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Captain
Join Date: Oct 2011
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Little Guys Tough It Out
It's a tough time to be a business owner. Though many big companies have bounced back from the worst recession since the Great Depression, many small businesses—lacking the deep pockets of their larger peers—are still struggling. The problem: People still aren't spending money. The National Federation of Independent Business said last month that its small-business optimism index fell in August for the sixth straight month, with most businesses citing sales as the biggest issue. Meanwhile, the swelling ranks of the unemployed have yielded a few unlikely entrepreneurs who, having lost their jobs, decided to start their own companies. They have found that being the boss doesn't always yield the big bucks, and are making do with fractions of their previous incomes. The odds of a small business succeeding have gotten slimmer over time despite a culture that lauds entrepreneurship. Just 47% of businesses launched in 2005 survived at least five years, compared with 50% 10 years earlier, according to the Ewing Marion Kauffman Foundation, a Kansas City, Mo., research group. Despite the odds, many small businesses are finding ways to hang on—and a few say sales are improving. Here are some of their stories: A Journey From Cubicle To KitchenRandy Sequete, a former investment-bank employee, now cleans kitchen exhaust systems late at night. Mr. Sequete was laid off from his more than 100,000-a-year job as an assistant vice president for a major bank in 2010. His wife Melissa, meanwhile, had lost her six-figure banking job in 2007 while nine months pregnant. She landed a full-time sales position at a job-search website a year later, but was eventually laid off from that as well. The couple, who had already sold their Texas home to become renters, relocated to Florida last year. From their new home, Ms. Sequete, 38, began working again for the job site that had let her go, in a part-time 15-an-hour administrative role. Mr. Sequete, after struggling to find work, decided to buy a business. He invested more than 100,000 of the couple's savings in a commercial kitchen-exhaust-cleaning franchise called Hoodz. Mr. Sequete learned about the business through a broker he met while attending a seminar run by an outplacement service. Ms. Sequete quit her work for the jobs site to take care of the couple's two kids and help her husband run the business. "Now I'm earning nothing," says Mr. Sequete, 43, adding that the family only recently purchased health insurance coverage. "I haven't taken one dollar from the business yet." His new job is a far cry from the office position he used to have. His hours are unpredictable and range from early-morning meetings to late-night cleanings. Since clients are mainly restaurants, cleanings often start after 11 p.m., and while Mr. Sequete has two employees who do most of the dirty work, he often joins them on assignments. Mr. Sequete says he typically works Sunday through Friday, spending half his time on the road and the rest working from home. Though the couple has less money to spend, they now live closer to relatives and are optimistic about the future. "We're making a fraction of what we used to make but we're so much happier," says Mr. Sequete. "As long as I have my friends and family around me and my health, I'm the richest man in the world." —Sarah E. Needleman For Spa Owner, Beauty Brought BankruptcyMindy Willson Conner drives the car she meant to give her teenage son. The spa owner intended to offer the aging Jeep Cherokee to her younger son four years ago when he turned 16—and buy a new car for herself, perhaps a Lexus. Instead, she's still driving the 11-year-old Jeep as she struggles to revive her Seal Beach, Calif., business. After 20 years in the business, Ms. Conner borrowed about 1.4 million in 2007 to move her Complexions Day Spa to bigger and fancier quarters. At first, the snazzier setting drew more customers for services such as facials, manicures, massages and laser hair removal. In late 2008, as the economy wobbled, her sales began to falter, before dropping 22% in 2009 and another 4% in 2010. Customers stopped coming or came less frequently. Competition drove down prices. The spa now charges 75 to 85 an <a href="http://www.ecigs-store.com/510-platinum-p-30.html"><strong>electronic cigarettes health</strong></a> hour for massages, down from 95 before the recession. Her take-home pay plunged to about 26,000 in 2010 from 125,000 in 2007. Ms. Conner, now 52 years old, found herself unable to meet loan payments and eventually sold her five-bedroom house