Bad economy, wired world encourage small entrepreneurs to take the plunge
Ronald Reim saw the end coming.
And with it a new beginning.
“Literally, within three or four days, we decided we were going to make a run at this thing,” said the 53-year-old Reim. “We had a company formed and had taken over contracts within about a three-week period of time.”
“This thing” was Oculus Inc., a downtown architecture firm that Reim and his wife Lisa Reim-Bell founded when it became apparent that the properties management subsidiary at SBC where Ronald worked was set to shut down in 1994. Today, Oculus employs about 20 people but, starting with just four employees, its nascent stages went fast.
“That’s something about being an entrepreneur,” he said. “You have to be able to look at a situation, determine what the opportunities and risks are and make a decision….You have to put the right pieces in place, almost overnight sometimes, and then the opportunity will turn into long-term prosperity.
“But if you miss it,” he added. “It’s gone.”
A life of uncertainty
It may have been nearly two decades ago, but Reim’s story of a disappearing job and the quick transition to a new lifestyle couldn't be more contemporary. It's one that seems eerily familiar to a whole generation of today’s new small business owners, innovators and freelancers who are also hunting for that same kind of prosperity amidst a fluid and ever-shifting employment picture.
Increasingly, a sour economy has actively pushed budding entrepreneurs out of the security of their nine-to-fives and into an exhilarating and vaguely terrifying world of being on one's own. The boss who makes the rules, sets the hours and signs the checks is the same one staring back in the bathroom mirror each morning.
Though it has its drawbacks, St. Louis isn’t a bad place to make the leap. Reim said that while the city's legendarily close-knit social culture can be a bit hard to penetrate, it’s easy to hire quality staff, and the lower cost of living helps keep his company competitive in bidding for jobs in other parts of the country.
In fact, it was that latter factor, along with affordable taxes and a nurturing supply of startup capital from public and private agencies, that moved Kiplinger.com in December to name St. Louis one of 10 great cities in which to start a business, an honor that put it on a list with such traditionally cutting-edge locales as Seattle and San Francisco.
Of course, the Kiplinger stats also revealed some painful differences between the Lou and its hipper coastal cousins. Seattle, with barely half a million more people, had 27 times more invested venture capital than the Gateway's comparatively modest $11.2 million. For the Bay Area, with less than twice the population, the figure was a staggering 130 times as much. St. Louis had 2.5 patents for every 10,000 residents. That puts it ahead of Oklahoma City’s 1.0, but still far short of Midwest counterpart Minneapolis with 8.6. San Francisco’s number is more than 14.
Still, one can't have the coasts without the costs. San Francisco’s self-employed cost of living score topped 162 in the Kiplinger study with 100 being the national average. St. Louis was 92.3, perhaps one reason the site identified some 47,000 small businesses calling the metro area home.
No matter where you start, things are not all roses and rainbows. Reim describes it as tough, particularly in his field, which has been ravaged by the bust in commercial ventures and real estate. Architectural firms like Reim’s have found the going difficult, perhaps all the more so because the rocky road came after a decade and a half of solid growth for Oculus.
“It was a very abrupt change in direction,” Reim said, noting that the company used to employ twice as many people as it does today. “We can almost point to the day when one of our biggest clients stopped about a third of our annual revenue in one telephone call.”
It’s that kind of uncertainty that entrepreneurs must learn to live with as a matter of course. It’s one of many changes in mindset that Dick Slackman, co-founder of Tenby Technologies, says is a big part of the change from going into the office to going out on your own. Trailblazers have to focus on action, not procedure.
“In the corporate world, it’s more about dotting the i’s, crossing the t’s and making sure things are perfect,” he said. “An entrepreneur can’t afford perfect. You just have to keep going.
“Some people adapt well to it,” he added, “and some people don’t.”
Slackman seems to have been one of the former, but his story differs from Reim’s. He and his wife Lynn founded their technology company, which focuses on website design, in 2007. The pair was looking for an alternative to retirement, not a fallback to a job that was vanishing.
“I didn’t want to be bored,” explained Slackman.
Also, unlike Reim, the Shiloh, Ill.-couple went the home office route. Tenby is intentionally small and the two-person company is precisely the way Slackman likes it.
“I’ve been a manager,” he said with a chuckle. “I don’t want to be a manager again.”
Single-person or couple-owned home-based operations are not unusual these days. Advances in technology have wired the world and made the virtual office a more viable reality than at any time in the past. As telecommuting arrangements have increased in the traditional work world, they’ve exploded outside of it as well. Today’s office worker can operate without seeing the inside of an office.
Slackman said that his business isn’t just based on the internet. It’s also located there. A small IT concern can exist almost entirely in the cloud.
“Everything is computerized,” he said. “Everything is online.”
