By Tabitha Yang for 850 Magazine
One part courage and one part economic downturn, area entrepreneurs have found the recipe for turning the tables on market nay-sayers
With the national unemployment rate the highest it’s been in decades, erratic stock market behavior and general economic malaise, the market isn’t exactly in top shape. Most people are scaling their businesses down and tightening their belts.
But a few are exhibiting a quality that seems rare during this recession: some good, old-fashioned, entrepreneurial courage. They’ve taken the plunge and opened up new businesses, including everything from restaurants to marketing firms. Despite all the tales of possible pending depression and gloom and doom, they’re making ends meet and looking forward to prospering, regardless of everything market analysts may say.
In fact, when you look at the trends, in some counties there are actually more businesses opening now than at this time last year. In Leon County, for example, 647 new businesses filed for business tax receipts between January and March, whereas during the same period last year, 600 new businesses filed, and in 2007, 593 businesses filed. Some businesses are exempt from filing, such as banks, nonprofits, and real estate agents, but most small businesses must file for a tax receipt before they can open their doors.
“The trend shows that in recessions, people lose their jobs and get creative and entrepreneurial,” said Juli Puckett, director of communications and marketing for the Leon County Economic Development Council.
Tallahassee business owner Deanna Mims is one of this brave new wave of entrepreneurs. A 30-year veteran of the nonprofit sector, Mims took things into her own hands last June and started her own marketing and PR firm. Knowing that a lot of companies would be scaling down during the recession and laying off their full-time PR staff, she decided to step into the void and take on individual clients on a freelance basis.
“It’s been the most incredible time of my life,” she said. “After about seven months, my business is now self-sustaining.”
Being self-employed, Mims said she’s working harder than ever, but she enjoys getting to exercise her creativity while helping businesses present a professional, polished face to the public.
“I’m able to earn their trust because it’s just me,” she said. “I’m pretty responsive and nimble.”
Pinch a Penny, Save Your Business
Mims, and others like her, are taking advantage of the fact that the mindset these days is saving money. The more you can help businesses save, the more likely they are to use your services.
Jon Negrini is another local business owner who’s taken this lesson to heart. He’s one of the co-founders of Blue-Lyte, the creative/web design arm of Arrive Digital Marketing in Tallahassee. He started up his web design business in January, along with two other web designers, and they are already turning a profit.
“I work out of a virtual office,” Negrini said. “There is a network of us working out of our homes and our cars, running off BlackBerrys and laptops. This allows us to keep our overhead low.”
For the time being, his firm does not offer health benefits or retirement plans to its employees, which allows for further savings.
“We have looked into it, but basically we’re not in a place where we can do that,” he said. “If the next six months keep up like we think they should, then that’s something we’ll look into.”
Not offering fringe benefits is something companies can get away with more easily during recessions, according to Rick Harper, executive director of the Haas Center for Business Research at the University of West Florida.
“It makes sense when you consider that fringe benefit costs, particularly health care, are rising at greater than the rate of growth in wages,” he noted. “In this competitive job market, businesses (that don’t offer fringe benefits) are able to get employees who previously wouldn’t have considered a job without a generous fringe benefit package.”
The savings on overhead costs that Negrini and his partners have gleaned get passed on to their customers, and it’s paying off, because they’re getting more clients than they expected. In addition to the low prices his business offers, Negrini credits part of his success to the Web site his business designed for an episode of “Extreme Home Makeover” that was filmed in Tallahassee in March. He got that job by talking to the builder who was working on the home and putting in a bunch of pro bono work. The site helped get his name out to potential clients.
Networking and building connections with people who will give you opportunities for exposure is always key, but especially so during a recession, said Heather White, an adviser with the international company Ghost CEO. Ghost CEO mentors female business owners world-wide and helps with business coaching, facilitation and management.
She suggests recruiting “champions” to help promote your business.
“Champions are people who know what you do and the type of client you service,” she wrote in an e-mail interview. “They refer business to you on a regular basis.”
Finding a Niche
Addressing the question of what makes a business successful, Jeremy Brandt, local board member of the international non-profit Entrepreneur’s Organization said, “The market is looking for solutions, and if the product or service fits a relevant need, it has a high chance of success.”
Many of the businesses opening across the Florida panhandle were started by entrepreneurs acting on that principle, realizing they’d have an edge on the market if they struck out on their own and introduced a unique product.
This approach worked for Brandon and Tonya Hatcher, who opened their Blountstown-based store, The Depot, in February. Brandon Hatcher had been working in the sales and finance field, making $250,000 a year, but his salary quickly plummeted to $100,000 during the recession.
A friend of his was getting out of the printing business, so he bought his friend’s equipment, stocked up on some additional equipment and opened up shop.
“We do a lot of custom T-shirts,” he said. “Because of the economic situation being the way it is, you really have to find a niche. And we’re the only printer basically in North Florida that I know of that does true, digital shirt printing.”
