Turning Point

The case against British au pair Louise Woodward raised concerns about our nation's child-care services. Can small business calm the storm?
Magazine Contributor
15 min read

This story appears in the April 1998 issue of Entrepreneur. Subscribe »

In the aftermath of the now-infamous trial, has attracted the nation's attention. The focus is understandable: According to the Children's Defense Fund, 13 million U.S. children spend part of every day being cared for by someone other than a parent. And most of these kids enter nonparental care by 3 months of age, are cared for an average of 30 hours per week, and usually remain in such an arrangement until they start school.

All this has led to the boom of an industry that's woven itself tightly into the social fabric of American life and captivated entrepreneurs--from day-care operators to in-home child-care providers. But while studies have uncovered problems with child care, the issue waned somewhat until Louise Woodward hit the headlines, bringing to the surface parents' worst nightmares.

"[The case] made parents think about what they're doing," says Nancy Adler Manket, co-founder with Marcia Zaiac Wasser of Interactive Management, a Watchung, New Jersey, company that provides services and products related to child care and other family management issues. "We don't think the only solution is to stay home; parents don't have that luxury. But we think it's good there has been greater attention [paid] to how to get quality child care. There are, in fact, things you can do to ensure your child is receiving good care."

Today, quality is key. What might have at first seemed like for the industry has actually helped some entrepreneurs, including Zaiac Wasser and Adler Manket. Last year, the partners launched The Nanny Training Program, an interactive kit designed to heighten parents' confidence, improve the selection of child-care providers and manage caregivers. Its workbook asks potential caregivers for responses to hypothetical situations; a video details the challenges and safety issues that arise when caring for kids. It's all about quality care, and parents are snapping up the workbook and video by the hundreds.

Zaiac Wasser and Adler Manket insist irresponsible caregivers are the exception, not the rule. But companies that intend to survive are responding to the magnified parental anxiety--by thoroughly checking references, providing training and giving psychological tests to potential caregivers.

"I don't think it's hurt the industry," contends Zaiac Wasser. "It's redefining [it]. The bar has been raised for better quality and better teamwork between the [caregivers] and the parents."

Waiting To Exhale

holds its breath amid Asia's financial crisis.

By Charlotte Mulhern

By now, we've all seen the headlines, but what does the Asian economic crisis really mean for small business?

First, some background: The meltdown dates back to July, occurring on the heels of the Thailand bank fiasco, caused by an unwise lending spree that lasted several years. In a much-expected domino effect, the economies of Indonesia, Malaysia, the Philippines and South Korea soon mirrored Thailand's economy collapse. Then the International Monetary Fund stepped in, pledging to lend, in installments, $35 billion to some of the depressed nations. So now the world pauses, waiting for word on the long-term consequences of Asia's dismal financial condition.

At press time, the fallout had yet to trickle down to small business. "I haven't seen any credible reports [from] the statistical offices yet," says Joseph Hayes, executive director of the Washington, DC-based U.S. ASEAN (Association of Southeast Asian Nations) Business Council. "Probably by the end of the first quarter of '98, you'll begin to see on which side of the fence this is going to fall."

For now, experts predict the backlash will strike at least one segment of small business very hard: suppliers to large corporations. Consider Boeing: Not only is the billion-dollar corporation the largest export manufacturer in the United States, but its top export market is Asia. In theory, if Asian buyers stop buying aircraft, Boeing will stop buying from small suppliers many of the nuts and bolts that go into building the airplanes. "It's the smaller suppliers at the bottom of the food chain who eventually will carry the brunt of the load," says Hayes.

And if you're in the agricultural business, beware. Because Asia--whose regional currencies are now worth as much as 40 percent less than before--is the largest consumer of U.S. agricultural exports in the world, small-business exporters of agricultural goods are left with two options: Either raise the prices of products sold in Asia to reflect the exchange rate, or lower prices in a competitive motion and absorb the losses. But consider yourself warned: "If those two things can't accommodate the exchange rate fluctuation, the sale just doesn't take place," Hayes explains.