Tenby’s business brings Slackman into close contact with many a nascent entrepreneur. After all, among the first things a new company needs is a website. He said that self-employment is a reality check. Entrepreneurs have to deal with the marketing, the revenue, the networking and the control of expenses. For many, all the new hats are a new experience.
“I generally work about 60 hours a week and I like it,” he said. “It’s not a matter of how easy or hard it is. It’s a matter of fun or not fun. It’s fun but it’s hard.”
Retail is out, service is in
If the economic crisis is birthing more small startups, it’s also giving them an early education in the harsh realities of life.
“I think people are much more realistic now than we used to see because they are not able to get funding from banks for many types of businesses,” said Susan Young. “They have to go back and redefine their business plans.”
Young runs a CPA firm called People in Business and also heads a local networking group of the same name. Now numbering more than 300, its members gather in groups across the area to meet, greet and hopefully stir up commerce. She said about a third of the group turns over every year with businesses either dissolving or being absorbed by larger entities.
Young said that in the seven years the networking operation has been running, she’s seen a substantial change in the type of member it attracts. For instance, between the devasted economy and the strident competition, micro-retail is a tougher sell than in the past.
“Years ago, someone might have opened a store specializing in textiles or clothing or bird lovers or selling costume jewelry on a small scale,” she said. “A lot of those markets have been absorbed by the big box stores and don’t exist anymore.”
In their place have bubbled up an array of personal services businesses. There are attorneys, accountants, wedding planners, pet walkers, even businesses focused on life or career coaching.
Some of the attraction to services is a matter of practicality. Retail establishments are traditionally a nightmarish marriage of unstable revenue streams, exhausting logistical issues and crippling overhead costs. But certain service businesses don’t need a location at all. The work line is a cell phone. The office server is a home computer and the storefront is a catchy-sounding URL.
“You could have clients in California and still work from home,” she said. “People are opting to take that advantage rather than pay rent in many cases.”
In some areas, that boom in working from home has given rise to a unique new social infrastructure for freelancers, particularly in creative fields, who have found that life without an office can leave them without the kinds of interactions that help them to grow professionally. It’s not just a need for networking groups like Young’s but more eclectic gatherings where people meet and work at a private home or coffee shop to share ideas, stimulate innovation and boost productivity. Known as a “jelly,” the concept, pioneered by two New York City roommates in 2006, has now sprung up in dozens of cities.
Meanwhile, entirely new freelance aggregation platforms like Elance have blossomed on the Internet allowing IT, creative and administrative entrepreneurs to sell their services to people on the other side of the country – or the planet. The old adage about “location, location, location” being the three most important things for a new business seems a tired relic from a horse-and-buggy era of storefront retail.
Young said it remains an open question whether the economic crunch is creating entrepreneurs or scaring them off.
“I think there is a mixture of the two,” she said. “We have some people who have started small businesses during this time, primarily out of necessity because their job was downsized or for some other reason. Then we have people who were operating businesses but because of the economy decided to go back to working for someone else, possibly even a job that wasn’t strictly in their career field.”
But it’s a dynamic that’s difficult to quantify. With the employment picture so unstable, is job security any worse for the risk-taker than for his or her tamer counterpart? It’s a question Reim ponders back at Oculus.
“If we worked for somebody else could we have found ourselves forced into needing to find a completely new career path anyway?” he asked. “Would we have found ourselves confronting unemployment again?”
'A big leap of faith'
Reim believes stage of life plays a factor in that quandary however.
“For people my age, I think there is a large number who found themselves laid off in this recession who are faced with pretty difficult futures,” he said.
Would he start Oculus now with retirement just around the corner?
“I think I’d have to think a lot harder about it because when you are 30 and starting a company, you have a lot of recovery time,” he said. “If you fail, you just sort of dust yourself off and make another start at it. When you are 53 and fail, the time clock is really ticking. You are not so resilient.”
Of course, there are some entrepreneurs for whom retirement is the furthest thing from their mind.
“It is a big leap of faith,” said Carlos Restrepo. “But we just think it’s going to work.”
Restrepo is founding a business but he isn’t a mid-life entrepreneur like Reim or an ex-retiree like Slackman. At age 22, the Colombia native is just finishing up his senior year at Webster University. He’s also working to found a new Spanish language newspaper in town with a friend from Venezuela.
“One of my professors told me that if you can’t find the work that you want, create it,” he said.
He’s spent much of this year obtaining funding and developing his business plan to do just that. In the end, he’s under no illusions that it will be easy. Journalism has been among the hardest hit industries over the past three years.
“It hasn’t deterred us,” he said. “What we thought is that if you find a niche and you can really fill that hole, you can be successful.”
Restrepo said that if it works it will be exciting and if it doesn’t, it will still be a great learning experience.
Reim might agree. Despite all the pitfalls and the hard environment, he’s unequivocal about making the move.
“It was the best decision we ever made,” he said.