I think that it can be done if you know your stuff, realize it is a business, and know how to network and treat people right.
Now is NOT the time to go looking for other people to employ you in this field; however, the time is good for setting up your own small studio and going from there. There are TONS of people that want to record--you just have to figure out how to find them and sell them on your services.
Being a small fish means you are not competing with the big studios--you can't afford their gear and high overhead, and you probably have zero chance of attracting their clients. In other words, you're not going to be making 2000 bucks a day out of your small studio.
But you can make 250-350 easily.
Realize that you are competing with other small fishies that have bought their own equipment to record their bands, but realized they aren't getting good results. You have to have the things they DON'T have:
-good spaces to record with, meaning rooms that are acoustically sound
-good microphones and plenty of them
-good attitude and knowledge to deliver quality product fast and on the relatively cheap
People say that the home recording market is killing the big studios... I highly doubt this because last time I checked Aerosmith and Metallica weren't recording in someone's basement (even if St. Anger sounded like it). In my opinion large studios are hurting from lack of business from the major labels, who are in turn hurting from the lackluster sales in recent years due to the crap they attempt to peddle.
The best things you can offer are the things that the typical home recordist or band that wants to try to record themselves are the SPACE to do it in, the MICROPHONES they can't afford to properly mic their drumkit and in many cases the ability to record more than 8 tracks simulataneously. If you have that you are commercially viable.
Last minute advice:
Keep your bills down, avoid leasing equipment, avoid putting equipment on high interest credit cards. Keep your rent as cheap as you can make it for what you need. Get insurance and invest in a security system because people will try to rip you off. Realize and accept that if you are able to make 30K a year after overhead and expenses you are doing good.
There are a lot of people that failed or feel they have failed because recording didn't make them rich who will tell you to run away from this business. Personally they were spoiled when recording was more akin to a guild with 'trade secrets' and something that they had a vested monopoly in--making them able to charge ludicrous rates for many times poor service.
It's a buyers' market now, act accordingly. If you can't give quality results for budget needs and do it FAST you need to get out of this business now. I used to be a "90% analog" guy--the only digital thing in my rig was a hard disk recorder, but I am changing my tune now that I have to work with clients quickly... digital mixers are great for this (too bad most sound like crap and are expensive to boot). In general, the more digital you go the faster you can work provided it is well-engineered... avoid computer/software solutions. Look for dedicated hardware, which will be more reliable in the long run and not give you some random .dll corrupt error. Be ready to put up with a lot of terrible musicians; heck, most of my client's are so terrible that I won't post their results on this message board! However, they pay the bills so learn to be a whore.
It would be great if recording was great bands, doing great songs that you dig, working with talented musicians with original vision on awesome sounding gear in museum quality rooms... but it isn't. It's all about talentless hacks pooling together enough cash to set up their beaten and worn equipment into a converted warehouse 'studio' and recorded as quickly as possible on second hand, second rate gear whose sole ambition is to sound like Blink 182 and complain when they don't.
However, it beats office work or any factory any day.
