With the election tomorrow, a lot of attention is focused on the economy and which candidate has the best plan to fix it. As a small business owner, this means a lot to me. I usually stick to cookies, not cash, on this blog, but I think it’s important to share my experience as “Kelli the Baker” in this economy.
To understand how the economy has affected Amai recently, it helps to know how we started. There are many ways to finance a new business, but I chose to go with loans over investors. The people I learned from started their businesses with the help of friends, family, and banks, and that’s the way we did it. In order to buy out my partner in 2006 I had help from my family who believed in my ideas and ability to make something of it. After working on the business and putting together a plan for a retail store, we needed outside financing to grow. I didn’t have a home or any other substantial collateral to put up for a loan, but I did have a good credit score. This helped me secure bank loans for reasonable rates. By doing this I put my personal credit and reputation at risk, which meant a lot to me, but the banks believed in our plan and gave us the money we needed to open the shop in 2007. While the loans were enough to open, it didn’t give us much of a buffer. We had to make money quickly.
Fast forward to July 2008. The retail shop had a strong opening, but the summer was slowing down. The majority of Gramercy residents left for the summer, and we felt the impact. To get through this downtime and start planning to expand, I approached banks for an additional round of financing. This time, I didn’t get any help. I faced rejection after rejection. I didn’t realize it at the time, since this was before the media turned their attention to the economy, but I was experiencing the credit crunch first-hand. I expected it to work just like it did when I approached banks to open the store in 2007, but this time it was completely different. I must have talked to every bank and small business advisor in the New York State area. I even tried the programs that were supposed to help businesses in times of crisis (World Trade Center funds, etc.). All of it was closed to me. By September I realized the banks were a lost cause, and the stock market was dropping and the government bailout was in full effect. The reality of the credit crisis was obvious to me, and I paid close attention to what the proposed “bailout plan” was offering. I heard a lot about homeowners and forclosures, but relatively little about small business loans. The government said the bailout money was going to be used to get credit flowing again, and I hoped it would help.
Now its November and I don’t feel much has changed. Amai does most of its banking with Chase, one of the “strong” banks, and they said they are currently revamping their application process and hope to have things updated by next year. It seems that the money they got from the government is going more towards purchasing other banks than releasing credit. This is definitely not the way the bailout package was sold to me. Credit is not flowing again as far as I can see. I also read about CEO compensation packages and $400,000 executive retreats, and I start to feel even more mislead.
I am a strong believer in small goverment and letting market forces work on their own, but when banks, homeowners and small businesses are so intertwined that a few companies and selfish business practices can bring down an entire system, something is wrong. I have personally seen CEOs of small to medium sized businesses do harm to a company resulting in layoffs, and they walk away with millions. How does this happen? If my business fails or I have to layoff an employee, it would only happen after I have cut everything possible from my end. I am responsible for the success and failure of the company, and I take the hits or rewards associated with it. How could I walk away with a million dollars and lay somone off? It’s unimaginable. It’s infuriating to think this is being done by people who manage money and have control over whether I get loans or not.
Amai is at a critical point in its history. The retail store has been open for one year, and we have had a chance to learn what is working, and what is not. There are things we’d like to change in order to make next year even better, and with the right financing we have great opportunities to expand. Overall, the business has been successful. We have good traffic and the majority of our customers are repeat customers. We don’t have a big marketing budget, but have received great press and built a respectable reputation that I am proud of. Even with that, we had a tough summer. Gramercy is a seasonal area, and at least 50% of the residents left town. We saw people in September that we hadn’t seen in the store since May! We didn’t expect such a drastic change, and it hurt us. As a small, independently owned shop we do not have a huge stash of cash in the bank to get us through tough times, so every day and every dollar counts.
Amai is fortunate that we have seen our business grow in September and October, even though the economy has declined. We are also very lucky to have opened in 2007 when we were able to get loans. If we attempted the same thing this year, I don’t think we would have been able to do it. I expect that our business will continue to grow into 2009. Tea and sweets still provide a relatively affordable relief from the daily stress of the world, and we are happy to provide them. For now, we will need to be self sufficient – the true American way.
Going forward I will turn my attention to outside investors and other forms of financing to help Amai grow and reach its fullest potential. The election tomorrow may start to change the economic tide, but my perspective has permanently shifted. I don’t count on banks, small business associations or the government to help. I will put my faith in my business plan, customers and employees rather than a proposed tax plan. As our button-of-the-day will say tomorrow, “I like Amai”, and I’ll keep working on it.