Archive for August, 2009

Do Small Businesses Really Make Money?

August 7, 2009

I have only worked for publicly owned corporations a few times.  I’ve spent virtually my whole  ‘career’ working for microbusinesses.  The rules of the publicly owned corporations are to protect THEM—not to advance YOU.

Microbusinesses are business that gross under $500,000 a year.

When I first started working, I really hadn’t a clue.  I just knew I wanted to groom dogs.  I had this fantasy that I would like to have a boarding kennel and be a professional AKC handler.  I didn’t pursue that route for a bunch of reasons.

When I started working as an adult, I moved from the Chicago area to Milwaukee, where you could rent a 3 bedroom apartment for about $150.  With 4 of us paying rent, my share was under $40 a month. Groceries cost about $10 a week.  My bus fare to work was the most expensive cost I had.  I was making about $250 a week. That was big money then.  My father still paid for my health insurance.  I was able to save a lot.

I worked for a grooming shop called ‘Jo-Kor’s Klippette’ on Appleton Avenue.  I don’t know if it’s still there.  Although the owner, Joan Fredericksen, was a harsh taskmaster, she taught her groomers a lot and had a very successful business.  The best thing I learned from her  was the day to day cash flow of the operation.  She told me what she paid for the building, and what the improvements cost, and all the other costs were pretty self-evident.

She decided she wanted to sell, and I asked my father to help me buy the business.  He had a small business (one that grossed $500,000 to $5 million).  He wouldn’t buy the business because Joan said she didn’t have any ‘books’ that would show the business’ worth.

That was a disappointment, but I later  bought 2 other businesses.  One I sold, and one I closed.

I sold one because  I  was tired of the commute, and I had just gotten divorced, and it was just time to  pursue other interests.  The other I closed down because I was paying too much overhead for the amount of work I was doing, and my clientele was changing (about 30% of my  business—old dogs that came in every week or 2 weeks for grooming, died in the last year, & their owners were not getting other high maintenance dogs).

In between those businesses, after graduate school, I worked for a nonprofit called Women’s Self-Employment Project.  It was a micro-lending organization, and the mission was to help very low income entrepreneurs start businesses.  In reality, their track record was no better than  the general public’s record —those who do have access to credit. The main reason for this was really that people have a fantasy notion of what being in business is…from TV or media—and it’s just not like that.  Their business plans  never resembled anything real.

No matter how good your business plan is, you really have to be in the right place at the right time, with a unique idea that is doable, and you either have to have a very low overhead, or your economy of scale must be enormous.  Amazon.com could not make it as a local business.  Neither can Starbuck’s.

I worked  for one business that was one of the first  ‘dog daycare’ facilities and cageless boarding kennels in the city of Chicago.  It is now on its 3rd owner, so I won’t  say its name, but the original owner had  no dog experience beyond being a dog owner.  He didn’t understand that just because his dog got along with all dogs, that not every dog he took in would get along.  The first week he was open, two dogs got into a fight and he had a vet bill.  Also the first week,  scared dogs who couldn’t find a safe place to sleep started chewing on the  wood in the boarding area.

It was his business, so I didn’t care.  We parted ways because he  argued with me over the fact that I would not bathe a matted Old English Sheepdog.  If you bathe a matted dog, you can not get all the shampoo rinsed out, nor would you ever get the dog dry.  It was a matter of integrity, but he didn’t care about integrity.  It wasn’t even the owner who wanted the dog bathed, but a dog walker.

I am sure he probably broke even, but that he never made the money he ‘planned’ to, as he could never safely keep more than  12 dogs in the space. To make money, he would have had to have 20 regulars every day.

I was recently  considering opening  a resale store.  Unfortunately, rents for a 1000 sq. ft. store are about $1.50 per square foot.  With all the costs involved, I’d have to average at least $200 a day to break even (to me, a real job pays for health insurance & liability), and  it would probably be at least 6 months before this type of store in the area I was looking at got to that point.  It’s a no-go.

In the past 2 years, I have been offered  10  ‘jobs’ that weren’t real ‘jobs’.  Since dog groomers get paid commission, the offerers—the bosses— figured I should wait around until dog grooming came in. They wouldn’t have to pay me anything.  A few were offended when I said I couldn’t do that.  A few I tried, as they did have some business, but just not enough.  I was making money   other ways, and they could easily get a groomer right out of school.

Many friends  continue to suggest that I start another business, since I have had 3 businesses (one was not dog related).  The whole landscape has changed.  In a ‘major market’ like Chicago, it’s extremely expensive to run a microbusiness.  You got to give the business owners some respect for sticking it out.  Yet I know many who are just struggling along.  Land rents—and that includes property taxes—are just too high to have a cute little store.

All those businesses that exist with just a computer and a telephone?  They are either providing a very scarce skill, or they are ‘drop shipping’ a highly desired product.

That said, I am working with  some friends in Africa, where land rents are lower, on some possible ideas.

If you haven’t managed a small business for a whole year, to see if it is seasonal, or if your luck lasts, I’d advise doing so.  Either tthat or find a place you don’t have to pay rent and overhead on.

Pet Peeves

August 3, 2009

I am a cynical, curmudgeon type of person, and have little patience for the rude people in the world.
One of my favorite types to hate is the macho guys who sit on the machines at Bally’s Total Fitness. They are sitting under the guise of ‘resting between sets’, but they are hogging the machine. You ask if you can use the machine for a set—and they tell you they are doing just one more set—after sitting on the machine 10 minutes or more. They also hang their smelly towels on the machines to ‘reserve’ the machine they intend to use next. Nobody ever tells them not to rest on the machines. They are so rude—as though they own the place. It makes it very hard to work out sometimes.
Another kind of person I have no patience for is liars. People who tell you one thing & then swear they told you something else. I am at the age where I think, “Maybe I didn’t understand, or I got it wrong,” but when they do it to me over & over, I know it’s not me. It’s them. You can’t trust anything that comes out of their mouths.
Not fond of people who don’t follow through on projects.
I do admire, however, people who’ve been to Africa, seen a need, and found a way to help people in Africa organize themselves to improve their own communities.
One that I admire an awful lot is Malawi Children’s Village in Mangochi, Malawi, on the lake.
It was actually formulated by Peace Corps Volunteers who thought there might be a need for an orphanage in the area. When the PCVs started talking to people who lived in the area, they found that the families of the orphans wanted to keep the kids with them if they could, but they did need technical assistance in starting a health clinic, a community center, a vocational school, and a library. They also asked for help with school fees.
This is not a slick operation. Sometimes the website is up, sometimes it’s not. We’re not as sophisticated about fund raising & marketing as we could be, but we have been paying school fees for kids advancing a grade in school, and we did get the health & community centers, as well as the vocational school & library built and stocked. It’s real people to people aid. I am proud to have sent over a ton of books in the last 10 years.