Digital shirt printing is faster than the traditional screen printing methods, and also allows companies to print complex graphics with greater definition on T-shirts.
Hatcher is doing brisk business selling the T-shirts, as he’s able to print designs or text on T-shirts in three minutes, and can do the printing while customers wait. It saves them the several-day wait they’d have if they ordered T-shirts off the Internet.
The Little Guys Win
Small businesses like Hope’s and Hatcher’s tend to handle recessions better than large corporations, according to Brandt, of the international Entrepreneurs’ Organization.
“Small businesses are much better suited to deal with a slow economy, and will be the organizations that lead us out of it,” he stated. “A small business can react quickly to market conditions and is very nimble. They are very close to their customers and see the effects of market changes immediately.”
Jerry Osteryoung, director of outreach for the Jim Moran Institute for Global Entrepreneurship at Florida State University, said the one tip that people starting small businesses should heed is not to get into debt.
“Starting a small business is very risky,” he noted. “Starting it with debt makes it even more risky.”
If you’re going to start a business, experts say, make sure it provides a product or a service people are going to need regardless of the economy, like medical services, car repair or computer services.
“If it’s a service that needs to be done regardless, than you’re going to do well,” Osteryoung said. “If it’s a non-necessity, those businesses are going to have difficulty.”
In some ways, it can be advantageous to start a business now.
“The advantage of opening a business (in a recession) is whoever you go to for service or assistance are going to treat you very well because they don’t have a lot of business,” he said. “If you need vendors, they’re going to treat you very well.”
Harper expressed similar sentiments.
“If you have a business that has a potential to get some market share in this market, it would be a great time,” he said. “You’d have your pick of employees and the ability to negotiate better terms and lower prices with your suppliers.”
Another good thing about starting a business now is that rents for commercial properties are cheaper than they were when the economy was booming. And lower rent equals lower overhead costs.
Lower rents were a boon for Magali Posey and Michelle Woods Smith, who wanted to open their own private counseling practice and were looking for a space within their budget range. They managed to find some office space in their hometown of Pensacola, above an oral surgeon’s practice.
“We were very fortunate to get the rent that we did,” Woods Smith said.
“It was up for rent for a long time for a large amount,” Posey added, “and then the owner decided to (lower the price).”
Posey and Woods Smith had worked together at a community mental health clinic in Mobile, Ala., but they disliked the long commute (an hour and 15 minutes one way) and stressful schedules. Plus, with budgets being slashed due to the recession, it was getting harder and harder to provide clients with the quality of care that Posey and Woods Smith felt they deserved.
Last year, they took the plunge and opened up their own practice, Finding Peace Counseling.
Everything has been going well so far, they report.
“So far, we’ve been able to pay our bills,” Woods Smith said. “We feel like with the clients that we have, we’re able to manage their treatment and help them.”
Both of them have really enjoyed replacing their more-than-an-hour commutes with short, five-minute drives to work.
“That’s definitely one of the positive things,” Woods Smith said.
She has three young children, so opening her own practice has been great in that it allows her to spend more time with them.
“I’m at home now, so if something is going on at school, I can actually do that,” she enthused. “(Operating a private practice) definitely helps with having children that are still young.”
Posey agrees. The flexibility of managing her own schedule has allowed her to spend more time with family as well. And she loves not working 14-hour days anymore.
“I thought I was going to die in that agency!” she exclaimed with a laugh. “Being on my own has been great.”
Good Businesses Can Succeed … Even in Recessions
While an economy in recession is causing some to tremble in their boots, a number of entrepreneurs, like the ones above, are forging ahead with their own plans, trusting that quality and reasonable prices will help them win market share.
Greg Lissor, who opened a cake baking company in Panama City in January, said he believes a company will succeed as long as it sells a good product and operates with integrity.
Lissor’s business partner, Antonio Pasulo, owns a restaurant called the Pasta Grill, and also operates a bakery. The business that Lissor and Pasulo have started together, the House of Cakes, makes gourmet desserts and freezes them for shipment to restaurants around the Southeast. They’ve already landed contracts with Cisco and U.S. Food Service, which takes their products and transports them to the restaurants.
They make all their products without preservatives, simply freezing them after they’re baked to preserve freshness. Their signature dessert is a hamburger cake, which is made out of chocolate and vanilla spongecake, frosting, and marzipan molded into the shape of buns and sprinkled with sesame seeds.
“The appeal to our products is the freshness and flavor,” Lissor said. And selling their goods for an affordable price has also helped, he added.
He and Pasulo took on some debt to open up their factory, but they did cut back on some of the start-up costs by putting up sheetrock and painting their facility themselves. They hope to be turning a profit by the end of the year.
Jim Dever, an associate professor of entrepreneurship at Florida State University, observed that on the whole, opening during a recession really can be helpful for businesses.
“The nice thing about it,” he said, “is that any companies that open right now, while they may not boom, they may be in a position to avoid some of those growing pains that in a real strong market they may have encountered.”