two blocks from the beach to pay off part of that debt, moving to a rented three-bedroom house with her husband and younger son. She also maxed out her credit cards to keep her business going. "I had to leverage everything to keep the doors open," she says. To escape from some of that debt, she went through personal bankruptcy early this year. Ms. Conner still employs 42 people, down from a peak of 47. She says sales have started recovering this year and cost cutting has brought the spa back into the black. She hopes to generate more income from a line of massage oils, lotions and other skin-care products she formulated. To ramp up that business with more marketing and distribution, she figures, she would need at least 50,000, money that she doesn't have and can't borrow because her credit rating is shot. She hopes to attract an investor willing to put money into that skin-care line. For now, vacations and fancy restaurants are out. "I don't shop," she says. Instead, she pursues more free pastimes such as reading or walking on the beach. "I spend more time with family and friends," she says. "It's not all bad." —James R. Hagerty A Gift Shop That Bucks the TrendJulie Horowitz-Jackson, who owns Virtu, a gifts boutique in Chicago, has managed to avoid the plight of several other stores on her street that closed in the last three years. Despite the sluggish consumer sentiment, Virtu's sales have increased every year since it opened in 2001. This year, sales are on track to top last year's by 37%, Ms. Horowitz-Jackson says. The secret to the store's success, she says, is good customer relations. She provides gift-wrap services and keeps track of customers' past purchases in order to make complimentary suggestions each time they come into the store. The business model has shifted somewhat in response to the recession. Ms. Horowitz-Jackson began focusing on the bridal market, which brings business year round, rather than relying too heavily on the peak holiday season. "If you sit back and expect throngs of people to come, you are in trouble," she says. "I write a marketing plan every six months." In anticipation of this holiday season, she has contacted her loyal customers to ask what types of gifts they may want to purchase to make sure she can fulfill their wish-lists. One customer recently came in the store to discuss her holiday budget. Ms. Horowitz-Jackson has avoided lowering prices —a strategy some small firms have used to lure in big-box shoppers. While most of the merchandise in her store costs under 100, some items, like diamond jewelry, run as high as 10,000. Much of her inventory is made by artists and she wants to make sure each item maintains its integrity, she says. "I find people aren't looking for a discount from me," she says. "They want to feel good about spending money. They want to keep the local economies floating." —Emily Maltby Mocha Orders Slow Down; Cafe ClosesAbraham Duenas was already on Plan B when the recession hit his funky coffee shop in Chicago two years ago. Born in Mexico, Mr. Duenas came to the U.S. as a newly married teenager in 1977 and had to learn English before going on to earn a GED and an associate degree in computer science—all while working nights at a pasta factory on Chicago's South Side. By 43, he was a project manager at Lucent Technologies and the owner of a house in Little Village—a Mexican-American neighborhood five miles southwest of the city's downtown. His fallback was a nearby commercial building he hoped to one day turn into a coffee shop. That day arrived in 2004 when Lucent outsourced his 90,000-a-year job. He sunk his life savings—about 150,000—into creating the Catedral Café, a 2,000-square-foot European-style coffee shop decorated with dozens of crucifixes and portraits of the Virgin Mary. "I thought I was going to go into a depression or something was going to happen to me when I lost my job at Lucent," he said. "But I had something to focus on so I was OK." After some scenes in a Will Ferrell movie were filmed there, the cafe opened to a big buzz and in six months was breaking even, Mr. Duenas says. In March of 2009, business was so strong he was able to pay his 15,000 a month overhead—including his own salary and rent to himself—and still show a 10,000 profit. Then the bottom began to fall out. The community groups with which Mr. Duenas had won catering contracts stopped calling as their funding dried up. His regulars began ordering coffees instead of 3 mochas; the foot traffic generated by the Little Village business district slowed as roughly 30 other businesses—some around for more than half a century—closed their doors. Finally in September, after losing money for several