Sunday, December 13, 2009

The worse it gets, the more chances people take.

Interesting article in the Oregonian a couple of days ago, about small business in Lake Oswego. (Below).

If you read the article, I think you can almost substitute "Bend" every time they mention "Lake Oswego," and you wouldn't be far off what's happening here.

They even use the word "counter-intuitive" to explain the phenomenon.

All well and good, but if you'll notice, many of these businesses were started because the owners couldn't find a real job; which ought to have been a warning.

Reading between the lines, it looks like the financing came either from family, or from home equity. Which puts the new owners in a double bind. It's one thing to fall through on a business loan, it's another to lose your home and or lose your parent's home.

New businesses in the downtown core is just great; I'm all for it. It certainly helps my business out to have occupied spaces instead of vacancies. But, it just means that someone is willing to take a chance -- maybe even more willing to take a chance because there are no alternatives -- than because the economic conditions justify it.

Like I said: I'm all for it. As long as the new owners fully understand what they are in for. I suspect it's like parenting -- ignorance is bliss. Some of these new businesses will have the right stuff, and others will flounder, as is true no matter what the surrounding economic conditions.

I think downtown Bend may have had a waiting line for businesses that either wanted to open or to move here. So we've been benefiting from that. And, as I've mentioned before, where else in Bend are you likely to get real foot traffic? (Besides the Old Mill.) So if any place in Bend is going to fill up, it's downtown.

In theory, opening in a recession should give the new owners some clout; in reality, I think the advantages are probably marginal. What they do have, perhaps, is a more realistic appraisal of the economy, and the understanding going in that it will probably be a struggle. And that would probably keep them from being foolish with their finances, and a bit more careful in their approach, and a little more willing to endure the bad times.

Again, I'll use the word 'counter-intuitive'; but that very awareness of the dangers may be enough to get them through.

I should probably mention, opening at the depths of a deep recession is exactly what I did. And for much the same reasons -- no job. The amount of money risked wasn't a killer, but I certainly approached my new business with a great deal of wariness. I think that has served me well, over the years.


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A recession marked by new businesses

By Yuxing Zheng, The Oregonian

December 11, 2009, 7:20AM
LAKE OSWEGO -- A peculiar trend emerged here during the depths of the recession: A slew of businesses opened their doors, including about a dozen restaurants.

Helene Rimberg had nurtured the idea of opening her own restaurant for more than a year as a way to combine her passions for international travel, food and wine. "I'd been out of work for a year and a half, and I felt like I either had to go back to work or start this business," said Rimberg, who had spent years as a psychologist at a nonprofit. "In terms of what I could do to go back to work, there wasn't a lot there."

And so, in February, Gusto Bistro & Marketplace opened in Lake Oswego's downtown retail core.

Times like these, it turns out, force us to reinvent ourselves.

It might seem counterintuitive, but recent conditions have swayed a number of new owners to use home equity or cash from corporate severance packages to realize the long-delayed dream of business ownership.

In Lake Oswego, an October retail market analysis commissioned by the city found a 4.8 percent vacancy rate in downtown -- a relatively healthy number in a wounded economy.

Recessionary economics shake out favorably for fledgling companies in some ways: inexpensive equipment, affordable labor, and better leasing terms from flexible landlords more willing to negotiate. On the flip side, it's tricky to obtain a loan or other start-up capital in this bear market.

Rimberg and her husband and co-owner, Doug Boe, took a mortgage out on their Lake Oswego home to open the 1,600-square-foot bistro and shop. They spent weeks laying the floor tiles themselves, painting the walls dandelion yellow and violet, and saving money by doing all the renovations except for the electrical work. The landlord paid to build a wall so Rimberg could lease a more manageable-sized space.

Like other businesses that have opened recently, Rimberg made several adjustments to try to increase her store's chance of survival.

"One thing we hoped is that in creating a business in a fairly affluent community, we would be a bit more recession-proof," Rimberg said. "The other strategy we've tried to employ is having very reasonably priced offerings. We offer high-quality food for a lot less than you find in a lot of other establishments."

The difference quickly became apparent on the marketplace side, where it took seven months to sell the fourth and final bottle of a $29 Italian nebbiolo wine. By comparison, she restocks monthly the $10 bottles of Greek cabernet sauvignon.

Unlike other communities, when the punishing economy forced some Lake Oswego businesses to close, others opened. So far this year, the city has licensed 166 new commercial business and 111 new home businesses. Those numbers are down from last year's 192 for commercial businesses and 124 for home businesses, but still encouraging given the circumstances.

Excluding the financial service businesses fleeing Kruse Way office space, the result has been little net change in the number of retail businesses and restaurants, city and business leaders say.
Three blocks away from Rimberg, Caitlin Massey opened Lakeside Home & Gift in October.

The shop is a reincarnation of the store her mother, Lynne Wintermute, operated for years in downtown before shuttering the doors in 2002. Wintermute had considered getting another job with the worsening economy, so Massey approached her mother about reopening the shop, where Mom is now manager.

"I had always wanted to open a store," said Massey, who grew up working in her mother's shop. "It was a good opportunity. There were a lot of spaces open because of the bad economy. I knew I could do it, and jumped on the chance."

Massey said she got "a good deal on the property" and is hopeful that will help her get through the recession. She's also relying on the store's name recognition with her mother's former customers and Lake Oswego's culture of supporting independent local businesses.

A number of successful businesses that exist today started in recessions, said Bill Conerly, an economic consultant based in Lake Oswego. Now is a better time to start a business than in three years, he said.

"The worst time to start is when the economy looks really strong, because you're likely to pay a lot for rent and for people, and then the economy starts to weaken and you can't support those expenses," Conerly said. "If it's a step you want to make, I wouldn't hold off just because of the economic situation now. The economy is going to get better."

3 comments:

With Apologies To Henry David said...

You said: And, as I've mentioned before, where else in Bend are you likely to get real foot traffic? (Besides the Old Mill.) So if any place in Bend is going to fill up, it's downtown.

I've noticed a uptick of leased space at the Cascade Village Shopping Center / Mall north of town in the "golden triangle." What is your opinion of the foot traffic for a new business in the village mall -- better or worse than downtown? Old Mill? Visitors or locals only?

Duncan McGeary said...

It doesn't seem very browser friendly to me, but then I don't shop much.

Helene said...

As one of the business owners in the original story I would agree that we have been much more cautious as we took on this new business venture. However, I wouldn't say we lauched because of the recession (I didn't try too hard to find a real job) but rather despite the recession. You can't change the times - merely pursue your dreams anyway. Next time you are in Portland - come eat at Gusto