Is it alive? Entrepreneurs see marketing as the voltage needed to resuscitate businesses

Americans have only to look to their own dwindling buying and borrowing power these days to recognize the domino effect that the banking crisis, collapsed stock market and shocked economy are having on their lives.

For small-business entrepreneurs in creative industries, the situation has become a scary kind of laboratory, where they must experiment with parts of their operations to see what will best help them and their enterprises to survive. In the Cleveland area, two owners of quite different arts/artisan businesses are finding that marketing may be the juice that keeps their companies running.

Photographer Roger Mastroianni, whose well-established studio works with national firms and many arts organizations, including the Cleveland Orchestra, said he plans to rework his website and launch a stronger marketing campaign to try to make up for business lost to clients’ budget cutbacks.

“What’s happened, for instance: The Cleveland Play House is not using me anymore, because they can’t afford to pay me,” Mastroianni said Wednesday. “They’re using a free intern, instead.”

   Cleveland Play House production of “My Fair Lady”           

Photo by Roger Mastroianni 

Doing it better. During an economic downtown, many people regard arts as nonessentials. But, he pointed out, photography is not a budgetary priority in times like these even among arts organizations.

That’s a grim reality for Mastroianni, who derives nearly 40 percent of his business from arts clients. Yet he does anticipate one improving vital sign: Just as he needs to increase his marketing efforts, so, he hopes, will other enterprises, meaning more advertising-related photo assignments for him.

In the meantime, the Mastroianni plans to “do what I’ve done in the past, better.”

His fellow Cleveland entrepreneur, Michael Feigenbaum, won’t compromise the quality and type of work he does either, but he’s willing to tinker with practically everything else.

Feigenbaum, a highly credentialed culinary artist who owns and runs the storied Cleveland bakery, Lucy’s Sweet Surrender, has tried all kinds of creative strategies to overcome what’s happening to his business in its changing Buckeye Road neighborhood. Once a bustling community, a stronghold of the Hungarian-American culture reflected in Lucy’s Sweet Surrender strudels and European cakes, Buckeye long ago lost most of its middle-class population to the suburbs and sank into poverty.

The bakery had been a Cleveland institution for decades when Feigenbaum bought it in 1994. People were still driving in from the outskirts for the delectable treats they remembered from their childhoods and the neighborhood eventually showed signs of revitalization as other business pioneers moved in. Feigenbaum even opened bakeries in other Cleveland locations. Then Sept. 11, 2001, dawned.

“After 9/11, things really did change a lot,” Feigenbaum recalled. Expenses climbed, including rents; he had to close his other shops. 

He didn’t give up, though. After Lucy’s was featured on the Food Channel, Feigenbaum started a website and began shipping baked goods out of town. He developed a market among local coffee houses, supplying them with fresh pastries. He has a presence at local farmers’ markets, works with the wedding trade as a cake supplier and even opened a cafe recently in another struggling Cleveland neighborhood where a budding arts district promised clientele.

Stretching his market reach. But for all his courage and creativity, it hasn’t been enough. With Cleveland the epicenter of the foreclosure crisis and the national economy tanking, many neighborhoods that had been teetering on the edge of renaissance have fallen back into a moribund state of abandoned, shabby homes and closed businesses, including coffee houses that had been Feigenbaum’s clients. The buyer for one of his closed locations went bankrupt, leaving the baker with debt to pay off.

He and his wife can’t afford to hire another baker; they do the work themselves and so can turn out only so much product to ship. Meanwhile, his walk-in traffic has become limited to bursts of sales at Hannukah and Christmas, Passover and Easter, with little in between.

“Gas stations sell more baked goods than bakeries” do now, he said ruefully. The factory-produced stuff doesn’t taste anything like his strudels, which he concocts from real eggs and butter and flour, but it can be made much more cheaply and mass-shipped to thousands of retailers.

So Feigenbaum, 54, is in danger of having to close Lucy’s, nearly the only business left open on its stretch of Buckeye Road. “Until this catastrophic downturn, I’ve been fine, [but] I can’t keep getting up at 3 in the morning forever,” he said. Plus, Lucy’s is going to need remodeling soon: “It’s a building built in the ’20s with equipment from the ’60s. I’m reaching this difficult point.”

This would be a sad story, indeed, except that, in the almost same breath, Feigenbaum began ticking off the many things he still has working for him. Though the cost of a real marketing campaign is beyond him financially, he’s been getting attention in the local media and his website draws people happy to discover how easy it is to navigate, he said. He’s recently started a blog to increase his market reach. And Lucy’s delivers locally, an important selling point with the many Clevelanders who still hanker for nut rolls, dobos torte and Russian tea biscuits.

