News Column

'Adapt' Is the Word for Small Business

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The official start of the worst economic downturn in almost 80 years was three months away, just as Stephen Wilson and his wife embarked on their dream of owning a high-end bakery.

Opening in Vineland in September 2007, the Sweet Life Bakery would survive and adapt to a changing economic world, outgrowing the shell of a 700-square-foot former Jamaican restaurant, taking over a much larger storefront and adding a dozen employees.

Five years later, the bakery is among the half of new New Jersey businesses that have managed to survive -- adapting in its case by adding a lunch menu and introducing cooking classes to augment the slow times.

"This is the economy we've known," said Wilson, 31, who owns the bakery with his wife, Jill McClennen. "It's a good thing, because it forced us to do what we do in the economy we have today."

Local entrepreneurs created businesses from 2007 to 2010 even though jobless numbers were climbing, banks were tightening lending and companies around them were folding.

Some were among Americans creating their own jobs. Entrepreneurship spiked after the recession began, and the rate of new-business creation was 5 percent higher than before the recession, according to the Kauffman Index of Entrepreneurial Activity.

But surviving in this economy is not easy: Companies established for less than five years have the highest failure rates among businesses, a trend exacerbated by the economic downturn. About 53 percent of the 16,618 New Jersey establishments created in 2007 were still around by 2010, according to the latest data from the U.S. Census Bureau's Business Dynamics Statistics.

For those who saw their concepts come to fruition, surviving the early years required taking risks, staying determined and overcoming early missteps -- and they continue to struggle as they seek to thrive and grow.

Growth does not yet mean economic comfort for Wilson, who was able to expand to a 3,000-square-foot location.

"I was hoping after five years it wouldn't be so much of a financial struggle, but that is a component of it," he said. "It is fun. It's soul-fulfilling. It's our profession, and it sustains us. But I'm not raking in big bucks, and I think a lot of entrepreneurs ... think they'll make a million bucks off an idea, (but) the reality is most people don't."

The couple started the businesses with a $40,000 investment, a loan from the Cumberland Empowerment Zone, and a culinary philosophy of creating unique cakes and desserts from scratch -- from the caramel syrup for lattes to homemade pie crusts, he said.

The high-end and labor-intensive products generally cost more, another hurdle for a business that opened before the official start of the recession.

"It was the scariest and most exciting month of my life," Wilson said. "We put the word out. I remember us waking up at 2 the first morning to bake, and Jill and I are looking at each other, and we were like, 'What are we doing? What if nobody comes?'"

Customers did come, and Wilson said he soon knew they needed more help.

That included expanding from a bakery to a coffee shop, and adding a lunch menu to draw more traffic. The owners, both graduates of the Culinary Institute of America, recently began offering cooking classes to supplement a typically slow time for bakeries, when post-holiday spending is down and New Year's resolution-fueled diets abound.

In Cape May Court House, Scott Reef , 47, opened Reef Family Pharmacy in 2009, coming from a career in pharmacy at Rite Aid and running a franchise for five years.

Despite success at his franchise, five banks turned him down for a loan.

"I thought, all right, maybe it's not meant to be. Maybe it's an omen that if the banks are so worried about their future, maybe it won't happen," he said.

One bank did loan him $250,000, which was significantly less than what he sought.

"We were underfinanced from the beginning. ... It was right from the beginning we were living week from week," he said, noting a nearly two-month lag time for health-insurance company payments. "But because of that, it has been good, because we really had to be tight with everything."

Reef Family Pharmacy has grown each year, and now employs five people.

"We started when the recession was starting. There were not a lot of people who said this is a really good idea. My father told me, 'What are you doing?' Because everywhere around, you saw businesses failing," he said.

Reef benefited from an industry somewhat insulated from the recession.

Starting the business came with sacrifices, including a 70-hour workweek that means missing time with his four children.

But he's practicing pharmacy the way he always wanted to -- accessible to his customers.

Joseph Molineaux, director of the Small Business Development Center at Richard Stockton College, assists start-up businesses and existing ones planning expansions.

How long it takes to determine whether a business will be successful varies by business and industry, he said.

Molineaux said Wilson's bakery, which sought the center's advice, did a good job.

"They realized who they were trying to reach and had good, measurable results," he said. "They actually sought as much advice as they could, and that allowed them to make really good business decisions."

The Kauffman Index, which tracks start-ups, said New Jersey had 270 entrepreneurs per 100,000 people in 2011, the latest data available.

New Jersey ranked 28th in the country in entrepreneurial activity, tying Delaware, Kansas, New Hampshire and Ohio.

In Ocean County, Steve Fritz started Seawall ARTifacts as a wholesale business in 2008 and then a retail operation on Long Beach Island in 2010.

Graduating from Temple University in 2004 with a business degree, Fritz had planned to be an entrepreneur and owned a nautical gift shop for several years after college.

Fritz, 30, of Manahawkin and Haddonfield, started in 2010 with minimal inventory, using his personal savings rather than taking out a loan tied to his home.

"I wanted to be really conservative with the way the economic climate was and give it a shot," he said.

He took the first year's profits and put them back into the business.

The business grew, and Fritz moved to a new location in Beach Haven -- eight days before Hurricane Sandy hit and flooded the store with 18 inches of water.

Fortunately, he moved the inventory before the storm.

Work to replace floors, drywall and lighting finished in mid-January. Fritz plans to reopen in March.

"You've got to stay calm, because you have to realize there's nothing you can do about it. Everybody was in the same boat together," he said.

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