Small business takes big effort

Homework required to be a success on central peninsula

Posted: Wednesday, November 27, 2002

Starting up a small business, especially for the first time, is not an endeavor for the faint of heart.

The economic downturn of the past year has made it even more challenging to make that first foray into the realm of business ownership. Even so, entrepreneurs in the central Kenai Peninsula continue to act on their dreams of owning a business. By doing so, they are faced with the reality of what it takes to keep it open and make it succeed.

There are several factors for new owners to consider when deciding to go into business for themselves. With hard work, the right handling and a little luck, a new business not only can stay open, but also can grow and prosper -- even in a depressed economy.

Mark Gregory, director of the peninsula branch of the University of Alaska's Small Business Development Center, said he's seen information that points to a healthy local small business sector.

"The interesting thing is we've seen some rise, a small but steady growth in (small businesses)," he said. "We haven't seen a whole lot of decline. That says the economy is diversified and reasonably stable."

One of the factors that goes into keeping a small business afloat is research. Before opening a business, it pays to make sure there is a market for whatever product or service it will offer.

"Definitely look into what you are selling to the community," advises Jeanie Carter, who opened her Yesterday, Today and Forever vintage and antique gift shop in April 2000. "Is this something that would enhance your community?"

Before opening her store, Carter visited similar gift shops in the central peninsula to see what goods they offered and to get ideas for how her store could be different.

When Annie Hemstock and her business partner, Mary Krull, owners of The Vintage Moose Tea Room, were formulating their business plan, they studied local demographics to see if there was a market for their business idea.

Having the resources to start the business is another must when it comes to being an entrepreneur. In this day and age, and especially this economy, it is vital to have enough resources to cover start-up costs, as well as enough money to form a safety net for the first year or so.

"Don't expect everything to be smooth sailing right away, it takes a while to get established," said Hemstock, who opened her business in August 2001. "You have to have the resources behind you to hang in there until you get to that point."

There are several ways to go about securing resources to open a business. There's the business loan route, which Hemstock and her partner did.

A business owner also can save up and finance the business out of pocket.

Jennifer and Irvin Kreider, owners of Peninsula Penny Saver, an advertisement publication which began distributing in April 2002, paid for all their essential business equipment before they started the business so they could avoid the weight of bills and payments.

Linda Stimaker formed a partnership with a sister and their mother to open their Petal Pushers gift shop in the Kenai Mall in August 2001. Real estate sales provided some start-up funding for the business, although financing was still the biggest challenge the trio faced when starting the business, Stimaker said.

Carter had an innovative route to financing her business start-up. She split the rent of a commercial space with her sister-in-law, who owns a quilting store, before moving into her own space in the Kenai Electric Supply building in Kenai.

"That got me on my feet, and I had an understanding of what I was getting into," she said. "One year later, I moved out on my own, so I was kind of helped along."

Location, location, location is the adage about business success. But as many new small business owners discover, it is not always possible to follow that advice.

Stimaker said the location of Petal Pushers in not ideal, but the desire for a great location has to be tempered with the cost of rent.

"If you are not south of Bridge Access (Road), then it is hard to have a business in Kenai," she said. "... We figured they literally gave us the best deal per square foot, and it was the second best location."

Hemstock said she and her partner also could not afford their prime location. They wanted to open their tea room in the log cabin in Soldotna where Malfunction Junction Gifts is now. Since they wanted to change the use of the building from retail to a restaurant, the city of Soldotna would have required them to renovate the building to make it follow the building code requirements for a restaurant.

The cities of Soldotna and Kenai both require a business owner to bring a building up to code if they want to change the use of the building, which can include everything from raising the ceiling to upgrading the sprinkler system and adding more parking spaces. To avoid that cost, Hemstock and her partner found a location outside the cities next to Healthy Changes on Kalifornsky Beach Road.

The space had not previously been used for a restaurant, so they still had to renovate it, but not as much as they would have if they had gotten space in Kenai or Soldotna.

For some businesses, working out of a home is a viable option. This generally works well for child-care centers, guide services and other business that don't need the storefront visibility and traffic of a commercial space.

The Kreiders took this approach with their advertising business, which does 95 percent of its business via the Internet, fax and mail, Irvin Kreider said.

"There is a fairly low overhead in this business and literally no inventory to speak of. This in turn means less money is required to operate our business, and by not establishing a storefront we are able to keep our rates low and not have a monthly rent to deal with," he said.

This approach obviously would not be advisable for all businesses, and it's not even possible for some.

The city of Soldotna allows home-occupation businesses -- which is a business that is a secondary use of the home and does not change the character of the residential district -- in all but one of its four residential zones. In some areas of town, a home-occupation business only can be opened after a conditional-use permit is granted by the planning and zoning commission. To get a permit, the business owner must pay a $250 fee, fill out an application and have that application approved by the planning and zoning commission after a public hearing.

In Kenai, a home-occupation business can be located in any residential zone. Businesses that operate via the phone or mail and don't have customers coming by can operate without getting a conditional-use permit. Businesses that are more elaborate, with customer, signage, etc., need a conditional-use permit to operate.

In Kenai, submitting a conditional-use permit application costs $105, and the permit must be approved by the planning and zoning commission after a public hearing.

After opening the business, the next step is drawing in customers and making enough money to at least stay open.

"You can't look at finances right at beginning," Carter said. "If you're meeting rent and paying bills than you're doing well, you're on the road to success. They say give it three to seven years. I talked to other small business people who are now taking a deep breath and starting to enjoy the business seven years later."

As Carter notes, time is another big factor in the equation of establishing a new small business -- time for the business to grow and prosper, as well as the time the business owner must put in to the process.

"It's all consuming, you constantly think about it," Stimaker said. "A business owner told me before I started to prepare to lose your life. ... I should have taken it literally because when you own your own business, it is a 24-seven job."

Eventually, that hard work and preplanning can pay off, as business owners who have weathered the stormy seas can attest to.

"Ninety-nine out of 100 days I'm having a ball," Hemstock said. "Everything is probably twice as much work as you think it will be. By the same token, when things go well and you're putting out a service and product that people enjoy, the rewards are twice as great as you expect."

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