Story from American Chronicle
Opening a new business requires a dose of bravery in any economy.
The challenges only mount during a downturn. For starters, customers and lenders get stingier with money. Still, this recession, as in past slumps, is sparking a surge in wannabe entrepreneurs striking off on their own.
"Smart and hard-working people lose their jobs, sometimes with severance packages, and no one is hiring," said Thomas Miller, head of N.C. State's Entrepreneurship Initiative, established in July to foster start-up activity. "It's the perfect opportunity to take a shot at that good idea you've always had in the back of your mind."
With the state's jobless rate rising to record levels -- employers cut 41,300 jobs in March, and unemployment shot up to 10.8 percent -- it figures that more workers are considering other options.
Local organizations that help fledgling business owners, including Wake Technical Community College, SCORE and the Council for Entrepreneurial Development, report big increases in demand for classes, seminars and other assistance.
Some are ventures that will always remain one- or two-person operations. Many will fail. But a few could blossom into successful employers that bolster this region's economy.
A year ago, Wake Tech offered one Planning the Entrepreneurial Venture course. Now there are four, with two more starting soon. The $65, 10-week class teaches students how to write a business plan, marketing basics and more.
"Does a business have legs, can you make money at it? That's one of the keys," said Fred Gebarowski, director of entrepreneurship at Wake Tech. "I'm providing a service by keeping some people from starting a business."
It's not just the newly out-of-work that turn out for classes. "Some people are still employed, but want to ramp up their side business, just in case," he said.
Audra George had a full-time job as a legal consultant in late 2007 when she started making speciality cakes, decorated cupcakes and other baked goods out of her North Raleigh home.
She was let go a few weeks ago. Now she's sinking all her time and energy into her business, Audra's Cakes and Creations.
"Of course it's scary," she said. "I always had the security of a job before this. Sometimes things do happen for a reason."
George, 37, makes four to five dozen cupcakes, as well as some rum and amaretto cakes, each week for A Southern Season, the gourmet food store in Chapel Hill. She's in talks with Whole Foods. And she sold her first wedding cake last month. The couple wanted a cheaper option than a traditional cake, so George made a small six-inch cake surrounded by 100 cupcakes.
As she started her venture, learning how to write a business plan was crucial. "I needed to figure out how many cupcakes I had to bake and sell to make a profit," George said.
And she's had to adjust her business model -- she resisted seeking wedding business at first. Now she's hoping word of mouth will attract more. And she's looking ahead to the fourth quarter and the typically busy holiday season. If she can build her client base by then, she expects her business will become profitable. Eventually, she'd like to open a shop.
"In order to move it to the next level, it's going to take a lot of discipline," she added. "Hopefully, things will get better."
Sometimes hard work and a good idea aren't enough, especially during down times. For every recession-era success story -- think Microsoft -- the landscape is littered with failures.
But in some cases, a recession can be a smart time to start a venture because owners learn to make it on a shoestring budget. And choosy customers quickly weed out weak ideas.
"You've got to understand that you're going to be living on the edge financially for some time," said Bob Pickens, recently named director of entrepreneurship at CED, a nonprofit in Research Triangle Park. "It's not for everyone in good times, and it's certainly not in bad times."
Running with an idea
Joe Philipose and Lesley Stracks-Mullem hatched plans for Taste Carolina Gourmet Food Tours last fall. The business partners are forging ahead despite the recession. In March, they started running tours of restaurants, wine bars and other foodie attractions in Durham, Carrboro and Chapel Hill. The Durham tour is gaining fans, with eight or more people each time. Chapel Hill has been a bit slower going.
Tours in Raleigh start Saturday.
"We're doing our best to make money, but we see how tough it is," Philipose said. "We know people don't have a lot of money to spend."
But the owners are passionate about local food, and they know others are, too. The tours ($37 for three hours) offer tastings, a chance to mingle with restaurant owners and chefs, and exposure to new eateries.
Philipose, 36, went to law school but had been doing corporate strategy for drug makers. Last year, he got laid off by Biogen Idec. That hastened his dream of starting a food tour business. He met Stracks-Mullem, 35, who had a similar idea, through a Durham restaurant owner.
"We're definitely taking a long-term view of this," she said. "We've been in business six weeks and we're really pleased with the progress."
They've started marketing the venture, are trying to attract corporate and alumni tours and are considering themed tours -- based on shows at the Progress Energy Center for the Performing Arts, for example.
"It's natural to be nervous," Philipose said. "Do people have less disposable income? Yes. But in times like these, people take time for little luxuries."
Their business is a relatively low-cost endeavor. There are marketing costs, but mostly just lots of hours that Philipose and Stracks-Mullem put in.
And Philipose does have a back-up plan: He recently took a job with Kerr Drug as vice president of strategic planning and business development.
Seed money for nappies
Securing money to start a business becomes a major hurdle in down times. This recession has lenders tightening loan requirements more than ever.
"Banks like a sure thing," said Jerry Lustig, a retired IBMer who is chairman of the Raleigh chapter of SCORE, which taps retirees to counsel small-business owners.
Karissa Binkley realized she needed a few thousand dollars to start a high-quality, eco-friendly diaper service. So she turned to a friendly face for a loan: her grandmother.
Binkley, 30, is a birth doula who helps about two women a month through childbirth. Her family is Dutch and very supportive of natural childbirth.
The Triangle Diaper Co.'s Web site is up and her service officially opens May 4. Binkley, who lives in Cary, sat down with her husband before starting to plan her business selling organic cloth diapers washed in green detergents. He agreed with her assessment that there was an underserved niche, even in a recession. Costs start at $50 a month for 25 diapers a week. A "welcome baby" 12-week package is $285.
Binkley has training in writing business plans, so she built three spreadsheets based on different sales projections.
"The first couple of months are really going to make or break me," she said.
Although she didn't have customers signed up last week, she has consultations scheduled with five mothers, and inquiries from more that are expecting in coming months. She is getting support from several OB-GYNs, the UNC-Midwives practice and others who are giving her information to prospective clients.
"Doors keep opening -- people have been looking for this," Binkley said. "As long as I'm not greedy, I think things will work out. I believe in karma, but you still have to have some business sense, too."
A warm fuzzy
Karen Diebolt didn't feel much pressure when she started her small business because she had a day job as a commercial loan officer. Then in July she was laid off.
"Running your own business is hard, but looking for a job in this economy is really tough," she said. So she turned her complete attention to Softedz, which sells soft, fuzzy creatures for corporation promotions and special events.
Its origins came from Thanksgiving with family in Savannah, Ga. After dinner, Diebolt would help organize crafts. Her sister suggested she take her skill and try making money at it.
She took a Wake Tech class and a series of online seminars. She learned about business plans and online selling. She found a manufacturer in China and secured a supplier.
Now she needs customers.
"It's hard for businesses to spend money on promotions when business is slow," said Diebolt, 54, of Wake Forest.
As she waits for corporate business to perk up, Diebolt is selling some Softedz with a friend's food products from a booth at Magnolia Marketplace in Raleigh. A store in Savannah will start selling them next week. And she's trying to sell them to kids' sports teams as an alternative to trophies.
She's not ready to give up.
"I believe this is a viable idea," Diebolt said. "The timing just turned out to be not as good as it could have been."