The irrepressible Feigenbaum even sees a silver lining to the economy’s dark clouds: “Funny for me, the business is going to do better in these times … because we’re a very inexpensive luxury.”

Even the recession-stressed like cream-cheese pastries.

Improving the survival rate for small businesses

I was talking with a group of small-business people yesterday. A couple of them happened to mention that the great majority of small businesses fail. And that there are a great many reasons why they fail, from insufficient capital to poor planning and bad management.

This got me thinking: There may be nothing anyone can do to prevent a disorganized or dimwitted entrepreneur from destroying his start-up. But why should we all assume that this huge rate of infant-business mortality is inevitable and immutable? 

Why couldn’t the teaching of certain practices and the establishment of helpful programs increase the number of young businesses that survive and thrive the same way that proper nutrition, regular obstetrical check-ups and well-baby examinations help more mothers and infants stay alive?

And why don’t more of our communities see the survival of small businesses as a priority?

I think the answer to all three is: There’s no good reason why small business remains so unsupported. And I think communities everywhere owe it to themselves to get busy and create development programs that will allow more entrepreneurs to succeed.

The arts sector has been leading the way for several years now. Many cities, universities, arts councils and development agencies have recognized that artist-entrepreneurs have enormous potential as creative economic drivers, but need guidance in best business practices and access to resources in order to make their enterprises viable.

Cleveland is one of the nation’s leaders in this, with its unique Artist as an Entrepreneur Institute co-founded and run by the Council of Smaller Enterprises (COSE) and the Community Partnership for Arts and Culture and also the COSE Arts Network, which provides information, educational opportunities and resources to member artist-entrepreneurs. 

Because of such imaginative efforts, encouragement of arts-based businesses has become a national trend.  

But it shouldn’t be limited to the arts. After all, nearly every business starts small, even those that eventually become giant conglomerates. (Coca-Cola? One pharmacist with a recipe. GE? One tinkerer who invented a lightbulb. Google? Two guys with a computer). The one or two people who start a small business often have a great idea, vision and drive, but relatively little experience with management – and even less money. 

They need guidance, mentoring, moral support, access to investors and bridge loans or grants to help them take that all-important step from struggling to self-sustaining. Perhaps what we need to set up for them – as we do for those needing health care – is community clinics: resource centers where any small-business entrepreneur can go to find all those things and learn to make effective use of them.

Can we let any expectant mother go untutored and uncared-for? Can we justify letting any child be born unhealthy and live unattended? 

Can we afford to let any good idea die? 

No. So let’s get going.      

Where’s the help for small businesses?

Well, I took a few days off, but the country’s economic implosion didn’t. In my post-holiday look at the news, I’ve found that some other people are upset about the same thing that’s been infuriating me: Though the U.S. depends heavily on the jobs and commerce generated by small businesses, small-business entrepreneurs and owners get next-to-no help from anyone with money – not governments, not venture capitalists, not business-development organizations – not even in this age of bailouts. 

As Simona Covel of the Wall Street Journal wrote Friday:

 ”For many small businesses across the country, these are scary times. The dramatic pullback in consumer spending is only the latest blow threatening to push some strapped small businesses out of existence. Customers are paying their bills late, cutting off cash flow, the lifeblood of a small business. Even healthy companies are being choked by the lack of credit lines and bank loans. Others are still reeling from several years of high raw-materials prices.

“In a recent survey from the National Federation of Independent Business, more than a quarter of small business owners said the current economic downturn is threatening their ability to survive. Nearly half of respondents said slow or lost sales are their most immediate problem.

“In the months ahead, ‘we are going to see small businesses that were marginal go out of business,’ says William Dunkelberg, NFIB’s chief economist. ‘We’ve never seen sales trends as weak.’

“Small businesses are a driver of the U.S. economy. In the past decade, small businesses — those with fewer than 500 employees — have created 60% to 80% of the nation’s net new jobs each year, according to the Small Business Administration. More than half of Americans are employed by a small business, and these companies are responsible for more than half of the nation’s nonfarm private gross domestic product.”

I have to ask: Does it make sense to anybody that even in better economic times, community and state business resources go almost exclusively to luring and nurturing big technology ventures? And that since times have gotten really bad, all the help is going to the giant corporations that messed things up in the first pace?  

Where are the investments in the diversified array of smaller companies that every economy needs? Haven’t we learned anything from all the factory towns that have collapsed because the one big employer pulled out or went bankrupt? Why are our government development efforts and venture foundations and angel investors putting all their eggs in the tech-manufacturing basket? Even the greenest portfolio manager would recognize that as a dumb move.