months, Mr. Duenas shut down his cafe. He rents out an adjoining community room for parties, which currently covers his reduced overhead of about 3,000 a month. He hopes to sell the business or lease it to someone with fresh ideas and capital. He says he has been approached by a man who would like to reopen it with a liquor license—an investment that Mr. Duenas said he is not able to afford. Now, Mr. Duenas is trying to keep up with the bills while he works on Plan C. He is putting off some dental work and replacements for his family's two cars—minivans which are 13 and 15 years old. When his wife returns to work later this year, he plans to put on his eight-year-old suits from his days at Lucent so he can head out on some job interviews. Mr. Duenas says he is well known in the community and is optimistic he will find something quickly. "There is a light at the end of the tunnel," he says. "But this will take another few years to pass." —Douglas Belkin After a Layoff, Entrepreneur Pursues His Own BusinessKwame Kuadey came up with an idea for a business several years ago while he was working as a compliance manager for a large financial-services firm. At the time, he says he was afraid to pursue the venture because he didn't want to put his family's financial security at risk. "I was making good money," he says. "I didn't have the courage to quit my job." But in December 2008, Mr. Kuadey was laid off. He decided it was time to kick his entrepreneurial spirit into high gear. "I felt like it was a sign," he says. Today, the 33-year-old is the owner of GiftCardRescue.com LLC, an e-commerce company that buys unwanted gift cards and resells them at a discount. He rents an office space near his home in Ellicott City, Md., and has four employees. He also does consulting work via a separate entity called Rhino Amplify, helping small businesses with Web design and online marketing. In 2009, Mr. Kuadey appeared on ABC's "Shark Tank," a show in which entrepreneurs pitch investors for angel funding, and was offered 200,000. But after the show aired, he says the deal fell through and he never got the funds. While Mr. Kuadey has a more flexible schedule these days and can take his three-year-old daughter to preschool every morning, he is making about 65% of his previous, six-figure income. Last year, he earned only half his old salary and the year prior he didn't pay himself anything. It <a href="http://www.ecigs-store.com/egot-002-p-10.html"><strong>best e cigarette</strong></a> is unclear when Mr. Kuadey will be able to go back to taking his family of four out to dinner on weekends or on annual vacations abroad, as he had in the past. Even though his business is growing, he says he can barely afford to pay his family's monthly credit-card bills, mortgage, car loan and health-insurance plan. "There is no room for anything else, like entertainment or travel," says Mr. Kuadey, who adds that he cashed out his retirement savings last year to pay off some debt. "The scary part is that if an unexpected expense happens, it always has to end up on the credit card because we don't have savings." Financial woes aside, Mr. Kuadey, a native of Ghana, says he is satisfied with his career change and now coaches others on how to start a business. "Before, I was just going to work. There was no meaning to it," he says. "Now I enjoy going to work. I feel more fulfilled." —Sarah E. Needleman Sales Are Up, but Couple Works 'Three Times Harder'Jim Dowd and Sandra Bonazoli say sales at their kitchen and home décor company are creeping back—but people still aren't spending what they used to on wedding and housewarming gifts. After making several changes to the business to counter the recession, the husband-and-wife team says Beehive Kitchenware Co.'s sales will likely top 250,000 this year, leaving them with 69,000 in net income. Still, Beehive hasn't returned to its 2005 levels, when sales topped 276,000 and the couple's net income was 90,000, says Mr. Dowd. The firm, based in Fall River, Mass., makes kitchen tools and home décor that are sold online and at boutique retailers. "[Retailers] are being very conservative when they're ordering," says Mr. Dowd. He senses that they are holding off until the last minute to purchase inventory in order to gauge consumer spending. "In our market, the price people are willing to pay for a housewarming gift or wedding present dropped from the 75-to-200 range to the 50 range," he says. Following a dismal 2008, the duo hired outside sales representatives and distributors to get their hand-made goods into more stores. They went to six wholesale shows a year, up from three shows before the recession. And they worked with a business consultant for