Too Small to Fail
While the big boys wait for bailouts, small businesses remain essential to the nation's economic and social fabric.
Over the past 18 months or so, the phrase "too big to fail" has become nearly as universal as "In God we trust." But what about the flip side--is there such a thing as "too small to fail"?
Talk to independent business owners and civic leaders from one end of this country to the other in places like Thomasville, Ga., Columbus, Ind., and Gearhart, Ore., and they'll tell you with certainty that the answer is yes. They'll quickly point out that beyond creating jobs and generating tax revenue, small businesses are essential to the social fabric of towns and cities and foster, in essence, a sense of community. Small businesses, they will argue, support local civic initiatives and open their doors and wallets to charitable events. "They are always the first ones to step up to the plate," says Karen Smith, director of Thomasville's Main Street program, which aims to rehabilitate historic downtown buildings with the assistance of the Georgia Trust for Historic Preservation.
In downtown Thomasville, Dana Davidoff Abernathy, co-owner of specialty kitchen store Relish, has created what she calls a community "hangout," with overstuffed seating and roomy kitchen tables for morning coffee. "You could sit here for five minutes or five hours, there will always be someone to chat with you. Everybody wants to feel part of a community."
But as the recession continues to bite, independent business owners, experts say, are the ones most at risk of failure because, unlike large corporations, they have fewer cost-trimming options left. And when it comes to additional financing, they have not received either the attention or the money the federal government has lavished on big corporations.
"It's crazy," says Jose Gonzales, co-owner of At Home in Thomasville, a specialty retailer in downtown Thomasville. "If big corporations can't keep themselves alive, why should we foot the bill? I mean, who's going to bail us out, the small-business owner?"
Adds Jerry Osteryoung, who has mentored entrepreneurs and independent business owners for the past 14 years at the Jim Moran Institute for Global Entrepreneurship: "All you hear about is the problems big businesses are facing, but I'm here to tell you small business is getting hit hard. And if you look at who really supports their local communities, it is small businesses."
If you want to see firsthand the big impact small business can have on a local community you need look no further than Columbus, Indiana. That's where local entrepreneur Anthony Moravec has embarked on a two-year, multimillion-dollar odyssey to restore Zaharako's Confectionery. The landmark fell into disrepair after the Greek family that operated the business since the early 1900s was forced to close its doors because of personal and business setbacks.
"It is an investment in the future of the community," says Moravec, CEO of Applied Laboratories, a small manufacturer of over-the-counter pharmaceuticals that has about 100 employees. "The immediate goal was never about profits."
That's a good thing, as it turns out, since Moravec has put more than $3 million of his own money into the Zaharako's project. "I had no idea how expensive restoration could be. It's twice what I estimated. And if I had a partner, they would have thought I was nuts."
Moravec committed to restoring Zaharako's in 2007 when his pharmaceutical business was booming. His goal was to restore the ice cream shop to its original grandeur, right down to the maple floors and the century-old Welte Style 3 Cottage Orchestrion, a self-playing pipe organ that sounds to the ear like a full-bodied orchestra. In order to achieve his goal, he had to repurchase the Welte from a private collector who snapped it up when Zaharako's had closed.
"It cost me an arm and a leg, but I was determined to have it," says Moravec, who also bought an old-fashioned ice cream parlor in New York and had all of its contents shipped to Indiana. "I became collectible-obsessive," he admits.
Zaharako's Ice Cream Parlor and Museum held its grand reopening on June 9. And thanks to publicity in Chicago and surrounding areas, crowds streamed into town all day and waited in line for hours to glimpse the renovations, sample the ice cream and dine in the restaurant, which Moravec added to create revenue opportunities.
"Before it opened, I told him it was a great gift he was making to the city. I also told him he'd never make a dime on the place," says Jack Hess, president of the Columbus Area Chamber of Commerce. "I'm now starting to think I was wrong. I took my family there a week after it opened and it was standing-room only."
Hess says Moravec follows in a long line of Columbus entrepreneurs who have taken it upon themselves to reinvest in the community.
"It's not just about jobs," Hess says, "but about social capital and the positive ripple effect it has in a place like Columbus."
For his part, Moravec thinks he might have stumbled upon a successful new enterprise, which is OK for now since he's finding it difficult to convince bankers to lend him money at a reasonable rate to expand his pharmaceutical operations.
"It's kind of ironic. We've never been in better shape financially with less debt, but bankers have grown extremely conservative. Any talk you hear about government supporting small business is, quite frankly, lip service," says Moravec.
A half a country away in the tiny seaside hamlet of Gearhart, Ore., John Allen, operator of the Pacific Way Bakery & Cafe, echoes Moravec's sentiment. The cafe, praised by the late gourmand James Beard for its fine food and atmosphere, is a local icon and hub of community activity.
"We try to provide a personal experience at the cafe and our customers have responded by supporting us," Allen says, but admits the slowing economy has forced him to trim employees' hours. When asked if the bailout programs have helped small businesses like his cope with the recession, he responds, "Nope. Absolutely nothing."
Mark Pawlosky is a West Coast-based digital media consultant who during a 20-year career has written extensively about entrepreneurs, startups and small business.