As small business owners, we know that every day our business is open is a day we defy the odds. The U.S. Small Business Administration (SBA) reports that two-thirds of new businesses survive at least two years, and about 44 percent survive at least four. SBA researchers note that these numbers don't differ greatly by industry. Therefore, no matter what market you're serving with your small business, you have about the same chances of survival as everyone else.
Let's face it: 2009 was an especially tough year as a lot of small businesses succumbed to the "Great Recession." I closed my restaurant business, Dessert Noir Café & Bar in Beaverton, Oregon, in July 2009, after four and a half years of operation. Dessert Noir Café & Bar was among a handful of independent restaurants in Beaverton that offered suburban diners an alternative to the casual-dining and fast-food chains. Recognized almost immediately as a standout for its food and beverages, this award-winning restaurant was also known as a venue for special events, celebrity sightings, and live musical performances and art displays from local-area talent.
Despite Dessert Noir Café & Bar's success, the downturn proved too strong for my restaurant's long-term survival. Three key factors came into play:
1. Restaurants are on the front line of consumer sentiment, and I saw the first signs of today's economic troubles in April 2007, well ahead of when the bad news started to get reported widely. Back then, I lost customers who teetered on the edge of personal economic failure, people who were living beyond their means in houses they couldn't afford.
2. I counted on my core customers who still felt secure in their jobs and investments. However, Wall Street's meltdown and the resulting impact on the economy and credit markets changed that picture dramatically. Even my most affluent, fiscally prudent customers ran for cover in the wake of mounting job losses and dwindling investment and property values.
3. As we endure the slow pace of recovery, it's still nearly impossible for small businesses to get access to credit. Despite the recent actions of the Obama Administration to cajole the banks into lending, I couldn't get a bank to work with me to save my life, despite being a customer in good standing. As former U.S. Labor Secretary Robert Reich describes in his 2009 year-end commentary, Wall Street's bailout has not "trickled down" to Main Street as normal, everyday people continue to suffer through mortgage delinquencies and job losses and small businesses can't get credit.
Well, the most optimistic of entrepreneurs like me couldn't overcome these serious challenges in the marketplace. Even so, I've learned valuable lessons and gained tremendous insights that will follow me into my next business venture:
Money, money, money, money, money!
I wish I had a better handle on the costs to ramp the business at the beginning because I paid a heavy price for the "learning curve." If I had even a fraction of the money I spent on costly start-up mistakes, I would not have "hustled" nearly as much as to keep the business going. Inevitably, as the breakeven target moved farther away, the business wound up costing more to operate than I originally anticipated, and when the economy started to tank, it got worse.
Everyone who runs a small business warns against being undercapitalized, but no one is ever prepared. It was at these times when I did not have help from banks or elusive angel investors, and I essentially had to dig deep into my own pockets and lean on my real "angels" who were watching over me – i.e., friends and family – to stay in business. Also, where the banks have walked away from entrepreneurs, other grey-market and alternative financiers have stepped in to fill the void, and I was forced to explore creative (and often very expensive) financing options to meet my commitments and keep the business running.
Know when it's time to say, "That's enough."
When I wrote my business plan for Dessert Noir Café & Bar in early 2004, the economy was growing and the business outlook was positive and encouraging, especially in my local market. Fast forward to the summer of 2009 and I did not have any idea that I'd have to manage a business through the worst recession in a generation. Increasing job losses, a financial crisis that's severely tightened credit, and predictions for a painfully slow recovery all weakened consumer confidence, which is critical to a restaurant's survival. I held on as long as I could, but even with local and national publicity and recognition, a new approach to the menu, and a renewed commitment to be Beaverton's premier dessert destination, none of it was enough to keep the business alive, much less to thrive. Unfortunately, the business had to close and there really was no other choice.
The lesson here is to not hold on too long. There's a lot of wisdom and value in knowing when it's time to move on. I probably held on six months too long because I "wished" the economy would improve and sales would "just turn around next month." I also tried to save the jobs of my nine employees as I was very concerned about their prospects in a job market with double-digit unemployment.
Be clear about your sense of purpose.Our journey as entrepreneurs can be a long, difficult one, and there will be days when you ask, "Exactly why did I do this to myself?" The stress and anxiety will keep you awake at night because you carry a huge burden most people with whom you interact cannot appreciate or understand. After all, most people don't have the courage to take the risks that we're taking and are collecting paychecks at their jobs that they complain about constantly and don't really like doing.
Your purpose is the light that illuminates the path when you cannot see. When you focus on your purpose, your inspiration for being in business in the first place and stay true to your dream of success, the day-to-day trials and tribulations become easier to manage.
Failure of your business does not mean your failure as an individual.
If you shut down your business, it's not the end of the world. Even if you fall flat on your face, you've created momentum and shown progress. You've also probably learned something about yourself and your capabilities as a business owner. I had a clear strategy that provided me an "elegant exit," which included holding on to my "day job" while having the business, which needless to say, has come in very handy. I also made sure that I would not be financially ruined and I honored all of my commitments to my employees and business partners.
In fact, I've speaking to a lot of groups recently and telling them that despite closing my restaurant, 2009 was a great year for me. I published a book, Divas Doing Business: What the Guidebooks Don't Tell You About Being a Woman Entrepreneur, which features a foreword by Oscar-winning actor Morgan Freeman. I've also been getting more exposure as a small business expert and sharing my experiences with fellow entrepreneurs. Finally, I'm spending the time that I didn't have when I was in the throes of running the restaurant to think about what's next on the horizon.
So you closed that business in 2009? Don't worry because your next act is destined to be better. When there's a will, there's a way. If you believe that being an entrepreneur is the right course for you and you can visualize yourself at the end of the journey having achieved your goals, then you will defy the odds.
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