Small business, love it or leave it

Owners of small businesses from physical therapy services to bookstores belong to the biggest segment of the U.S. economy

Posted: Tuesday, May 08, 2001

For about nine years, physical therapist Leah Davis worked at hospitals. Now, as owner of Kinetic Physical Therapy, she drives a van to her patients' homes or meets them at gyms, pools and offices.

"I just needed a change," Davis said. "And I was eager to advance my career. I wasn't able to move up in the hospital environment I was in at the time."

Davis knew her job when she started Kinetic Physical Therapy a year-and-a-half ago, but she didn't know how to run a business. This is her first one and she didn't have formal business training.

Before, working in established practices, patients fell into her lap. Someone else took care of billing Medicare or insurance companies. Now it's her job.

"I have to market myself to the doctors and the community, and I have to secure my income as any self-employed person does," Davis said.

She turned to the Juneau Small Business Development Center for help figuring out how many patients she needed a week to break even, for marketing ideas, and to set up a retirement plan.

In putting her toes into the waters of small business, Davis is joining the largest segment of America's economy.

The U.S. Small Business Administration defines small businesses as those with fewer than 500 employees. So it's not surprising that a large share of Alaska's private employers are considered small firms - 15,210 out of 15,677 in 1998, according to the latest available figures from the U.S. Census Bureau.

But most businesses in Alaska really are small, even by laymen's terms: 13,878 Alaska firms employed fewer than 20 people in 1998. Another 36,000 Alaskans were self-employed for at least part of their income.

None of Juneau's private employers even approach the 500-employee threshold, according to the state Department of Labor. Ninety-seven percent of Juneau's businesses that collect sales tax report sales of under $1 million, the city said. They generate $182 million in taxable sales, 38 percent of the total.

"What's important for the community to understand is what a vital part of the economy small business plays, especially since we're a government town," said Jackie Stewart, director of the Juneau Small Business Development Center.

The number of small businesses nationwide rose each year through the 1990s, and they accounted for most of the new jobs, the U.S. Small Business Administration said. The agency is celebrating Small Business Week this week.

"I do feel like people are definitely looking at things that they think they'll find personal satisfaction in," said Stewart, who counsels small-business owners individually and organizes classes on topics such as marketing and financing. "People seem like they're trying to achieve personal goals through business creation."

For Shawn and Irene Hunstock, their new business is a type of Christian ministry they always talked about but thought they'd have to go to the Lower 48 to run. The Hunstocks recently bought Northern Echoes Bible Shoppe at the Airport Shopping Mall and plan to open a downtown store this month.

Getting into retail business, their first, "probably has more to do with our religious beliefs," said Shawn Hunstock, who also works for the state. "It's really a ministry. People come in looking for reference materials, Bibles. Usually they have something they need and we're able to give them some direction and feedback."

Stewart at the Small Business Development Center helped the Hunstocks with their business plan, which was so detailed that a bank approved financing 90 minutes after looking at it, Shawn Hunstock said.

They also got a lot of help from the former owner, Maura Truitt, whom they kept on for a month, and other employees who stayed. The Hunstocks were surprised at how long it took to set up accounts with about 50 suppliers for the shop, which sells books, music, art and gifts.

Like other people buying into or starting up a business, they said it takes a lot of time to prepare for it and to do it.

"It's really important, when you're running a business, it has to be the same desire for a husband and a wife, or a (business) partner," Irene said.

"It's such a time commitment that it has to be something you enjoy," Shawn said.

Davis, the physical therapist, agreed that the family has to be supportive, "because there's going to be a big change in the finances initially and a huge change in your work-time investment."

Anthony Gates said he works from 8:30 in the morning to 9:30 at night, plus some time on Sunday. He and his wife, Jennifer, bought Carpet Alaska about a year ago, and he's senior partner in Archival Imaging, a nearly year-old document-scanning service.

But it's worth it to Gates to be his own boss, and he sees business ownership as the key to financial independence.

"There's no great reward without great risk," Gates said. "That's something I keep in mind. If someone truly desires to be financially independent, the only true way to do that is by working for yourself. ... Working for others you're always capped and you're only as valuable as the cost it will take to replace you."

Like many who start their own small business or are self-employed, Gates doesn't have a business degree. But he knew the carpet business, has done some managing and sales work, and computers were a hobby.

Knowing the field technically, knowing the market and having three years of working capital are essential to creating a successful small business, Gates said. For Archival Imaging, he and his partner talked to local businesses that would be potential customers. They talked to computer companies about what software and hardware to use to scan and store documents. They spent weeks on their business plan, with advice from Stewart at the SBDC.

"We had to be spot on," Gates said. "We really had to know what we were talking about to get backing. Tons and tons of time spent."

A business plan will be the road map for the business if used properly, said Jamey Young, vice president for commercial lending and business development at First Bank in Juneau.

Prospective owners of start-ups should ask themselves what their skills are in finance, management, marketing and the subject of the business. They need a plan to fill those gaps, such as with a bookkeeper or a sales staff. They need realistic projections of revenues based on sound assumptions of meeting those expectations.

"I like to see that a business plan has some reality to it," Young said. "Even when people think they're being very conservative, revenues are overstated and expenses are underestimated."

It's also important that

prospective owners have equity in the business at the start, Young said. If owners are not willing to put most or all of their resources into the business, why should they assume a bank will lend their neighbors' deposits and assume the risk, he asked.

It's hard to pinpoint what the risk of failure is. About 2,500 small employer firms closed in Alaska in 1998, out of about 16,000 such firms, according to the latest available statistics from the Small Business Administration. Nationally, about 9 percent of small businesses close a year.

But the statistics don't include most self-employed people. And going out of business doesn't necessarily mean the business failed.

Nationwide in 1998, about half of the small employer firms that closed were successful when they shut down, the SBA said. The owners retired or went into another business. Three-quarters of small businesses existing in 1992 survived at least to 1996, an SBA report said.

Gates, of Carpet Alaska and Archival Imaging, suggested prospective small business owners take courses in stress management.

"I think hair will literally jump off your scalp from stress at certain points," Gates said.

Entrepreneurs have to be able to encourage themselves, he said.

"There are times you just want to crawl in a hole and pull a rock over your head, and you have to pull yourself out."

Eric Fry can be reached at efry@juneauempire.com.



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