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Jim Markey
Jonathan Hagmaier and Joyce Waugh
Interactive Achievement’s Jonathan Hagmaier and Chamber CEO Joyce Waugh, on the occasion of Hagmaier’s receipt of Virginia’s 2012 Small Business of the Year from the U.S. Small Business Administration.
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Roanoke Chamber of Commerce
Aerotek
Aerotek, since merged with Tek Systems, was the Entrepreneur Center’s first tenant.
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Regional Partnership
Beth Doughty
Chamber CEO Beth Doughty: “As a community, we need to do all we can to nurture and incubate small business.”
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Roanoke Chamber of Commerce
Business Seminar
Roanoke Regional Chamber business seminars have included presentations on cloud computing.
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Roanoke Chamber of Commerce
Roanoke Chamber Entrepeneur Center
The Roanoke Chamber’s Entrepreneur Center has since its opening day provided space and support for start-up businesses.
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Jim Markey
Jonathan Hagmaier and Joyce Waugh
Interactive Achievement’s Jonathan Hagmaier and Chamber CEO Joyce Waugh, on the occasion of Hagmaier’s receipt of Virginia’s 2012 Small Business of the Year from the U.S. Small Business Administration.
In the weeks leading up to the presidential election, we’re bound to hear plenty of pontificating about how small businesses serve as the anchors of our Main Streets, the backbone of America, the engine of our economic recovery.
The metaphors may be stale, but truth lies amidst the political hot air. Small businesses create jobs.
Joyce Waugh, president and CEO of the Roanoke Regional Chamber of Commerce, says small businesses are nothing short of critical to this area’s financial health.
“Think about it collectively,” says Waugh. “If all the small businesses are combined they turn into big business.”
Ready for some numbers? About 17 percent of employees in the Roanoke Valley area work for businesses that employ fewer than 20 people and about 46 percent of employees in the Roanoke Valley area work for businesses with fewer than 500 employees, according to data from the U.S. Small Business Association.
What’s more, the Star City boasts a considerable number of one-person companies – the consultant, the neighborhood electrician, the freelance web designer. The Roanoke Valley had 17,433 single-employee businesses in 2009, producing receipts of $690.6 million, according to John Hull, director of research for the Roanoke Regional Partnership.
Beth Doughty, executive director of the Roanoke Regional Partnership, explains Roanoke needs a diversity of businesses of different sizes to stay financially healthy.
“Are small businesses important?” she asks. “Absolutely. Are big businesses important? Absolutely.”
That said, Doughty points out that hardly any startup companies set out with 100 employees. “As a community, we need to do everything we can to nurture, incubate, and support all businesses,” she says.
What constitutes a small business in the Roanoke Valley differs from bigger cities.
The United States Small Business Administration defines a small business as an independent company with fewer than 500 employees. Waugh figures that if you charted the Roanoke Valley’s biggest 100 employers, the companies at the end of that list would employ a couple hundred people. Clearly, the SBA definition doesn’t work here.
So how do we define a small business?
Doughty figures any company with fewer than 50 employees can be considered small in the Roanoke Valley.
“The kind of business where the CEO would know everybody who works there,” she says.
To Be Your Own Boss
A handful of folks assembled around a table at the Chamber of Commerce on a recent weekday afternoon to learn the fundamentals of going into business for themselves.
Business Counselor Tom Tanner gives regular, two-hour tutorials to help hopeful small business owners to learn basic accounting, how to get the right permits, and about creating business plans.
Ken White turned out for the workshop after losing his position as a human relations executive at a large corporation during the economic downturn. Unable to find a position comparable to his last, White hopes to start working as a consultant.
“I knew I needed some help,” White says of launching his own business. “I didn’t know what I didn’t know. Until now, I’ve always worked for somebody else.”
Christine Hastings, longtime manager at Ram’s Head Book Shop, attended the workshop also. She hopes to reopen the bookstore, which its longtime owners closed earlier this year.
“Hopefully, I can get it going this summer,” Hastings says. “I do think there’s a niche for an independent bookseller.”
Hastings wants to hold onto the same charm as the old shop, which had operated out of Towers Shopping Center since 1964. To make it in this age of Amazon.com and eReader, though, Hastings also thinks she’ll need to sell online.
Waugh would consider Hastings’ plan smart. “You’ve got to adapt,” she says of today’s economic climate. “You’ve got to change. Do things a little differently.”
