Friday, August 10, 2012

Creative destruction.

Not to tease anyone, but I'm hearing a number of rumors about local businesses who are getting ready to quit. But, because they are rumors, I can't tell you.

A couple of confirmed. Fox's is closing, after 3 years. This opened with great fanfare, but then I didn't hear much.

And of course, Common Table. I was talking to someone involved, and he said that he thought if it was a "for profit" business, the owners would probably try to stick it out and turn it around, but because it was a non-profit business, there was no real margin for error.

Something I never thought about. Certainly, there were a number of years where any outside party who didn't have the motivation I had in keeping my business going, might have looked at my numbers and closed the doors. But I just bulled through the rough patches, daring them to lock my doors.

I was talking to someone at the store, and told them: "Notice. A business will always have a reason for going out of business that doesn't involve how well they are doing. Always. Just look for it."

For Fox, it was increased rent. For Common Table, it was further renovations to the building.

Well, of course they had other reasons for closing. But it think they are the symptoms, usually, not the cause. Not always, I suppose. But almost always. Very few of us get to the point where we want out of a thriving business and move on. Either we don't get that far, or if we're truly thriving, we can keep the business going by other means, or we'll keep on doing it.

'Quimby' was commenting on how impressively extensive my list of "Openings and Closings" has become. Now, people are seeing what I've always seen. That businesses come and go with great regularity, but very few are there for the long run. (Over 10 years, certainly over 20 years.) There was a point in my business where I wondered if ANYONE really succeeded.

Lots of churning cash. People benefit, somewhere, from all the creative destruction. But man, it's impressive to watch how creatively destructive it is.

Doing some traveling has made me think that Bend has a much higher turnover than other places. You can get that sense by how long businesses have been in business in other towns. If they think nothing of having been open for 15, 20, 30 years, then you know it's more normal there.

It's impressive how hopeful new entrepreneurs are, despite all the evidence.


Anonymous said...

i have been in bend in restaurant business and catering. we started the jackalope in the vet emergency stellar location a month before 9/11 struck, kept our catering company 'barking squirrel' half a nostril above drowning and started joolz downtown on the cusp of the country's spiral into economic quicksand.although i don't consider the career long term, it's been 12 years of blood, sweat and taxes. some may look at our busy dining room and think we are successful, but to survive we've eaten the cost increases on food, we've gone to sustainable, organic and humanely raised and slaughtered product absorbing the cost and not raising through the gross inrease by our vendors. downtown has a mythical power around it, unless you are the firehall; people consider it the holy grail, can't fail...isn't this the second olive oil boutique we've had in the same spot? downtown owners continue to get crazy leases, everyone says 'how can i fail? it's downtown bend'. let me tell you, you can. you may. and on your heels is another smarter entrepeneur with a savvy business plan who will curse you 6 months in and pack up in two years. if you are interested i have a great space. it would be a great restaurant, how can you fail?

Duncan McGeary said...

Thanks for that. It seems like I rarely hear from other downtown businesses who are willing to tell it like it is.

I'm not so sure the Firehall is a doomed location; it just needs a successful restaurant to go in.

I say that, because before Toomies took the space they're in, there was a series of seemed like the same kind of thing.

Downtown crazy rents. Yes, and what's worse is that is the baseline other locations use to calculate their rents, which puts everyone's rents out of whack.

But they can get it, because -- like you said -- downtown Bend has a rosy glow.

Leitmotiv said...

sort of related: The Hive in Redmond is closing August 25th. Did I read that hear? Can't remember.

Unknown said...

For some reason, as I read your post, I find myself thinking, yeah, and the bailout rate for marriages is pretty high too. There are always crunch points, in business and in marriages, and I believe getting through them requires some intangible combination of desire, luck and a strong foundation to fall back on, as well as a certain amount of intuition, more commonly referred to as ' a good business sense'.

It seems to me that a lot of people go into business with pretty unrealistic expectations, particularly those who go into something thinking 'investment equals return on investment'........ Of course, that goes for marriages as well -- romantic expectations based on too many tv ads of smiling couples laughing arm in arm through the waves of a tropical beach, too few shots of young couples tiredly changing poopy diapers.

