Small business, big impact
Small business survival
About two-thirds of America’s small business startups will make it to the two-year mark. Half of those will survive for at least five years. Source: U.S. Small Business Administration Office of Advocacy
Work force potential
More than half of the private sector work force, including 40 percent of the nation’s scientists and engineers, is employed by small businesses. Source: U.S. Small Business Administration Office of Advocacy
Small business in Lawrence
Lawrence is home to 2,674 business with one to 49 employees — about 25 percent below the average for similar-sized cities. Source: CNN Money, a division of Fortune Magazine
Let’s get big-picture statistics out of the way first.
According to a September 2009 report by the U.S. Small Business Administration Office of Advocacy, about two-thirds of America’s small business startups will make it to the two-year mark. Half of those will survive for at least five years.
Despite such sobering numbers, the estimated 29.6 million small businesses operating in the country today have a huge impact on the economy.
More than half of the private sector workforce, including 40 percent of the nation’s scientists and engineers, is employed by small businesses.
Locally, a 2009 survey by CNN Money, a division of Fortune Magazine, ranked Lawrence below national averages. Based on 2007 figures, Fortune estimated that Lawrence is home to 2,674 business with one to 49 employees — about 25 percent below the average for similar-sized cities — with a growth rate of 2 percent, about half of the 4.1 percent average.
Tough times for small businesses
So how are things really going for Lawrence’s small businesses?
“It’s much more difficult to get credit now than two years ago,” says Will Katz, regional director of the Kansas University Small Business Development Center, 734 Vt., Suite 104.
Partnered with KU’s School of Business, the development center assists in the startup, growth and management of area small businesses through seminars and counseling on business plans, feasibility studies and cash-flow management.
Undercapitalization kills most small businesses, according to Katz.
“At any given time, somewhere between 50 to 80 percent of local small businesses have the potential to experience capital difficulties,” he says. “The current tightening of lending qualifications and cuts to established lines of credit only heighten the challenge.”
Katz believes that connecting local entrepreneurs to local investors is an important step in building a sturdy local economy. “Just as we’ve seen the ‘buy locally’ movement spread across the country in the past few years,” Katz says, “we need to develop an ‘invest locally’ mindset as well.”
But a home-based system is only part of the solution.
“It’s also imperative that the community addresses the retail pull factor, how to attract retail dollars from outside the local economy,” he says.
Lending a hand
Attracting retail dollars is the focus of Downtown Lawrence Inc., a nonprofit membership organization promoting the interests of downtown businesses. Jane Pennington, DLI’s director and sole staffer, represents 120 members.
Pennington reports a spike in membership in the past year. “In this economy, people are seeing the value of working together and the importance of a unified voice when speaking to city officials,” she said. “I think we get good support from the City Commission.”
For small businesses looking to cut costs, the advertising budget is often the first to go. Lora Wiley, owner of Au Marche, a European-styled food market at 931 Mass., depends more these days on DLI and other grass-roots business alliances — such as the Lawrence Give Back network and the Lawrence Originals, a restaurant group — to boost revenue.
Wiley opened her business in 1998 and now employs nine people. Chocolate is her top seller, and mail-orders account for 10 percent of sales.
“Most weekends, I greet about half of my customers by name,” Wiley says, adding, “Many of them tell me they think it’s important to buy local.”
‘The human touch’
Only a fraction of Lawrence’s small business community is based downtown. Miracle Video, in the Haskell Square mall at 19th Street and Haskell Avenue, has been in business for more than 15 years.
During the past five years, owner Dan Jochems has weathered intense competition from big-box discount stores, video vending machines and Internet movie resources. Jochems, too, credits personal relationships — bolstered by Miracle Video’s low employee turnover — as the key to his longevity.
“Quality of service is what sets small businesses apart from bigger, faceless entities,” he says. “It’s all about the human touch.” Jochems reports sales at Miracle Video are “holding steady,” and that he’s “reasonably optimistic” about the future.
Scott Trettel concurs. “I’m still surprised at how much the phone rings,” says the owner of GRIA Inc., a design/build business with five employees based in North Lawrence. “We’ve built four new homes over the past two years.”
Trettel also builds and remodels retail stores and restaurants — 715 and Krause Dining are recent clients — and does custom fabrication work for the Spencer Museum of Art.
“But, this year, the combination of the economy and a rough winter haven’t been great,” he notes. “It’s hard for clients to get loans, it’s hard to work in the snow. So you learn to run leaner and to adapt to a little less work.”
Best business bets
Ted Haggart, president of Douglas County Bank, thinks the dire numbers whirling in the national news don’t necessarily apply to Lawrence. “The big banks aren’t like everyone else,” Haggart says. “In our case, I’m glad to say, we had a successful year in 2009, and we’re on the lookout for sound lending opportunities.”
Haggart notes that Douglas County Bank is “very active” with recently expanded SBA lending programs, which include substantial increases in loan caps and up to 90 percent guarantees on certain loans. But that doesn’t translate to lax lending practices.
“We always base loans on realistic business plans,” Haggart says. “Entrepreneurs need to bring two things to the table: reasonably sound financial projections and some sort of capital base.”
Is it easier for local entrepreneurs to get loans from local banks?
“A bank with deep roots locally will be able to make sounder decisions about lending in a local economy,” Haggart says. “The bottom line is that we both want your business to be successful.”
The best bets for local entrepreneurs in 2010?
“Starting a small service business as a technician — a hair salon or a plumbing company, for example — looks like a good bet for the future,” says Katz of the KU development center.
Wiley of Au Marche takes the larger view. “In business and life, everything is cyclical,” she says. “You adapt or die. Things have to change.”