The Roanoke Regional Small Business Development Center, which operates in partnership with the Chamber of Commerce and in the same downtown office, works one-on-one, for no cost, with would-be business owners like Hastings to talk about marketing or how to go about applying for a loan.
“One of the better things we do here is help people know when they’re ready to launch into a business or create a product,” Waugh says.
Often, the advice to hopeful business owners is to start slowly. “Keep the day job, save up your money, do it in your basement or garage, and then eventually launch,” Waugh says.
Business owners who have outgrown the garage but aren’t yet profitable enough to open their own office can rent space in the Roanoke Regional Entrepreneur Center for between $200 and $450 a month. The center provides the owner of a start-up with an office, use of a conference room, and a downtown mailing address. More importantly, the creators of the center hope it offers a synergistic environment where tenants can bounce ideas off one another.
The Roanoke Regional Partnership launched The Roanoke Entrepreneur hub (RoanokeEntrepreneur.com) over a year ago as a one-stop location of the many resources available to would-be business owners in Southwest Virginia.
“We connect people with what they need,” Doughty says. “There are a lot of resources. Before it was all over the place. We put it all together.”
Even without these resources, area small business owners help one another informally all the time, says Jonathan Hagmaier, CEO of Interactive Achievement, an education software business named Virginia’s 2012 Small Business of the Year by the U.S. Small Business Administration.
“The key in any region to small business is having a support network business owners know they can tap into at any time for help,” Hagmaier says. “That doesn’t mean money. That means mentoring. That means advice. Roanoke has that.”
Hagmaier says that when he founded his business in 2006, he knew zilch about running a company. But he found that when he asked for help, people were open to giving it to him.
“I’ve been doing this five years now,” Hagmaier says. “I still call people and email people, and say, ‘What do I do in this situation?’”
Hagmaier is more than willing to return the favor. “When another small business in and ask me questions, our door is open,” he says.
After attending the Business Basics workshop, White decided to move ahead with his consulting business.
“My business has no other employees and not a lot of startup costs,” he says. “It looks like I have very little risk.”
If White gets his business going, he can return to the Small Business Administration. The office also helps established businesses problem solve or make plans to expand.
Waugh asserts that services and support are invaluable for small business owners, but adds a caveat: “Nothing replaces someone’s drive, a tested concept, capital, and attracting the right talent and other resources you need.”
Downturned Economy
Hagmaier believes we won’t understand the extent of the recession for 20 more years or so. “People will look back and say 2007 to 2010 was a really tough time in America straight across,” he says.
The economic slowdown left an indelible mark on small business owners.
Aaron and Michelle Dykstra, husband-and-wife owners of Six-Eleven Bicycle Co., a Roanoke shop that builds custom, handmade bicycles, feel they can’t raise their prices, even in the face of increasing costs, due to the sluggish economy.
Interactive Achievement hasn’t upped prices for its education software since it launched either. Hagmaier knows that school systems can’t afford it. “It’s not like they’re cutting budgets saying, ‘We’ve got fewer needs this year,’” he says.
Oftentimes companies find their financial health tied to the economic fortunes of other companies that do business with them.
Roanoke architecture and engineering firm Spectrum Design saw a slowdown in the number of schools the company was building during the recession, a fact company president John Garland attributed to governments tightening their belts.
Green Earth Naturally, the Roanoke parent company of three smaller businesses that do work with waste remediation and on research and development of solutions to problems in agriculture and with energy, does business with a Virginia-based company that sells fuel. When that company takes a dive, so does Green Earth Naturally.
“Our cash flow is dependent on them,” says E. Carroll Hale III, vice president and director of research and development.
Hagmaier jokes that in the middle years of the last decade banks would loan money to any company as long as it had at least one breathing employee. In the aftermath of the too-big-to-fail bailouts, though, no one could get a loan.
For years, Wilderness Adventure at Eagle Landing in New Castle relied on a credit line to weather the lean times in the colder months. Then the economy tanked and the bank shut the line down.
“No one would give us credit,” says Julia Boas, group program director at Wilderness Adventure. “For a while we had some very worrisome winters.” The staff at Wilderness Adventure at Eagle Landing found they could no longer spend $80,000 annually to market the business.
On the other hand, AmRhein’s, a family-owned business with a long history in Roanoke, made it a priority not to cut back on the advertising budget during the recession, according to Rebecca Spaid, director of marketing.
