Small Businesses Struggled in 2001

For almost a week in December 2000, a sheet of ice froze most Northwest Arkansas operations. The streets were empty except for bundled sledders and electric power crews.

For retailers especially, the holiday shopping season usually sets the pace for the next year’s sales. Scarred by an idling economy and an international catastrophe, this year pummeled existing small businesses and stunted many startups.

But there is hope for turnaround in 2002, said Lance Sexton, director of the University of Arkansas Small Business Development Center and former small business owner.

The economy seems to be picking up, he said, and interest rates for small business loans are almost petty.

“That indicates that it’s a great time to start a small business,” Sexton said.

Washington and Benton counties teem with enterprising folks. Since January 2000, the Northwest Arkansas Business Journal has profiled 136 startup companies in its regular new business column. Of those, 87 opened for business by Dec. 31, 2000.

Within that group, 56 businesses, or 64 percent, still operate. A recorded voice declared the telephone service for another 28, or 32 percent, was disconnected, and the new phone book didn’t list a forwarding number. The remaining three in the group offered ambiguous answering machine messages that didn’t identify the businesses. No calls were returned from that last 4 percent.

The year-old lot includes 27 retailers, 25 service companies, eight technology firms, eight real estate and construction outfits, five health care offices, three investment consultants, three manufacturers, three food enterprises, three media and marketing businesses, and two trucking organizations.

The Journal’s profiles, however, offer only a sampling of Washington and Benton County industries and do not reflect the actual number of businesses that opened in each industry.

Of the Journal-profiled businesses that opened more than a year ago, the health care offices made the best showing of the survivors. Owners responded with positive feedback and said they had full appointment calendars. Dr. Rebecca Bryan — who was originally listed as Dr. Rebecca Cobb — Dr. Sara McCoy, Dr. Peter Xaysanasy, Ray Yumang and Kathy Ferguson — originally listed as Kathy England –?all passed the first-year mark.

Generally, about one in five startups survive the first five years of business, Sexton said. In 2000, the SBDC helped arrange 31 U.S. Small Business Administration and second home-mortgage loans for local entrepreneurs. Sexton said 19 of the loans were for startups. As of press time, 15 remained in operation.

According to figures from BizStats.com, 88 percent of sole-proprietor physicians offices are profitable. Washington, D.C.-headquartered BizStats processes numbers from trade associations and governmental agencies to compile small business analysis.

Retailers in Northwest Arkansas also proved to be strong first-year survivors, despite last year’s immobilizing ice storm. About 75 percent of the shops remain in business.

About 60 percent of the service stores last at least a year. Half of the technology firms profiled by the Journal celebrated an anniversary.

What Goes Wrong

Despite the statistics, Sexton said success is equal opportunity for all industries.

“A small business will succeed because of the person behind the business,” he said. “Any business can be a good idea if the right person is behind it.”

Consulting outside sources for business planning increases an owner’s chance of success, Sexton said. The SBDC offers financial and organizational advice to small businesses. Sexton said owners who continue using the center’s services after their businesses are open are more likely to succeed.

The biggest oversight that small businesses make is failing to project enough working capital, Sexton said.

“A lot of people start a business on a shoestring,” he said. “Most are passionate about their idea, and they’re just sure their idea will work — no ifs, ands or buts about it.”

He recommended owners maintain regular contact with four advisers: an accountant or bookkeeper, lawyer, commercial insurer and bank officer.

Outside consultants can help determine the market demand for a new service and its feasibility for profitability.

Sept. 11 lowered the profitability of the travel industry. Marilyn Chicken and Sandy Hurd opened Advantage Cruise and Travel in April of 2000. Hurd said the business was operating smoothly until the four jetliners were hijacked and crashed.

“It’s been difficult for a while, as far as getting by from day to day,” Hurd said. Airline commissions were lowered and capped, and Internet ticket sales can underbid any travel agent. However, Hurd remains optimistic.

“With the new year and new budgets, I expect we’ll become as strong as we were before Sept. 11,” she said.

The shock also strained retailers peddling luxury items. Dave Johnson, owner of Big Harry’s Music City in Fayetteville, said sales dropped off after the attacks. He’s confident business will return, and he’s planning a virtual storefront at www.bigharrysmusic.com and two more Big Harry’s locations in Northwest Arkansas.

However, Sexton said several of his regular clients who sell goods for the home claim this holiday season has been one of the best.

Reduced expenses for holiday travel increased the money available for items such as house wares and electronics.

Popart Studio and iTerra Inc., opened in September and June of 2000 respectively, are two technology firms that show no signs of slowing. Jodie Daniels, co-owner of Popart Studio, said his Web design company completed www.terminix.com and www.jjbodies.com. The pest service and dump-truck body manufacturer used Popart Studio to create the visual aspects of their sites.

iTerra Inc. — owned by Jeff Turner, Ken Young and Kendall Price — recently landed an order from an unnamed, national company to produce 1,000 hand-held units that will use iTerra software.

As Young put it, “Business is wonderful.”