Recession isn’t stopping entrepreneurs

By Janet Rorholm
Edge Business Magazine

When Susan Donohoe started plans to open her own physical therapy business two years ago, the economy was still solid. Since that time, however, things began changing quickly.

“We didn’t know this was going to happen when we started plans. In August, I had two banks vying for my business,” she said.

Today the country is in a full blown recession, credit is tight and people are trying to save as much as they can. That includes co-pays. But Donohoe refuses to be discouraged.

“For me this was a life dream …” she said. “I think I’ll never regret it. I just need to look at obstacles as opportunities.”

Donohoe opened the doors to The Physical Therapy Center, 600 Blairs Ferry Rd. NE, Cedar Rapids, in January and began building clientele through e-mail blasts, limited advertising and free Tai Chi and Pilates classes in February.

In addition to physical therapy and the fitness classes, the business also offers women’s health and weight loss classes and plans to add massage therapy.

Donohoe hopes to ride out the turbulent economy.

“You’re not expected in a new business to break even for at least six months. This economy makes me think it’s going to take longer,” she said.

Still, she says “health care is always a good bet” for a business.

Donohoe isn’t the only entrepreneur who is opening a business in the Corridor in today’s difficult economy.

She’s got plenty of company and opening a business now isn’t as crazy as you think, said Curt Nelson, president and CEO of the Entrepreneurial Development Center in Cedar Rapids, a non-profit organization that assists businesses in interstate commerce.

“There are a lot of very successful businesses that started during down times,” he said.

Nelson calls it the “best-of-times, worst-of-times scenario.”

“It’s the worst because it’s hard to raise the money necessary right now, but with so many people out of the work force right now, those who have thought about opening their own business are thinking about it now,” he said.

People resist change and so a lot of people who have always thought about opening their own business find it hard to leave a steady job and go out on their own, but getting laid off can certainly be the push they need, Nelson said.

“All of a sudden you find yourself on the street. So now is the time to start thinking about starting your own business. You’ve got the time,” he said.

While capital may be harder to find, it’s not impossible. Venture capitalists have money, although the terms may be tougher in today’s economy, Nelson said.

Nelson said there are areas where timing is right for entrepreneurs with the right product or service. Products that focus on the baby boomer generation, especially ailing baby boomers, will likely do well, as will products that can help people or companies save in this weakened economy, he said.

“It’s all about being smart about starting a business,” Nelson said.

The current economy makes it far less tolerant of poor practices, so playing it smart has never been more important, Nelson said.

“The reason good businesses are started in tough times is because people do the extra work before starting up,” he said.

Bridget Casey knows some people thinks she’s crazy for opening a restaurant now, but she’s convinced the timing and her location is ideal. Casey just opened The Bohemian in Czech Village in one of its flooded out buildings that used to be a cafe, a costume shop and, most recently, an antique store when the flood hit.

“It’s when the building was flooded and we were up to our eyeballs in mud that I said, ‘Let’s turn this place into a restaurant,’” Casey said.

Casey is banking on Czech Village coming back bigger and better than ever, but she also sees a real need for a community center of sorts for the area and she’s hoping her restaurant/bar will serve that purpose.

She said people still eat out, they just may not be spending as much and she believes that they want something unique when they do dine out.

“People don’t want to go to another chain or fast-food place,” she said.

On the plus side, the higher unemployment rate has allowed her to be choosy with her employees. She said she’s received hundreds of applications from out-of-work steel workers to homemakers needing to supplement their income.

Business is already good for Patrick Lage who opened his own business, MidAmerican Career Associates, in Cedar Rapids. Lage is using his skills as chief operating officer at PepsiCo for nearly two decades and his skills at running another career services business that he operated with a partner before going his own way in October 2008.

“I’m challenge-motivated, so I’m always looking for my next challenge,” he said of opening his second business in the midst of a recession.

While unemployment is high, Iowa is faring better than the rest of the country with the sixth-lowest unemployment rate in the country as of January. Still, Lage has seen his clientele base double to about 45 percent unemployed compared to what he saw two years ago in his prior business. The company works largely with those in managerial positions.

“You’ve got to know where to look and know how to hunt and that’s what we teach them – how to penetrate the market,” he said.

Starting the business wasn’t as easy this go around, however.

“The economy is dicey, there’s no doubt about that. That creates some challenges in getting start-up capital,” he said.

So Lage turned to family and friends, writing them promissory notes to get the doors opened. With companies outsourcing human resource functions and many people looking for new jobs, business has been good, so good the company is ready to double its staff to six in about as many months.

His advice to others thinking about opening a business in this economy?

– Make sure you find a niche.

– Make sure you are fully capitalized. Make sure you have at least six months of cash flow on hand.

– Make sure you surround yourself with the best people.

Lage said the economy may be difficult, but suddenly he’s found himself enjoying getting out of bed and going to work again.

“I’d do it all over again,” he said.

©2009, Gazette Communications