Saturday, April 04, 2009 7:00 AM
Carla Gillotti of Coach’s Pizza, Photo by Duane Tinkey
Though business start-ups tend to decline during a recession, according to data from Business Dynamics Statistics, the economic situation doesn't seem to be deterring some from pursuing new ventures.
Sherry Shafer, director of the Mid Iowa Small Business Development Center in Urbandale, said "the entrepreneurial spirit is alive and well in spite of the economy" and that she has not seen a drop-off in people interested in starting businesses. Iowa State University economist Liesl Eathington said the Midwest tends to see an increase in business start-ups during tough economic times as people laid off from jobs are forced to find ways to make money. However, many of these ventures may be part-time services, such as cutting hair or repairing homes.
From Oct. 1, 2008, to Jan. 9, 2009, the Des Moines district of the U.S. Small Business Administration guaranteed 147 loans worth $36.846 million, compared with 186 loans worth $50.6 million in the year-earlier period.
Despite the odds, here are three people who have taken the leap into entrepreneurship.
When the physician Carla Gillotti was working for decided to take a hospital job and shut down his clinic, Gillotti knew that she didn't want to work for someone else.
"I would rather put all my energy into something that is going to be mine," she said.
Seeing a need for a mid-priced, casual late-night restaurant in West Glen Town Center, she began putting together a business plan last fall. In the process of getting investors, one connected her to Gary Kirke, who sold her the recipes used at his former Coach's Corner on Eighth Street in West Des Moines. Gillotti hired two of Kirke's former chefs to make the pizza, pasta, sandwich and salad recipes and chose the name Coach's Pizza to draw people who liked the old restaurant's food.
After going through lease negotiations for the 2,000-square-foot space behind Cabaret Nightclub West Glen, finding equipment, renovating the space, getting a loan from the bank and more, Gillotti opened Coach's Pizza on March 7. Business has been growing steadily, she said. She had to add another table because the restaurant was turning people away and by 1 a.m. on weekends, a line runs out the door for pizza by the slice. However, Mondays and Tuesdays are still slow. She is just starting to advertise apart from a deal she made with Cabaret Nightclub to supply its food and have her menus on its tables.
The cost to get the restaurant open "wasn't cheap," Gillotti said, and she still is waiting to see her total build-out bill. She considered halting plans once the recession hit, but felt that the demand for something like this in the area was strong enough to move forward.
The biggest surprise so far, she said, is the number of hours she has had to work. Despite having five full-time chefs and one part-time cook, another manager and seven servers on her payroll, she's at the business most of the time when it is open from 11 a.m. to 2:30 a.m. Yet, she said, "I'm hooked."
"There are a lot of pieces but once you get the foundation done, it's pretty smooth after that I think. ... We'll see."
On the day Barack Obama was inaugurated as president, Ben Stone quit his job. It was a symbol, he said, of a new beginning. He had been working for a couple of months as a recruiter for Paragon IT Professionals, tasked with helping the firm break into the Omaha market at a time when companies were starting to cut staff in shocking numbers. He figured it was only a matter of time before he would be let go as well and already had an idea of how to improve the business.
So early this year, he launched RPO Consulting LLC, a firm focused on working with client companies throughout the hiring process, from writing the job description to finding candidates, to narrowing them down and helping with the hire. The model, he said, allows him to develop a better understanding of a company's culture and find a candidate who fits in with that environment. It also allows him to work with companies on what he calls "employment branding," or helping a company exude to potential candidates an image of what it is like to work there. This approach is much different from the common method of contingent recruiting, where firms compete to fill a position for a company and get paid, he said.
Several meetings with people in human resources have confirmed that Stone's business model is sound, but all have doubts about whether it will work during the downturn. Though he has several prospects, getting a client to commit has been a challenge. But he believes now is the best time to get started. "When hiring starts happening on a bigger scale," he said, "I want to go along for the ride in terms of being ready."
To start his business, Stone said he took out a personal loan, which would be possible to repay if the venture failed and he had to go back to working for a company. Minimal start-up costs, including a laptop computer and $325 per month to use Impromptu Studio as an office, have given him time to network and build a client base, along with the support of his wife, who works as a YMCA director.
His biggest challenge may not be from garnering business but rather that he could potentially be breaking a noncompete agreement with the local Manpower Inc. franchise, where he worked before Paragon IT. Under that agreement, he cannot work as a recruiter within a 100-mile radius of Des Moines for a year after leaving the company. He is still working out a deal with Manpower, but is moving forward, focusing on the consulting side of his business, which he said is sufficiently different from his previous work that the noncompete agreement doesn't come into play.
For Stone, this venture is feeding an entrepreneurial spirit he has had since working in human resources, helping place people with disabilities in jobs and creating job-training programs.
"I always think I can do it better," he said. "That sounds bad. That sounds so pompous, but it's always been there. Every job I've had I've tried to make it a better job. I've tried to create better systems. I've tried to create better processes."
Looking for a new challenge, Jean Baker left her job as executive director of the Urbandale Caring Corp. to pursue her own business in personal growth development. The transition took place last fall, right when the recession hit, and soon Baker realized that people were not going to spend for a service many consider a luxury.
So in January, she turned her experience in law and education into Red Lantern Group LLC, a new firm focused on providing legal advice to small and medium-sized businesses. So far, she has booked a few speaking engagements and has had some interest from potential clients, but no commitments.
"It's a harder sell in an economy like this, but again, this is a service that could potentially save them money," Baker said.
Her start-up costs have been low, with necessities such as a business telephone line for her home office, a new computer and a Web site. But at the same time, she said, "I can't afford to run at a loss for very long. 'Very long' is a relative term, but it's just like anybody. You have to figure out what's your breaking point. I'm not sure what that is yet. You also don't want to give up too soon either, because businesses like this take some time to go." She has not taken out any loans to get started.
In the next couple of months, she will be speaking to the local chapters of the American Business Women's Association and the National Association of Women Business Owners. She hopes that these engagements and two newsletters she puts out biweekly will generate actual business from companies seeking advice on topics including domestic violence, sexual harassment, anti-discrimination laws and company handbooks. Her model is flexible, with businesses able to book lunch-and-learns, supervisor training sessions or individual consulting.
Baker has always been attracted to entrepreneurship because of the flexibility it offered while she raised her two children, now ages 19 and 16. She ran her own law firm for several years before joining Urbandale Caring.
But she also has some added pressure now. "We're going to go with this for a while and just make sure, because even though people tell you this is a great idea, if nobody's willing to pay for it, then there's no point."