Maybe it’s time we small-business owners demanded smarter and fairer investment strategies from our cities, states and nation.

As Covel’s story notes, ”Many are frustrated that Washington is bailing out some of the largest companies and banks. ‘Our members are angry that the federal government is giving taxpayer money to big companies that have been horribly irresponsible while small businesses are not getting the money they need to keep their doors open,’ Margot Dorfman, chief executive of the U.S. Women’s Chamber of Commerce, told the House Small Business Committee earlier this year. The government should set aside money specifically to assist small businesses, she said.”

The small-business community needs to speak up now – and not just owners, but anyone who works for or buys from a small business. We all need to remind our mayors and council members and state representatives and governors as well as our national leaders that small businesses are a big part of our nation’s economic survival and future.

Imagine how many small businesses and jobs that $150 billion AIG bailout would have supported. Now pick up the phone and call your elected leaders.

Radio bedhead

Hey, there. Sorry I’m late. I had a bit of an adventure this morning.

A number of weeks ago, Cleveland’s Council of Smaller Enterprises (COSE) sent out an e-mail message inviting member businesses to apply to be on the COSE Spotlight segment of the Lanigan & Malone Morning Show on WMJI/105.7 FM. The station takes five minutes every Monday morning to put a representative of a COSE company on the air so the drive-time hosts can try to guess the nature of the business and then give the visitor a chance to talk about the company’s products or services. 

I responded to the e-mail promptly and was lucky enough to be chosen – really lucky, considering that COSE has about 17,000 members. 

The only drawback was having to get up at 5 this morning in order to get clean, dressed, fed and more or less conscious and still make it through I-480 traffic in time to arrive at the station by 8. I am, shall we say, not a morning person.

But I so overcompensated for delays and my own native sluggishness that I got to station-owner Clear Channel’s office in Independence at least 15 minutes early. Not even the receptionist was there yet, so I sat around fighting the seductive gravity of sleep until two COSE staff members showed up to oversee the event and keep me awake with genial chitchat.

The actual Spotlight is truly brief. First, John Lanigan and Jimmy Malone ask you to state your name and give them a clue about your business. Then they make a good-natured stab at guessing what it is. But mostly they let you describe it, chiming in with a comment or two and making sure that, before you leave, you’ve told listeners the company name a couple of times and explained how to reach it by phone or internet. 

It’s a nice service for local small businesses. I mean, free advertising – it’s like getting an early Christmas present, especially in a year when there are going to be fewer presents than usual. With luck, a lot of people in WMJI’s listening area have now at least heard of Geniocity.com and a few may even visit the site.

And all it cost me was the admitted agony of getting out of bed in the dark. I lived. And maybe I’ll prosper, too.  Thanks, COSE and WMJI.

Really new ideas will save us

The blogosphere is buzzing about the vice-presidential debate last night. Somewhere in the District of Columbia, and among worried constituents at home, congressional legislators continue to agonize about the threat of another Depression. Like Cleveland’s Council of Smaller Enterprises, local chambers of commerce are probably polling their members to find out where they stand on propping up Wall Street when their own small businesses are teetering.

Let’s face it – no one really knows what to do. Our leaders and lawmakers and candidates and economists are guessing. Some people sound smarter than others and some have relevant experience with money, markets and the dismal science, but there are so many factors in play right now that no one can claim to have the solution to our financial crisis.

Talk about Hail Mary passes – the whole country is muttering a rosary’s-worth of oh pleases while waiting to see where the bailout ball, er, bill, lands.

As co-owner of one of the smallest small businesses in America and someone who will take creative risk-taking over conventional wisdom and stasis every single time, I have to say this:

It’s time to cut the crap and start using our brains here. No reflexive bailout is going to do any real good – the problems are too tangled and ingrown for a double-dip ice cream cone to make them all better. Not doing anything won’t work, either - that’d be like knowing you have an aggressive cancer, but deciding to sit still and just let it sort itself out.  

The fact is that the current administration isn’t smart enough or inventive enough or responsible enough to come up with the innovative strategies we need to rid ourselves of the rotten parts in our financial structure while saving what deserves saving. All we should do right now is help the banks just enough to keep them standing until the next president can collect the best creative brains in the country and start designing a real plan to change the way America’s money is handled. 

I’m not the only one who thinks so.

But I haven’t heard anyone else say that the plan the next administration and Congress devise needs to be  revolutionary. It needs to replace our corrupt and collapsing financial sector with a carefully structured, but imaginative framework of policies supporting not just institutions or the greedheads who run them but, most all, the regular citizens who depend on them.

It needs to create a banking culture that invests in community development by helping individuals, small businesses, neighborhoods and towns get on their feet and stay there. 

