Business is booming for purveyors of any advice or service that a would-be entrepreneur might seek.
Business start-up classes are straining at the doors. Advice agency staffers field streams of faces, worried or hopeful. This month's Entrepreneur Expo in Reno drew 1,000, breaking all attendance records.
All players point to the same force spurring closet entrepreneurs into action: The down economy.
This scene is a new phenomenon, says Deborah Prout, president and chief executive officer at Nevada MicroEnterprise Initiative. Six months ago, she noticed a shift in clientele, with more dislocated workers coming in for aid. These days, busy Initiative staffers field 200 visits a month.
Rod Jorgenson, a counselor at Small Business Development Center, a service offered through the College of Business at University of Nevada, Reno, says "Every time we have a downturn, people tend to come out of the woodwork. In a down economy people who have pent-up desires to own a business move in that
direction. But this time they're more desperate. Now there are not a lot of alternatives. People are looking for a way to feed the family."
Donna Crooks, senior business development manager at Economic Development Agency of Western Nevada says, "Folks who lost jobs turn to an idea they'd always had." The agency hears from individuals wanting to fly ideas from restaurant to concierge to online services.
But too often, says Prout, in their haste to get started, entrepreneurs forget the feasibility analysis: Is this a viable business?
"People used to think about starting a business while they were already employed," she says. "Now they're ready to move on an idea that's not been worked all the way through."
But the credit crunch has thrown a spanner in the works.
"A year ago, people wanted help shaping an idea," says Prout. Now they want financing.
The competition for dollars is fierce, with an increased number of existing businesses also on the money hunt, she says. And even those who once were able to get loans now can't qualify. The result: Existing entrepreneurs are in danger of losing their business due to slow pay, no pay, and a general downturn in business.
Don't look for relief anytime soon, says Jorgenson, who cautions those wanting to buy a business: "You can't anticipate that profits from '07 and '08 will continue into '09 and '10." But more importantly, consider: "Is this really a business that people would want to spend their discretionary income on?"
If it's in retail, the answer is probably no.
Two years ago the Initiative saw a move away from retail, says Prout. "Now it's almost non-existent. People understand retail is a tough environment."
Judy Harr, chair of northern Nevada chapter of SCORE the Service Corps of Retired Executives warns people away "unless you have a niche that's recession proof."
Potentially promising categories, she says, include "getting your nails done. It's inexpensive, whereas you might not do a massage anymore. And people have to eat."
In this economy, Harr holds out no illusions of success to start-ups. "There's no money. The consumer is not spending money. When people start a new business they're looking for money. There isn't any. It's a really bad time to start a new business."
Still, Jorgenson predicts a 50-50 chance of success for today's start-ups. "More of those entrepreneurs have good skill sets, as this recession has hit more white-collar folks than those of the past," he says.
Potential entrepreneurs appear to know what they're facing.
"Start ups have always been hard to do and that will continue," says Lonnie Thomas, a vice president at Nevada State Bank. "Start up requests have really dropped off during the past 12 to 18 months."
He adds, "We're getting new loan requests every day. We are making loans to credit worthy individuals. But we're scrutinizing them more carefully now."
When entertaining a loan application, says Thomas, banks like to see two to three years in business and a history of repaying loans. And, a banker must be comfortable looking at projections.
Meanwhile, existing business owners are seeking relief from the terms existing loans, he adds. And the bank works with them, sometimes accepting deferred payments and interest only payments. The most important move an entrepreneur can make, says Thomas, is to be upfront early on with the banker.
Mark McKibben, vice president and senior loan officer at Heritage Bank, has noticed two separate sets of applicants.
"The first see this year as a year of opportunity," he says. "They've been watching assets fall and have been waiting in the wings looking for opportunities to buy at bargain prices."
But there are those who got in over their heads, and now are trying to restructure their business model.
"This is the year of dissolving and shifting to a new horse," says McKibben, who says the trend is particularly noticeable in construction.
"Contractors see no more work on the horizon for this year or the next. So they want to switch gears into something else." Many subcontractors, he notes, are shifting from subdivision developers to commercial
remodels.
And Bob Larson, partnerships committee chair at SCORE, says business owners in all fields
manufacturing, data storage, and drywall are seeking marketing help to find customers during the recession.
Would-be business owners are packing classes of all colors. SCORE, for instance, offers four orientations a month.
"They're packed," says Harr. "We've never seen them so full." She points to layoffs, but also to existing business owners looking to survive. A recent business survival workshop filled in just four days. Another is planned.
Fear is filling classes, says Gary Valiere, professor of entrepreneurship at University of Nevada, Reno. He points to double the number of students and says, "People have less confidence in their future; a sense they must do something; be active and get moving."
Most people want to go into a business they're familiar with, he says. "A mechanic may want to open a garage. Many have worked in a restaurant. That's totally wrong."
For start up ideas, he adds, students look for research ideas around the campus that might lend themselves to commercialization.
