Archive for Wednesday, January 21, 2009

Small-business owners keep faith, despite economic crisis

Residents start up small businesses, despite economic doom and gloom

Sean Passmore, owner of Bling Drop Off Store, hopes his small business will survive recent economic hardships. He sells goods for people on eBay. "On average, people have about $2,000 of unused stuff in their homes," Passmore said.

Sean Passmore, owner of Bling Drop Off Store, hopes his small business will survive recent economic hardships. He sells goods for people on eBay. "On average, people have about $2,000 of unused stuff in their homes," Passmore said.

January 21, 2009

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Sean Passmore, owner of Bling Drop-off Store, looks at a guitar brought in by KU student Dave Clothier. Passmore hopes his start-up business will make it through the recent economic recession. Passmore will try to sell Clothier's guitar on eBay.

Sean Passmore, owner of Bling Drop-off Store, looks at a guitar brought in by KU student Dave Clothier. Passmore hopes his start-up business will make it through the recent economic recession. Passmore will try to sell Clothier's guitar on eBay.

Rachel Bechtold presses out the chocolate chip dough for a giant sixteen-inch cookie. Eileen's Colossal Cookies opened up earlier this month.

Rachel Bechtold presses out the chocolate chip dough for a giant sixteen-inch cookie. Eileen's Colossal Cookies opened up earlier this month.

Owner Michael Neth opened Eileen's Colossal Cookies earlier this month.

Owner Michael Neth opened Eileen's Colossal Cookies earlier this month.

Sara Tramp puts icing on small sugar cookies for a special order.

Sara Tramp puts icing on small sugar cookies for a special order.

Before the doors to Lawrence’s Massage Envy opened in July, Amy Gilliland’s husband and business partner were nervous about an economy that was on the decline. Six months before, as Gilliland was looking for space to house the franchise business, her father warned that the country was headed for a recession.

But all that news of economic doom and gloom didn’t make much of a difference for Gilliland, who was too busy getting the business ready to open to worry.

“How many hard economic times have we lived through?” she said. “And we have always come out of it.”

Gilliland is among the entrepreneurs in Lawrence who, despite an economy that was headed for an historic downturn, made the decision to hang an open-for-business sign.

In 2008, the Kansas secretary of state reported 16,618 new business filings, which is less than a 1 percent decrease from the year before. And it’s a slight increase over the number of new businesses that filed in the financially stable year of 2006.

Recently, Beth Johnson, vice president of economic development for the Lawrence Chamber of Commerce, has received more calls from people looking to start their own business. A large number of those inquiries come from laid-off workers in the construction field who are thinking about venturing out on their own doing handyman or remodeling jobs.

Typically, in weak economic times activity for the Kansas Small Business Development Center goes up, said state director Wally Kearns.

For starters, people who have recently lost their jobs take the opportunity to act on long-lingering business ideas. It’s also the first time that some small businesses have been faced with a down market, so they come into the state’s centers looking for advice.

Keeping the doors open

In truth, the economy didn’t have much to do with Gilliland’s decision to start her own business. The stay-at-home mom was preparing for her youngest to begin school full time, and the family decided they wanted something they could own.

The franchise’s market research — and feedback that Gilliland gathered separately — indicated a massage business would be well-received in Lawrence.

Her business plan was to change the image of a massage from an elite, luxury service to one that is affordable and has lasting health benefits. So far, it’s a model that has worked. Her massage therapists are booked, and she is looking to hire more so she can keep true to her advertising promise that clients can make same-day appointments.

“There is absolutely nothing that tells me I need to close my doors,” she said.

Feeling the crunch

With tight credit, low consumer confidence and high unemployment, it’s a tough world for the small-business owner, said Wally Meyer, director of Entrepreneurship Programs at Kansas University.

“In many cases, small businesses and certainly start-ups have a tendency to feel the crunch even more because so many of the challenges of working in a down economy are magnified on the small business,” he said.