At the very least, experts predict an overall slowdown in the U.S. economy. On the plus side, however, Asian imports will likely drop in price. "In chaos, there's opportunity," adds Hayes. "People may be able to find new opportunities [as a result of] these shifts in the market."

The Road Ahead

Minority business owners often look on the bright side.

By Charlotte Mulhern

Although entrepreneurs are widely known for their enthusiasm, a recent Dun & Bradstreet (D&B) study reveals that minority small-business owners are even more optimistic about the future than their nonminority counterparts. Why the variance?

"Minority businesses are getting more respect from their various suppliers [than in the past]," contends William F. Doescher, senior vice president at D&B. "They're finding it easier to manage cash flow and overcome the traditional problems of getting access to capital, and they're feeling less discriminated [against]." These factors lead to a notable 72 percent of minority entrepreneurs expecting healthy profits this year, compared to 62 percent of nonminority entrepreneurs.

"We're very optimistic," says Gordon H. Chong, founder of architectural firm Gordon H. Chong & Partners in San Francisco--the same company, by the way, that landed the number-three spot in our January listing of the nation's top 10 minority-owned small businesses. Why is he so confident? "There's a tremendous amount of pent-up demand that has yet to be satisfied, at least in our industry," says Chong, who expects nearly a $1.5 million increase over last year's $12 million in revenues.

As the results indicate, Chong is not alone in such positive thinking. And all the shared optimism leads to real benefits for this second-fastest-growing segment of small businesses. "Optimism leads to more aggressive marketing and greater investment in business," explains Doescher. "But best of all, the optimism should result in job growth in small businesses, not only further sustaining the U.S. economy but also strengthening minority-owned small businesses."

Shifting Gears

It's time to break out your bicycle legs.

By Heather Page

Despite the hard work involved in running a business, many entrepreneurs manage to break out of the office. With spring in the air, you may spot them riding bicycles--in shirt and tie.

In a nationwide trend, 30 million people participated in Bike-To-Work Month last May, according to the League of American Bicyclists in Washington, DC. And considering the many benefits of biking to work, entrepreneurs and their employees would be wise to get in on the action.

Pedal-pushing is not only healthy, it lowers insurance rates and even improves employee morale, experts say. For online entrepreneurs Brian Robertson, 24, and Warren Adams, 31, co-founders of PlanetAll in Cambridge, Massachusetts, bicycling and rollerblading to the office have many advantages. Says Robertson, "Besides being a great way to get outside and get my exercise, it's also quicker because there aren't any parking hassles."

The downside to riding your two-wheeler to work? Helmet head, wet pant legs and rumpled clothing. However, purchasing good equipment and planning ahead will minimize these drawbacks, putting you and your employees on the bicycle path to health and happiness.

Keep On Trekking

By Heather Page

Trudy E. Bell, author of The Essential Bicycle Commuter (Ragged Mountain Press), offers the following tips for quickly getting an office bicycle program up and, er, pedaling:

  • Provide bicycle racks or a safe place to store bikes.
  • Offer a place to shower at work (or at least a changing room with a curtain and sink).
  • Encourage employees to wear helmets.
  • Carry your work clothes in a garment bag, or bring a week's worth of clothes on a day you don't bike to work.
  • Bike to work yourself and offer employees incentives such as free bicycle helmets.

Split Ends

A little effort goes a long way.

By Debra Phillips

Maybe you know the theory. Maybe you don't. For those who don't, we'll explain that the 80/20 Principle centers around the idea that less is, well, more. Specifically, this means 80 percent of results stem from only 20 percent of efforts. How could this be? Author Richard Koch conducts a thorough analysis in The 80/20 Principle: The Secret Of Achieving More With Less (Doubleday, $25 cloth).

