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.
Magazine Contributor
8 min read

This story appears in the March 2002 issue of . Subscribe »

"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.

Why Are You Here?

Whatever the reason you chose your location, one thing is clear--you need to have a passion for what you're doing. If you think customers will break down your doors simply because you hung your shingle, you'll be in for an expensive lesson. In an underserved community, members will be suspicious of the "newest thing in town," especially if they've been expected to pay high prices in the past for poor service and product choices. They will want to know who you are and that you have their interests at heart. Van Groth says you must be "community fluent" before even thinking about introducing products and services into the market.

So how does one become "community fluent" in a community that's tight, possibly suspicious, and hard to reach? Get involved, says Thomas E. La Gabed, a chiropractor in Lincoln, California (population: 14,000). When La Gabed and his wife, Jennifer Norton, moved to Lincoln to start Lincoln Family Chiropractic, their biggest hurdle was having people accept them. "Moving into a town where everyone knows each other was very scary," says La Gabed. "We worked hard to be accepted." La Gabed and Norton joined the chamber of commerce, volunteered for committees, joined (and coached) local recreational teams, and attended church. Plus, they bought a house, securing their commitment to the area. His advice? "Get out and meet as many people as you can."

What's Your Deal?
It's possible that your business is replacing another that didn't make it. What will you do differently? Can you learn from their mistakes? How will you convince your consumer base that your business is worth creating a relationship with? Will what you are offering be enough for them to shift their buying habits in your direction?

In a down economy or depressed area, many are reluctant to change what they know and what feels comfortable, especially when it comes to their pocketbooks. They don't want to establish a new buying habit if they're not sure you'll be in business in a year. It's important that you offer the "over and above" kind of service, because in a tight community, people talk. And your reputation may count on how well you meet the needs and desires of those who have taken a chance on you. Van Groth breaks it down simply: "Give [your customers] the quality of service and dedication worthy of a lifetime customer, because that's what they will be if you give them the best that you've got."

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Making a Go of Things
You're set. You're determined. You know this is the place for you. The road to the open door is long and arduous, but it's only the beginning. You'll need to prepare specific strategies (beyond knowing your community) to build and sustain your dream. While these strategies would apply to any business, they become more important in a smaller, more economically challenged community:

  • Start your company as a homebased e-business, for a couple of reasons. First, it might be the way to raise capital for a brick-and-mortar business. Establish an image on the Web, test your product or service, and gain momentum and dollars before venturing into the high expense of leases and traditional marketing. Second, it's a vehicle that expands your customer base exponentially at a relatively low cost. Your online venture could be as simple as hawking products at an auction site or as complex as creating your own site from scratch.
  • Look for alliances. How can you get done what has to be done when people have more time than money? asks Andrew J. Birol, a Cleveland-based business growth consultant, owner of Birol Growth Consultants and author of Focus. Accomplish. Grow. The Business Owner's Guide to Growth.

La Gabed and Norton started their practice using the off hours of another chiropractor's office. He already had the equipment and office space they needed and was happy to strike a deal where he earned extra cash for time he wasn't working. It allowed La Gabed and Norton to build a patient base before signing their own lease. Think how you might be able to develop creative alliances with service providers and companies with complementary products. (Study McDonald's partnership with Disney, for instance.)

  • Know your customers. From the moment you open your doors, track your trends. Your customers may buck traditional wisdom, but you will not know it unless you measure it. Note average order sizes, purchase frequencies and responses to different ads you've placed. Watch what your customer is purchasing, understand how they intend to use them, and find ways to deliver more value to their experience. For example, an ISP might find that consumers new to technology would appreciate (and pay for) training with their Internet service.
  • Be flexible. Watch what works and what doesn't. Be willing to change your mix of products and services as the market changes.
  • Be ready for some hard work. Says La Gabed, "If you love the town and you are willing to work hard to get what you want, then it will work for you."

Carrie Schmeck is a freelance writer specializing in small-business marketing issues. She worked in promotional marketing for five years before leaving to help her husband run two small businesses.

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