Winning in a Losing Town

Your friends smile politely when you tell them where you want to start a business. Your family thinks you're nuts. But you know you've got what it takes--and you're right.

"There's no money to be made in this town."

"You're going to have a really tough go at it here."

"Why would you want to open a business here when so many are going out of business?"

Why? Good question. Your first response might be "Because I want to," but it's not going to get those naysayers off your back, and it definitely won't pay the bills. If you're thinking of starting a business in a town that sports rows of faceless storefronts and "Going Out of Business" signs and a little more graffiti than graphics, you've heard the comments. No one believes you, or anyone in their right mind, should open a business in the area.

While appearances are dismal, your prospect for profit needn't be. The area where you hope to build your business doesn't have to be in Podunk USA to be considered a "losing" town. There are pockets within almost every city and town that beg for either renovation or a wrecking ball. You could be smack in the middle of Los Angeles and still wonder whether consumers will find you, buy your product or service and make a success of your idea.

The fact that you've chosen the site you have shows that you hope to be part of a solution. And while the disadvantages are obvious, there can be some major strategic advantages to your choice of location. You might qualify for substantial tax credits and benefits, lower lease or rent rates, low interest loans and even expedited city permits. Find out by calling the local SBA office, Economic and Resource Development Department or Community Redevelopment Agency.

"But no one has any money to spend around here."
Say it ain't so. People at least need the basics, yes? Look around your area and notice the quality of businesses. Junky displays, homemade signs, high prices and poorly kept businesses do not a confident consumer make. Who wants to spend money where they feel like they're getting taken? Give the community a place residents can be proud to frequent, and offer fair prices for products and services they want and need.

Says Diem Van Groth, founder and CEO of ZGyde Inc., a Los Angeles-based urban-focused business and technology development company, "These [economically depressed] areas are proving to be some of the hottest targets for savvy redevelopment mavens." According to Van Groth, the economically depressed areas are untapped gold mines for the motivated entrepreneur.

Still, starting any new business requires hard work, lots of forethought and a great amount of moxie. If you're in a depressed area, you'll have more to prove, not just to your negative adversaries, but to your lender, your suppliers, and your potential customers as well. On the other hand, securing financing for your venture shouldn't be any more of a process for you because you're in an economically depressed area. If your business plan covers all the bases (strong idea, targeted market, a plan to reach that market and a responsible fiscal plan), lenders should be just as willing to be repaid by you as by any other entrepreneur. Jerry Darnell, director of the Small Business Development Center in St. Joseph, Missouri, a city with a current population of about 74,000 and virtually no growth, notes that a good business idea is a good business idea, and a good entrepreneur "doesn't base an idea on how the economy is doing," but rather, on a solid plan.

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This article was originally published in the March 2002 print edition of Entrepreneur with the headline: Winning in a Losing Town.

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