his wife won't be opening a Sophisticated Soap factory soon. "We thought of growing this into a commercial venture," he says, "but figured we'd have to cut costs and stop using the finest-quality ingredients. We'd rather keep making each loaf by hand, in what I can safely say is the cleanest kitchen in Laguna Beach."