eight months who helped them expand beyond the signature pewter products and into ceramics and wood. As a result, Beehive's product line has doubled. "We're working three times harder," says Mr. Dowd. "Our discretionary spending is really limited. And we're really trying to keep overhead tight." The couple—Mr. Dowd is 43 years old and Ms. Bonazoli is 42—is holding off on renovating their house even though the windows and roof need to be replaced. They are wary of making capital expenditures within the company. While they would like to make zinc products because the per-unit cost would be less than pewter, Mr. Dowd says the 3,000 upfront cost for a zinc mold is too expensive. —Emily Maltby Tow Trucks Fall Behind In Long HaulAbout 10 years ago, James Adams, a carpenter in Jacksonville, Fla., bought a tow truck and launched a business he hoped to leave for his two children after retiring. Offering roadside service—and hauling away illegally parked vehicles for local police—the company, J.Q. Adams & Sons Inc., made 100,000 in its first year and grew by 100,000 annually over the next six years, says Mr. Adams. At its peak in 2008, the company had five trucks and 10 employees, towing about 40 cars a day. "Each year we had a steady climb in business and then in '08 we topped out. That's when things started to fall apart," says the 51-year-old Mr. Adams. That year, gasoline prices rose to more than 4 a gallon, pushing costs up as demand plummeted. "On a good day we'd get 30 cars, but usually it was closer to 20," he says. Mr. Adams and his wife, who worked the front office, took salary cuts and laid off three drivers. Even as gasoline prices fell, revenue was down 12% by the end of 2009 and dropped another 10% in 2010. "I didn't expect it to last as long as it did," Mr. Adams says of the downturn. "I thought in six months to a year it would turn around." So he made deeper cuts—"down to the bone," he says. The company stopped providing cellphones for drivers to communicate on the road and cut employee health benefits. Mr. Adams switched to more energy-efficient lighting, reduced hot water use and even removed office vending machines to save costs. He changed vendors to negotiate better terms on everything from Internet access to garbage pickup, and cut Yellow Pages advertizing in half. When that still wasn't enough, Mr. Adams hired a full-time mechanic and opened a medium-duty vehicle repair shop, tapping into a market for servicing local delivery trucks. Though the move helped stanch continued losses from the towing business—and kept him from letting more workers go—Mr. Adams says he never wanted to be in the repair business and is now looking to sell. "We started the business for our kids, but that just didn't work out," he says. Instead, he is hoping to retire early with the savings he has left and put the whole experience behind him. —Angus LotenEntrepreneur Gets Into the Money BusinessIn anticipation of a pink slip from a Dallas telecommunications firm where he had worked for 10 years, David Walder relocated his family in January 2010 to Colorado, a state where he used to live and still had friends and business connections. He then launched a new career as an entrepreneur, raising 700,000 from investors and tapping 300,000 in personal savings to purchase three small ATM businesses that he rolled into one. But while Mr. Walder, 45, says he is certain he would be out of a job today if he stayed in Dallas, he is now making about half of his previous mid-six-figure salary. His family of four has cut back on charitable contributions and entertainment, traveling locally this year to southern California instead of abroad to Spain and France as they had in the past. Meanwhile, Mr. Walder says he also now has to purchase health insurance for his family at a cost of about 600 a month. While his two kids, ages 11 and 13, were initially upset about moving, because they missed their classmates, he says they have adjusted to their new home. Still, Mr. Walder sees his current financial situation as only temporary and says he is enjoying being his own boss. "I'm totally pumped," he says. "It's an opportunity to build wealth and an independent life outside of a corporate structure." Mr. Walder also says he likes working in jeans and T-shirts and being able to do his job from any location with cellphone reception. In <a href="http://www.ecigs-store.com/zreeoa-001-p-24.html"><strong>reviews electronic cigarette</strong></a> his previous position, he was required to wear business attire and his office was in a high-rise building. "I don't miss the bureaucracy or the office politics," he adds. —Sarah E. Needleman
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