Small businesses can be reliant on lines of credit and a steady supply of cash to operate, which banks have become more wary of giving out. And many small businesses offer those nice-to-have versus need-to-have items.

“The only guys that seem to be doing even half well are McDonald’s on the food side and Wal-Mart on all the other sides,” Meyer said. “At the opposite end of the spectrum are small businesses that demand a premium price.”

Small business loans are harder to come by these days, but they’re not impossible to get.

Regional banks continue to be well capitalized and have more than enough liquidity, said Doug Gaumer, community bank president for Intrust Bank. But underwriting standards have put more restrictions on loans.

Compared with a year ago, people wanting financing for small businesses will need more collateral or equity to get it.

Giving it a go

A few store fronts over from Massage Envy sits Eileen’s Colossal Cookies at the intersection of Sixth Street and Wakarusa Drive. The franchise store, which sells elaborately frosted cookies and tubs of cookie dough for fundraisers, opened Jan. 12.

The country’s financial meltdown fell between June, when Michael Neth proposed the idea of opening a cookie shop, and this month, when the first cookie sold. While the turmoil was on Neth’s mind, it didn’t stop him.

“We had so much confidence in what we were doing and how we were going to do it that we never blinked at it one bit,” Neth said.

Sean Passmore, owner of Bling Drop-off Store, is hoping he has a somewhat recession-proof business. More than a year ago, the former newspaper ad salesman set up shop in a basement at Ninth and Massachusetts streets. For people who want the bidders but not the hassles of Web auctions, Passmore takes in items and sells them on eBay. In return for a 30 percent commission and other fees, he will post the item online, oversee its selling and ship it to anywhere in the world. He hopes that people looking for extra sources of income will come to him.

His start-up costs weren’t much: the rent, a computer and a few lamps. He had a little help from his parents, but didn’t have any loans.

“I’m operating on a wing and a prayer,” he said.

Regardless of the economic conditions, Will Katz, who is regional director of the KU Small Business Development Center, said the three M’s — management, market and money — have to be in place before starting your own business.

And the ones who are going to do best are those who can differentiate their business from others and market it to a well-defined group, not to the masses.

For new businesses that are able to weather this economic storm, the rewards could be plenty, Katz said.

“If you can get a foothold now, when the economic times improve, you will be on solid ground,” he said.

Comments

spankyandcranky 6 years, 3 months ago

This article brought to my atention a couple new businesses I hadn't yet heard about. And I always like to use local businesses before larger chains if I can. Interesting article. Thank you.

bizarre 6 years, 3 months ago

I have used Message envy and they do give a great massage! They use heated sheets, and you can choose between a deep tissue massage or a gentle relaxing message.

LogicMan 6 years, 3 months ago

I heard a rumor that Steak n Shake had closed. Is this true?

Thats_messed_up 6 years, 3 months ago

Obama's going to help all of us small business owners by forcing us to provide free health care to all employees. This will definitely get us out of the recession quickly!

ksjayhawk74 6 years, 3 months ago

@ flamingdragonZING! Very topical. Actually he's been in business for a year and a half. Obviously he's doing something right.His commission is more than 5% less than the competition. The reason he only accepts things that are selling for more than $20 is so that it's worth the customers time and his time to have it sold. It's MUCH easier than doing it myself.I brought my old Star Wars collection in and he did very well with it. I had 1 action figure that sold for $350! Supposedly, that's a record for the highest selling loose action figure. I had no idea it was worth so much but he knew to sell that one by itself so it wouldn't get mixed in with a lot of less valuable figures.He also told me about selling a 10 year old Game boy game that was sealed and sold for $400, same story as mine where the person who brought it in had no idea it was worth even close to that.

bizarre 6 years, 3 months ago

I think that the ebay guys fees are very reasonable. I have seen other ebay drop offs that charge up to 50% commission.

bizarre 6 years, 3 months ago

Pizza Street is gone! Last wednesday they just sent everyone home and now the building is empty! Not even one chair up in there. So sad.

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