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18 Months After Katrina

How are entrepreneurs on the Gulf Coast faring, and what's in store for the Crescent City?
March 1, 2007
URL: http://www.entrepreneur.com/article/174608

Eighteen months after Hurricane Katrina ravaged the Gulf Coast, these are days of "change or die" for area entrepreneurs.

"The reality of [Katrina's aftermath] is this: You either evolve or go someplace else," says Carmen Sunda, director of the Loui-siana Small Business Development Center, Greater New Orleans Region. "It's a wonderful place for opportunity, but the name of the game is change."

Sunda points to two entrepreneurs her office counseled. There's the manufacturer of Cajun spices whose clients were mostly cooking schools and tourist shops in the French Quarter. Ninety percent of that market dried up in Katrina's wake, but the owner had a good product and a good attitude. "We repositioned her nationally, and now her sales are close to pre-Katrina levels," Sunda says. "She expects her business to double soon."

Then there's the shop in Orleans Parish that will never open again. The owner didn't want to move the business to a more populated area.

Buoyed by flexibility, a new breed of entrepreneurs is changing the business landscape on the Gulf Coast. Michael J. Olivier is touting that new landscape. As the secretary of Louisiana economic development, he pre-dicts the state will become the center of construction technology for the U.S. and gain serious economic traction.

With money from insurance claims and sales taxes on goods for rebuilding, the state's surplus of more than $800 million this past fiscal year should be easily surpassed next year.

"We expect a booming economy for five years, perhaps a decade, based on a construction economy," Olivier says. "That will drive other parts of the economy. The whole supply chain will be impacted. We're starting to see a tremendous opportunity. Our banks have a glut of money they'd like to put to use."

The state's CDBG bridge loans and Gulf Opportunity Zone bonds now offer big-gun incentives for big business to invest in the area and bring jobs with them. But are small businesses getting incentives, too?

When the SBA brass visited Sunda in March 2006 and July 2006, they asked how to get beyond an impasse that saw just a trickle of loans come through when a flood was needed. Top problems Sunda identified in a seven-page memo included miscommunication, confusing paperwork, poor record-keeping by the businesses themselves, prohibitive insurance hikes and more. Whatever held the loans up, frustrated entrepreneurs placed the blame squarely on the SBA, she says.

Steven Preston inherited that criticism. When he replaced Hector Barreto as SBA chief administrator in July 2006, Preston immediately restructured 1,300 SBA jobs and re-engineered loan processes. In November, Preston said the SBA was "almost caught up with our backlogs;" by December, 85 percent of those who stuck with the process had gotten their funds or were in the closing process, Preston said.

For some loan applicants, it was too little, too late, Preston acknowledges. "I'm sure there are businesses that started this process and didn't continue it," he says. "There's no doubt businesses have gone under."

Although Ronee Holmes applied to the SBA right after Katrina, by December 2006, she was still waiting for cash--but not holding her breath. There wasn't time. Orders of her custom con-fetti from the bands Green Day and Weezer had spoiled in the levee break, and another major client's project loomed: the Macy's Thanksgiving Day Parade. "I knew I had these contracts coming up, and I didn't want them to go to my competitor," she says.

In a gambit that was equal parts pluck and luck, and with grants from two business organizations she belongs to, she got back in the game. Today, her company, Parti-Line International, is approaching pre-Katrina annual sales of almost $1 million.

P.A. Guillory's company, E-lance Business Services, offers outsourced business services for small companies. New to Louisiana prior to the storm, she was feeling a bit shut out in an insider business culture. After Katrina, a Chamber of Commerce consultant told her the landscape had changed, and new and reorganizing businesses would need her help. He was right.

"Now that there aren't enough employees to do the work, [companies are] more willing to outsource it," says Guillory. "It has been a tremendous boost for me." Her biggest challenge now: "To not take on more than I can manage."

Some businesses that relied on informal, long-established local ties are struggling now, Guillory says, and those with business plans firmly in place are getting needed help.

At the University of New Orleans, Chancellor Timothy Ryan is an economist who watches downturns in the retail, health-care and accommodations industries closely. His hope rests with the federal funds bringing cash and infrastructure back to the Gulf Coast. "FEMA is paying for the rebuilding of the public infrastructure," he says. "Over the next couple of years, we'll see $60 billion to $80 billion spent here--it will be 30 years of construction in a period of a couple of years."

He compares the Gulf Coast economy to the Wild West after the Gold Rush. "There are tremendous opportunities," he says. "The real question is sustainability. We'd like [businesses] to still be here after the first round of federal dollars has been spent."