June 6, 2009

The News Journal/GARY EMEIGH

Despite the tough economic climate, John Glenstrup (left) and John Black opened

Rigby's restaurant in Rehoboth Beach last month – and they say business has been good.

Cultivating a startup haven

Small businesses forge ahead during recession -- with some help from Markell
By DAN SHORTRIDGE
The News Journal

When John Glenstrup and John Black wanted to open up a restaurant in Rehoboth Beach, they didn't look to a bank to get the cash they needed. They turned to their own savings and a network of supporters, family and friends. So far, it's paid off. Their Rehoboth Avenue spot, Rigby's, is doing business at a good clip during a soft opening over the last three weeks. "I've always wanted to open up a business down here," said Glenstrup, originally from Philadelphia and in the investment management business.

The partners are among small-business owners forging ahead during the recession. Driven by their dreams, such entrepreneurs are starting up retail shops, bowling alleys, restaurants, cafes, limo services and more, despite the challenges of getting both credit and customers when banks and consumers are watching their bottom lines.

They're just the type of people targeted Friday at the first Governor's Entrepreneurial Business Conference at the Center on the Riverfront in Wilmington. The conference drew a larger-than-expected crowd of 529 attendees looking to network and share ideas on growing small businesses.

Gov. Jack Markell, who made small-business development a key element of his campaign and his administration, and Alan Levin, secretary of the Delaware Economic Development Office, have said small businesses are the state's future. Instead of expecting a big business from outside the state to arrive to support the state's economy, they want to encourage home-grown businesses already here and support the creation of new ones. "It's clear from this turnout that people are looking for resources," said Kenneth R. Anderson, a director with the Delaware Economic Development Office, which organized the conference. "They're looking for strategies to not only survive but thrive in this economy.

Small businesses are really the backbone of Delaware's economy, providing half of all nongovernmental employment in the state, said Austin Edison, chairman of the Delaware chapter of the Service Corps of Retired Executives, which offers counseling and resources to small businesses.

Many startups don't last long -- that's just a fact of business, Edison said. "They're sort of like fireworks -- they keep trying it and they'll flash and burn out," he said. "But somebody else will try again. It's just a constant flow of folks trying."

In Georgetown, the most prominent new business is the Brick Hotel on The Circle, which opened in January in the refurbished shell of the old Brick Hotel, a local landmark.

It took Ed and Lynn Lester a year to renovate the building from the inside out, beginning in January 2008. They pressed ahead despite increasingly gloomy economic news.

"The economy kind of bottomed out right after that, and we were obviously too far along to step back," said Lynn Lester, who manages the inn. "So we didn't have any choice but to keep going."

'Letting go of the windowsill’

Edison said business counselors describe that confidence as "letting go of the windowsill”.

"You no longer are going to pull a paycheck out every two weeks, and that must be a real shock," he said. "But people are willing to do it. ... That conviction is what makes entrepreneurs succeed."

Gregg Hill is facing a slightly different challenge, re-launching an existing business in a new market. He moved back to the Newark area last year after 15 years running a yoga and pain management practice in Texas.

When he began the venture in Houston, it was a shoestring startup. His massage table alone cost $5,000.

"I did it all on a credit card," Hill said. "I would not suggest that to anybody."

But the business picked up quickly, as he expects it to do soon in Delaware. "I'd do an advertisement for something, and it would pay for itself in three months," he said. "After a while, you don't need to advertise -- because everyone knows who you are."

Jerry Hickman is a former paramedic who started a business selling emergency-locator systems that activate strobe lights when 911 is called. He said finding the money was the hardest part of becoming his own boss. He took on a friend as an investor and put any money he made back into the business."So I wasn't paying myself," he said. "I was bootstrapping it." Perseverance does pay off, he said. Hickman was recognized Friday at the Governor's Entrepreneurial Conference with a $5,000 check, a competitive award for having the best business plan. "It's not easy," he said. "But it's your passion, and hopefully down the road there will be money to be made."

Some small businesses are exploring the value of collaboration. In Dover, for example, four businesswomen have come together to combine three existing businesses under one roof. The Fashion Connection on Loockerman Street, which held a grand opening celebration Friday, is home to Maxine's New York Fashion, The Wedding Boutique and Top Notch Sewing. "During these tough economic times, we found a plan that is helping us all financially while at the same time allows us to jointly offer our clientele one-stop shopping," said Maxine Lewis, of the fashion boutique.

Plan for worst, hope for best

When he started in Houston, Hill had a secret weapon -- a primary job at DuPont that gave him the flexibility to focus his off-hours on massage and yoga. "I wasn't trying to survive," he said.

A business plan should account for expenses such as paying personal bills, said Edison. If a plan shows a long period of no earnings, SCORE counselors ask whether the aspiring entrepreneur has enough set aside or can borrow enough money to live on during that time. "That may dissuade people if they have heavy obligations -- a big mortgage, kids in school and things like that," he said. "You tend to see people that maybe have a working spouse, or they try to start their operation while maintaining a part-time job."

Glenstrup's plan included just such an emergency fund. "I created a business plan that sort of went over the worst-case scenarios," he said. "I think it was very important. But so far we've done better than I had expected. ... Business has been great."

The Georgetown hotel has been buffeted as travelers have changed or canceled their plans in recent months, Lester acknowledged, but things are looking up.

There are fewer casual travelers and recreational visitors, but legal teams coming to town for the Court of Chancery hearings and other corporate travelers have helped make up for that.

"It's obviously not what we expected -- we're certainly behind what my anticipated target was for startup," Lester said. "But we have been pleased, having been open just five months.