I’m not a money or a policy expert, but here are the needs I see:  

Jobs – There aren’t enough good ones. So small businesses, especially the creative kind, need to be encouraged as much as big businesses. Why not expand micro-loans into programs of graduated loans that lend entrepreneurs increasing amounts as they pass certain business-growth milestones? Like those combined college programs that invite a qualified student to earn a bachelor’s and an M.D. without having to go through the med-school application process, a graduated-loan program could select entrepreneurs in the idea stage and move them through growth stages with money and mentoring until their businesses reach pre-determined goals and can operate independently. Unlike venture-capital companies, these programs would aim to help start-ups that would probably always be small, but would also be stable local employers.

Homeownership – There’s nothing wrong with every American wanting to own his or her own home.  Homeowners create community stability, maintain their properties better than renters, have stakes in the future of their neighborhoods. The real-estate industry just got criminally greedy about making money off people’s housebuying impulses. So why not take a similar graduated approach to homeowning? Just as leaders in Paducah, Ky., did, local governments and banks all over the U.S. could offer rundown or foreclosed properties for free or very little to artists and other entrepreneurs who agree to make improvements in exchange for ownership. As these properties appreciated – and in Paducah, they have – whole neighborhoods would improve and become magnets for desirable economic activity such as shops, restaurants and small businesses that employ the residents. And along with creative approaches to bringing homeownership within reach of lower-income people, let’s make sure banks strictly observe the proper standards of income and collateral that regular home-loan applicants should have to meet before they get any money.

Education – We’re going to have to make sure that communities – and thus the larger economy – have the human capital they need to engender creative businesses and provide the skills, knowledge and ideas that all community activities and systems require. How do we make sure that all people get good higher schooling and training and the chance for productive, self-supporting lives?  Maybe financial institutions should offer student loans that don’t have to be paid off in cash. What if students got money for college or vocational training from the same banks that offer graduated loans to small businesses? The banks could let students work off their loans during or after college by serving as apprentices to those same small businesses. The businesses would get skilled, low-cost employees as part of their loan programs, students would repay loans with their labor while gaining hands-on experience and resume credits, and the banks would get an accelerated return on investment in the last phases of the graduated-loan program as the apprentices allow the small businesses to thrive and pay back the banks sooner.

Let’s not come out of this national financial disaster with only a patched-up system and the same old mindsets to show for it. Maybe my creative ideas won’t work. But somebody else’s will.

What kind of dough gets your vote?

Barack Obama had some words for me last night.

He said, “We measure the strength of our economy, not by the number of billionaires we have or the profits of the Fortune 500, but by whether someone with a good idea can take a risk and start a new business.”

A little later, he spoke to me even more directly. “And when I hear a woman talk about the difficulties of starting her own business or making her way in the world, I think about my grandmother, who worked her way up from the secretarial pool to middle management, despite years of being passed over for promotions because she was a woman.”

He was speaking to you, too. For eight years now, we’ve all seen our economy turn into a feudal system where the resources and the future belong only to a tiny number of extremely wealthy, privileged people.  These people – the heads of major corporations, scions of rich families, big donors and personal friends of the politically powerful - have gotten richer and richer from insanely outsized salaries, golden parachutes, enormous bonuses, stock options and personal and corporate tax breaks while millions of ordinary people have tumbled into financial uncertainty or poverty.

To George W. Bush and his cadre, it has been more important to indulge the pathological greed of already moneyed people than to help the working poor and middle class keep their jobs and be able to afford food, heat, transportation, medical care and education.  This policy, if you can call it that, doesn’t make sense even for the rich – who will work in their industries and provide their services if everyone but them and their friends is too sick or unschooled or immobilized by gas prices to hold down what jobs remain? 

Obama has it right. The vitality and success of America come from its grassroots, from the creativity and initiative of its individual citizens. And all that has been largely ignored and neglected for eight years in which catastrophic wrongheadedness and decline have brought America to the brink of what, with all the home foreclosures and bank failures, has looked at times more like the coming of another Great Depression than a recession.       

So when Obama says he wants to eliminate the capital-gains taxes for small businesses and start-ups that create the high-paying, high-tech jobs that offer one of our nation’s best hopes for a prosperous future, I don’t just hear an idea that would help me keep Geniocity.com alive and growing. I hear a change in the wind, a hint that everyday Americans may once again, in time, be able to thrive and realize their best ideas and dreams through their own hard work, no matter who they are or how modest their circumstances.

For two terms now, Bush’s actions have said “let them eat cake.” John McCain wants to stay that course. But Obama wants to make it possible for each of us to make a better loaf of bread and own the bakery that produces it.

Can we afford to vote for anyone but him?