According to Koch, the 80/20 split holds up in the business arena--where, he writes, a mere 20 percent of customers account for roughly 80 percent of sales. Factor in a similar imbalance between the number of products you have and your corresponding sales, and you begin to understand what a difference a little more effort could make--if it's strategically applied.

For a 100-year-old theory, the 80/20 Principle holds surprising relevance today.

Heard On The Street

By Debra Phillips

  • Giving a whole new meaning to the term "net profits," the National Basketball Association (NBA) recently announced plans to launch its first retail store. Set to open in September, the New York City NBA Store aims to court sports fans with enough licensed b-ball merchandise to fill more than 15,000 square feet of space. Guess if Chicago Bulls super-superstar Michael Jordan ever needs to supplement his income, he could always moonlight as a sales clerk.
  • Are we the only ones who are getting a little tired of the M-word? (Millennium, that is.) Presumably so, if trademark filings are any indication. According to research compiled by the law offices of Dechert Price & Rhoads, the words "millennium" and "millennia" are current popular choices in the brand-name game. Other favorites include "extreme," "Web," "global," "planet," "link," "nation" and "Asia." Hey, does this mean we should change our name to Extreme Entrepreneur Millennium Nation?
  • It's taken a while--years, actually--for the U.S. Department of Agriculture (USDA) to formulate official standards for the organic foods industry. Even as the $3 billion-plus industry keeps growing, however, the USDA is getting closer to establishing the guidelines that will separate the organic from the inorganic. Keep your ear--and we don't mean corn--to the ground.

How Odd

Offbeat locations can be winners.

By G. David Doran

With so much competition out there, a must sometimes go to great lengths to succeed. Finding a location swarming with potential customers may require a bit of "creative sitework."

Take, for example, The Cavern Supply Company in New Mexico's Carlsbad Caverns National Park. The company runs two different shops there, a gift shop at ground level and a lunch shop in the caverns--750 feet underground.

Operating a business that has literally never seen the light of day isn't easy, according to Cavern Supply Company president George Crump. "It's a challenge to bring in supplies and get rid of garbage," says Crump, who sells sweatshirts, food and hot drinks to visitors chilled by the caverns' constant 56-degree temperature. "Everything and everybody, including my employees, has to go in and out by elevator--and it's a three-minute trip."

Customers don't seem to mind, though. Each year, more than 600,000 people visit the caverns and shops, which have been open since 1930.

Creative sitework can also mean opening a business in a location so unique, customers can't help but be intrigued.

The Church Brew Works near Pittsburgh is a former Irish/Scottish Catholic church built in 1902 that's now considered sacred ground by beer lovers. The site houses a brewpub and restaurant that features such aptly named potables as Pious Monk Dunkel.

Although the church has been slightly remodeled to accommodate the business (the altar area now contains a 15-barrel brewery, for example), company president Sean Casey insisted on making as few changes as possible to the church's basic layout.

"We wanted to highlight the inherent beauty of the building," says Casey, who opened the brewpub, the first in the nation to be housed in a church, in 1996. "It's a simple, elegant structure, and we tried to minimize the impact of putting in a restaurant/bar by keeping as much of the original structure intact as we could."

You Wanna Do What?

By G. David Doran

Selling the concept of an unusual, offbeat business such as an oxygen bar to customers is difficult enough, but given today's tight commercial real estate market, you may also have to sell the concept to a prospective landlord.

"[Landlords] don't want trouble," says associate commercial real estate broker Cynthia J. Kratchman of Friedman Real Estate Group Inc. in Farmington Hills, Michigan. "They want stability. If the use is too offbeat, the chances of the business surviving are less and they end up having to re-rent the space."

So how do you convince a landlord your unique business won't end up as just another empty storefront with soaped windows? Kratchman suggests a little salesmanship is in order. "The landlord might try and put you off, so be persistent and try to get a meeting," she says. "You're selling the landlord on the fact that you have the mental, physical and financial wherewithal to start and run this business. You should also be prepared: Bring some financial information with you and show a good business plan."

