Small businesses starting despite economic challenges
Starting a small business in a slow economy is not easy, but it hasn’t stopped entrepreneurs from gambling on new ventures.
To survive, many business owners have slashed prices, made do with fewer employees and worked harder at marketing. Some have tapped savings and cut personal expenses to try to keep their doors open.
Christy Platt, who launched Simply Layered Cake Design in Huntington Beach in February 2009, has struggled with inconsistent sales this year. Searching for new clients, she gave away hundreds of dollars worth of samples at the recent Taste of Huntington Beach. She also spent hours working for free earlier this year as an assistant on two winning teams in TLC’s “Ultimate Cake Off” challenges.
The work helped her land a job creating a cake for the launch party of actress Eva Longoria Parker’s new perfume, as well as other high-profile jobs. But Platt needs steady orders to be able to order ingredients in bulk and pay the rent on a commercial kitchen.
Rejected for a $25,000 small-business loan, she cut back on personal expenses and even moved to a cheaper apartment. Platt relies on a volunteer helper because she can’t yet afford a part-time employee.
“I still have to choose: Do I pay the electric bill or do I go out and buy butter?” she said.
These challenges are getting more attention these days from policymakers looking for ways to help small firms, which many believe are the source of the new jobs needed to speed up the economic recovery.
At Platinum Resource Group Inc. in Santa Ana, which was founded in February 2009 to provide temporary professional employees and consultants to mid-size companies, owner Christi Haley Stover employs six recruiters and salespeople. If sales were better, she said she’d hire more.
“We had to be a lot more creative in a number of ways,” said Stover, whose husband has been helping for free since he lost his job last year.
That creativity has included working harder to build relationships that fuel sales.
“Instead of making 10 calls a day, maybe I am going to make 50 calls a day, and instead of five meetings a week, maybe I am going to have 25 meetings a week,” she said.
Start-ups struggled even when the economy was running in overdrive. Finding the right solutions, faster, is more important today because the margin for error is smaller. Adding an employee is a costly step many are reluctant to make.
“This is not the same world it was in 2005, 2006, so their success depends dramatically on what they do in running their business,” said Ben Tenn, a senior business consultant at the Small Business Development Center at College of the Canyons in Santa Clarita.
Data may show that more people are becoming self-employed, but they also show even more people are leaving self-employment, said Scott Shane, a professor of entrepreneurial studies at Case Western Reserve University in Cleveland and a frequent blogger on start-ups and the economy.
“That suggests that this isn’t really a good time for entrepreneurship,” he said.
But people start businesses for a wide variety of reasons, and many don’t have the luxury or desire to wait.
Tonya Clark opened Eclipz Hair Salon in Hesperia in December with her mother, April Tingesdahl.
They left another salon, where they rented booths, to launch the Main Street business, which they funded themselves.
They were able to nab a spot in a Super Target shopping center for about one-third less rent than pre-recession levels and now have six people, most family members, renting booths from them. On the down side, it’s been harder to fill their last four spots because stylists and other professionals with their own clientele — a condition Clark requires for these openings — are uncertain their customers will follow them to a new shop. Some customers have lost jobs, homes or both. But that hasn’t stopped Clark.
“Yes, it’s another hair salon opening, and you wonder why because it’s the first thing women let go: hair, nails, feet,” Clark said. “But to be honest, it came to the point I didn’t want to work for somebody else anymore.”