“If anything that’s the time you need to be beefing it up,” Spaid argues.
The Dykstras launched Six-Eleven Bicycle Co. in 2009 – the height of the recession; Aaron Dykstra calls his timing “terrifying.” Luckily, the couple feels the downturn didn’t impact their business as much as it did some. Michelle Dykstra explains many of the company’s customers are wealthy enough that even during leaner times they had the disposable income to buy bikes that cost about $2,000 apiece. The less wealthy clients tend to be so passionate about biking that they make saving up for a custom bike a priority.
“It is a really unique segment of the cycling and outdoor industry in that there aren’t a lot of people doing it,” Aaron Dykstra says of custom-made bikes
AmRhein’s found its diversified product line – the business sells jewelry, bridal gowns and formals, and a line of local wine – to be advantageous during the recession. Sure, Spaid says some customers responded to lighter wallets by buying less expensive pieces of jewelry, but she says they also swigged more pinot grigio.
“Whenever the economy goes bad, people’s investment in alcohol goes up,” she says.
The staff at Wilderness Adventure at Eagle Landing credits the fact that they survived the economic slump with being nimble enough to change direction
when it became clear the company couldn’t exist solely as a summer outdoors camp for youth, the intention when the business opened in 1990. “That’s when we refocused,” says Boas.
Today, Wilderness Adventure continues to offer summer outdoors camps for young people, but the facility has also opened its picturesque grounds to church, civic and school groups. Locals can visit Wilderness Adventure to take advantage of a la carte outdoor activities like taking a ride down the zip line for $20. The retreat also serves as a popular spot for hosting weddings.
Even when Wilderness Adventure cut its marketing budget, groups still wanted to schedule retreats. “Our group numbers have really gone up on their own by word of mouth, by people loving their time here and telling all their friends,” says Boas.
Skin In the Game
As we inch along toward an economic recovery, Roanokers say banks are handing out money a bit more freely these days.
“People are being able to get loans when they need it,” Waugh says. “Is there as much as they want? Probably not.”
Hastings reports a number of banks have approached her to offer help financing the reopening of Ram’s Head. “I’m in the process of talking to them,” she says.
Michelle Dykstra pitched area banks for a business loan late last year and didn’t have any trouble getting it. Six-Eleven Bicycle Co. used it to buy equipment.
“In order to up production we had to get some machinery in here that’s going to allow him to work faster,” says Michelle Dykstra of her husband.
Despite the success stories, Hagmaier says even today he would advise a small business owner not to expect to get a loan if he or she doesn’t have assets or a revenue stream. “Everyone has to have skin in the game,” he says.
Nationally, some pundits have complained that companies are sitting on money rather than using profits to invest in new workers.
During the recession, Waugh says, small businesses resisted layoffs longer than corporations. “They’re the ones that kept people on as long as they possibly could,” she says.
Hagmaier says a day doesn’t pass that he doesn’t think about how the livelihood of his 42 employees and their families rests on his shoulders.
“I wake up every day and say to myself, ‘Go to work and work hard because you never know what could happen.’”
It only makes sense that when a CEO knows every employee’s name, it makes it harder to show an employee to the door. Now that the economy is beginning to improve, small business owners remain cautious about hiring.
“In the last year or two you’ve seen people adding,” Waugh says. “It’s with the mind that they’re going to keep those people.”
Waugh believes many small business owners are being careful about spending and hiring because they’re nervous about the coming changes in health care. “There are still so many things hanging out there that no one knows what the impact will be,” Waugh says. “And so, it’s a huge question mark. It’s harder for them to plan.”
Michelle Dykstra quit her full-time job last fall to work with her husband full time. If business continues to go well, they hope to hire another person later this year – a move they’ll make cautiously.
“When it’s your business that you’ve grown from the ground up it’s hard to bring somebody in and trust they’re going to have the same passion for it that you have,” Michelle Dykstra says.
Dykstra readily admits there are days when she misses working for someone else. “All the time I think about what it was like when I got a paycheck every two weeks and all I had to do was show up and be at my desk from nine to five,” she says.
Running Six-Eleven Bicycle, Co. is more stressful, but Dykstra says it’s also more rewarding.
“It’s just the two of us and everything that happens is a direct result of something we did,” she says. “We made it happen and that’s a cool feeling."