If the landlord remains skeptical, says Kratchman, hire a local commercial real estate broker who knows the spaces and their landlords, and let that person do the talking for you.

Off The Clock

New rules on bonuses and overtime pay.

By Stephen Barlas

The looming election-year debate over a minimum-wage increase opens the door to serious talk about a business-sought employee bonus reform amendment. We might see a compromise gel this summer--if such groups as the U.S. Chamber of Commerce and the National Association of Manufacturers agree to accept a minimum-wage increase in exchange for passage of the Rewarding Performance and Compensation Act (H.R. 2710).

Proposed by Rep. Cass Ballenger (R-NC), chair of the House Workforce Protections Subcommittee, H.R. 2710 would make it easier for companies to give their hourly employees performance-based bonuses. Hearings on the bill will likely take place in the next few months.

Currently, a company paying variable bonuses must divide those individual bonuses by the number of weeks the bonus is meant to cover, for example, 52. Then that figure is added to the employee's hourly wage, and his or her overtime pay for the year is refigured. An overtime payment must then be added to the bonus.

If an employee has not worked overtime, the system is simple. And if the company gives the same bonus to all hourly employees, overtime does not have to be refigured. "The problem is that you can't improve performance by paying the same bonus across the board," maintains Bob Niedzielski, director of human resources development for Tighe Industries Inc., a York, Pennsylvania, costume and gymnastics-apparel manufacturer.

Tighe was audited by the Department of Labor in 1993 after it distributed $307,000 in variable bonuses for the previous fiscal year. Tighe had to do the recalculations--and ante up an additional $12,390 in overtime pay.

Peter Eide, labor policy manager for the U.S. Chamber of Commerce, says the performance bonus issue must be addressed. Says Eide, "We've had members who were on the verge of issuing bonuses, found out about the overtime recalculation provision, and were then stymied."

Bills, Bills, Bills

Need a boost? The proposed SBA budget could cheer you up.

By Cynthia E. Griffin

Small-business owners could get a big increase in services and funding if Congress approves President Clinton's proposed fiscal year 1999 SBA budget.

The proposed $724.4 million budget is slightly more than a 1 percent increase over the 1998 appropriation and, according to a Senate Committee spokesperson, is one of the best SBA budgets ever submitted.

Among the proposals:

  • adding $153 million to the 7(a) General Business Loan Guaranty program, which is expected to support $11 billion in new loans
  • infusing $5.7 million into the Microloan Program, which, when leveraged, will total $60 million
  • more than doubling funding for the Women's Business Center Network from $4 million to $9 million, which will help underwrite the establishment of up to 30 new centers and subcenters
  • allocating $4 million toward the HUBZone program, which provides federal government contracting opportunities to small businesses located in economically distressed areas
  • pumping $10 million into the Small Business Investment Corporation (SBIC) program.

At press time, the budget as a whole was scheduled to move from the House and Senate Appropriations committees to their respective floors for debate. Then comes a full-Congress vote and most likely a trip to a conference committee to reconcile differences. Once approved by Congress, the budget returns to the President for a signature by October 1. Although the Senate Small Business Committee is concerned that the allocation for the SBIC program may be too small, officials do not expect any significant battles over the SBA proposals.

Contact Sources

Trudy E. Bell, 1260 Andrews Ave., Lakewood, OH 44107, tebell@mcimail.com

Taylor Hartman, 7070 Union Park Ctr., #335, Midvale, UT 84047, (800) 761-0001

Interactive Management, (888) -A1, nannya1@ifmllc.com

Jefferson Bank Business Resource Network, 1607 Walnut St., Philadelphia, PA 19103, (888) JEFF-SOS

PlanetAll, (617) 661-3995, http://www.planetall.com

Tighe Industries Inc., 333 E. Seventh Ave., P.O. Box 709, York, PA 17405-0709, (717) 852-6936.


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