Years ago I was standing in the shop, chatting with a young couple visiting from back East. They guy was saying how much he loved the shop and how he really wanted to have a bike store too. He nattered on about getting an MBA and how hard it might be to get investors, and when he paused for breath, I told him maybe he needed to rethink his 'plan'.

I don't know much about what you 'learn' getting an MBA, but I know some of the factors that have been part of our longevity and modest success (can I call staying in business for 40 years 'success'?) have more to do with human nature than a plan on paper. Start small, put all your time and energy into it, offer something people need and want, and keep at it through good times and bad. Evolve, adapt, learn. Pretty much the same as the requirements for a long, healthy marriage.

I also think intuition has a big part, and I doubt that can be learned in university classes. Duncan, you have followed your instincts in your determination to stay downtown and stay in business, and you have used determination and creativity to keep going.

For us, downtown was clearly holding us back in many ways -- lack of support by downtown organizations, lack of parking and loading/unloading space for our type of business, and potentially, a rise in rent. These were all factors over which we had no control.

Downtown was not a good fit for a bike store, at least not for ours, and it's not going to be a good fit for other businesses either. I do have to question the marbles of anyone thinking an olive oil boutique is going anywhere, especially the second person to think that. Sorry for the dig, I guess I'm going into my 'old timer lamenting the demise of businesses selling actual stuff and services real people need' persona again.

I am really sorry to hear about Fox's -- though I'm not sure it's properly 'downtown'? Our little westside 'neighborhood' has been a great place for many newer businesses like Kebaba, as well as older ones such as the Newport Ave Market (in its many guises through the decades).

These are surely perilous times for small business owners, and that means we all need to keep our eyes shaded from any rosy glow on the horizon -- unless it is the sunset over the mountains.

Duncan McGeary said...

Thanks for the detailed comment.

Yeah, it seems that people don't want to "Start small, put all your time and energy into it..." anymore.

Nor do they understand that it isn't "'investment equals return on investment'". (I'm stunned by the initial investments people are putting into untested businesses....)

And, yet, 40 years is some big success in my eyes!!

Duncan McGeary said...

I mean "and Yes, 40 years is some big success!!!"

Duncan McGeary said...

I'm not including Fox on my list of Comings and Goings, just found it interesting.

I should take the time someday to find out out how many businesses are on both lists, which means they lasted less than 4 years.

At the rate it's going, the old equation of 50% going out in 5 years, is going to hold up. I'm actually surprised it's not a little more, in Bend.

The more businesses coming than going, is at least partially due to a number of spaces becoming available in the last 4 years.

Unknown said...

It seems to me 50% is about the current average failure rate for new marriages too. As you have oftentimes commented, landlords who keep rents ridiculously high seem to be a big part of the problem. Many seem to feel rapid turnover of renters is acceptable, because it keeps money in their pockets. There seems to be no concept of the bigger picture -- isn't a longterm business paying modest rent better for all concerned than a series of shorterm businesses paying high rent? I would like to think some of them are trying to pay for rising landlordly costs, but somehow the word 'greed' keeps coming to mind......... I suppose it's the investor's version of the mythical 'investment equals return on investment', defining 'return in purely short term monetary terms. Intangible factors like making a contribution to the local economy by helping create viable businesses that employ real people, creating an atmosphere of stability and value in our modest little downtown, are not always evident in the actions of some (many?) business property owners. Focusing on and valuing the short-term vs long-term, is IMO a major flaw in our national character these days. This opinion could be old fogeyism, or just a plea for everyone to slow down, show a little luv and remember we're all in this (life) together.

H. Bruce Miller said...

"It's impressive how hopeful new entrepreneurs are, despite all the evidence."

I think this relates to the general tendency of folks in Bend to be queens and kings of denial. This place tends to attract rose-colored-glasses types.

H. Bruce Miller said...

"isn't a longterm business paying modest rent better for all concerned than a series of shorterm businesses paying high rent?"

Not better for the landlord, as long as there are more suckers waiting in line to pay the high rent.