Local entrepreneurs returning to the Valley
The recession of 2007-09 and its aftermath not only put thousands of people out of work in the central San Joaquin Valley, it also thinned the ranks of businesses operating in the region.
In Fresno County alone, 855 private businesses closed their doors between 2007 and 2010, displacing more than 28,000 workers.
Small businesses employing fewer than 50 people bore the brunt of the economic contraction — more than 75% of the lost businesses, according to a recent U.S. Census Bureau report on county-level business patterns.
There are signs, however, that some of those who lost jobs are wading back into the economy — not as employees, but as entrepreneurs.
The U.S. Small Business Administration’s regional director in Fresno, Carlos Mendoza, said the number of people showing up at the SBA’s free business workshops this year is up about 30% from last year. And, he added, more clients are taking advantage of services offered by Small Business Development Centers in the region for startup business counseling and training.
“What we’re noticing is that our attendance has increased,” Mendoza said. “Our classes are packed. There is a tremendous need out there, and most of our attendees are people who want to start up small businesses.”
While the sluggish job market in Fresno and the Valley — where official unemployment rates are hovering near or above 15% — has prompted some people to give up on their job search, others are taking matters into their own hands and deciding to work for themselves.
“The job market is merciless right now,” said Rich Mostert, assistant director of the Central Valley Business Incubator/Small Business Development Center in Fresno. People are turning to entrepreneurship “out of desperation, which is not always the best thing, but we’re seeing some wonderful creativity out there as a result.”
Mostert said that since the depths of the recession, he has seen a turnaround in peoples’ desire to start businesses. “They’re saying, ‘Now there’s a chance,’ ” he said.
Many are trying to avoid taking on debt to open or grow their businesses. Others simply cannot qualify for loans under tighter credit standards demanded of banks by their regulators.
“There’s no such thing as a bank that doesn’t want to make a loan,” Mostert said. “But underwriting criteria are so tight. You have to be really clean and have the three C’s: credit, collateral and cash flow.”
The SBA, which works with banks to provide government-guaranteed loans to startups and to small businesses wanting to expand operations, reports that overall borrowing by small-business owners is down considerably from previous years.
Mendoza said that in 2008, 30% of SBA-backed lending in Fresno County was for startup businesses. With two months left to go in the 2012 fiscal year, startups represent only 11% of SBA borrowing.
Mendoza said there has historically been a correlation between the number of loans and the number of startup businesses. “But the other fact that we need to put into perspective is that most startups don’t get bank loans,” he added. “If you can open up a small business without a loan, everyone will encourage you to do that.”
One trend Mostert sees is “the bank of Mom and Dad,” as would-be entrepreneurs borrow from family, friends and others to launch a business. “And another real common thing is ‘bootstrapping,’ ” he said. “They look at their idea and say, ‘Can I start this on a dime, do it bare-bones, and then put every dime I make right back into the business?’ ”
Those are the options Jake Belemjian and Carlos Martinez chose. Both entrepreneurs eschewed borrowing from banks to launch their companies.
Belemjian, who in March opened The Firing Line indoor pistol range in Clovis, had worked in motorcycle sales for more than 15 years and owned a Fowler motorcycle dealership that went out of business after the recession eroded his customer base.
“We basically became refugees after the motorcycle business basically evaporated,” Belemjian said. “I looked around and it looked like there was nothing out there for us. I have a college degree, but the job outlook was not good, so I decided I was going to have to do something on my own.”
With financial help from his family, and sweat equity from family and friends to remodel a Clovis industrial building, Belemjian succeeded in getting the business off the ground. “That is probably the biggest thing I am grateful for, the help we got,” he said. “In 20 years in business, I got to know a lot of people, and they recognized times were tough and were willing to lend a hand to get things going.”
Martinez worked in redevelopment and economic development for the city of Clovis, and pinch-hit on technology issues, before his position was cut in June.
He began developing his “Plan B,” a computer repair business, once his boss told him earlier this year that the city’s budget picture was bleak. He and his wife opened Computer Virus Solutions about a month before he was pink-slipped.
“I took some money that I’d set aside — not a large quantity — to do this because I didn’t want to start a business by borrowing money,” he said. “Starting your own business requires two parts: a little bit of capital, and a lot of knowledge of what you have to do. If you learn to do the stuff yourself, you can save a lot of money.”
Part of Martinez’s job with Clovis was mentoring new businesses, so he relied on his knowledge of the startup process as well as his expertise in computers.
“A lot of things we’ve done on our own, just my wife and I,” he said, “so we don’t have to pay anybody and we don’t have to use a lot of capital.”
By Tim Sheehan