The economist John Maynard Keynes applied the term "animal spirits" to describe a sense of confidence of the entrepreneurial ilk: "The thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death" (as quoted by economist.com).
Apparently the entrepreneurial ilk in Minnesota and Wisconsin are feeling their animal spirits.
Minnesota's Secretary of State's office reported earlier this month that March new business filings were up over the same month a year ago--the third month in a row of year-over-year gains.
"In 2012, the total number of new business filings in the first quarter was 18,221 -- an increase of 24%."
Now the Federal Reserve Bank of Minneapolis has compared that to Wisconsin's new business filings.
In the Gopher State, total registrations in the first three months of this year grew by 23 percent, about twice that seen in the Badger State. Growth in both states was largely driven by new registrations of domestic and foreign limited liability companies (LLCs). Should it hold, this would be a return to the growth of LLCs seen through much of the last decade in both states. And while registrations for new corporations were flat in Wisconsin--largely continuing a long-term trend--the same trend reversed itself in Minnesota, where new corporation registrations grew by 18 percent in the first quarter and were 8 percent above 2010 levels as well.
In all, Minnesota recorded some 18,000 new registrations in the first quarter. Compared with its easterly neighbor, Minnesota tracks many additional forms of business registrations, including assumed names, which are not incorporations of new businesses but registration of a name, possibly for use by an unincorporated sole proprietor. There were almost 4,500 such registrations in the first quarter of this year, about 6 percent more than in 2011.
You can find more background on trends in young establishments, entrepreneurship and self-employment in the Minneapolis Fed's publication, fedgazette, the cover articles in the July 2011 and January 2012, and on the "One Job at a Time" series of the Ground Level project of Minnesota Public Radio News.(1 Comments)
Cold Spring Bakery in Cold Spring, Minn. has been open for over 60 years and Lynn Schurman has worked there for nearly 40 of them. Lynn is the co-owner of the bakery along with her husband and brother-in-law and she was kind enough to take a break from her busy day to tell me how her business if faring these days. Here are three key insights she shared with me:
Weddings are back
Weddings can serve as a pretty good economic indicator (as we've looked at before here at MinnEcon) and 2010 was not a great year for weddings.
But business at Cold Stone Bakery is up since October and Lynn attributes some of that to the increased number of wedding cake orders that are coming in.
Experienced bakers are hard to find
Cold Spring Bakery, which has about 60 employees, is having a hard time finding bakers who have been trained in commercial baking. In part, that's because Minnesota no longer has trade schools producing the qualified graduates Schurman is looking for. Dunwoody as well as technical colleges in Mankato and Duluth all used to have programs, but starting eliminating them about 10 years ago. Television shows like Ace of Cakes may be driving more people to culinary school, but they are trained there to be pastry chefs, not bakers that make 300 pounds of bread at a time.
Their business is half retail and half wholesale, and they have open positions that they have not been able to fill. They are able to do some training on the job, but some positions, like bakers in charge of mixing large batches of dough, require more specialized training. They will have some interns coming in from out-of-state programs this summer and Schurman hopes they'll develop into the employees that the bakery needs.
Ingredient costs are rising fast
The price of honey and flour have both doubled since last year at this time. Flour has jumped from $12 to $24 per 100 pounds. Sugar has gone up 50 percent since last year and is now nearly $30 per bag. They've been able to hold their prices steady up until now but have just started to have to raise prices on some of their products. Cake prices are going up nearly six percent and breads and buns are going up as much as seven percent. "If flour is your main ingredient, you've got to do something," Schurman said.
Schurman said bakers are coming together to challenge the rising sugar prices. She recently signed a petition through "End the Big Sugar Bailout" and the American Bakers Association and the Retail Bakery Association are coming together to lobby Washington on this issue.
Lynn Schurman is a source in our Public Insight Network and we'll check back with her in a few months to see how her business is doing and if prices are stabilizing. You can tell us about your business here or in the comments.
A staffing company that works with smaller manufacturers in Wisconsin and Minnesota hired over 600 temporary, contract and direct placement workers for their clients last year - a potentially hopeful sign for the struggling economy.
Brigham Group Staffing saw a 90 percent increase in hiring over 2009 last year and expects at least another 10 percent increase this year.
The kinds of companies that Brigham Group Staffing works with at its Bloomington and Baldwin, Wis. offices have anywhere from five to 500 employees and Jennifer Brigham, president and founder, is heartened by the capital investment she's seeing. Several of her clients have added new assembly lines and the people needed to run them.
"After biding their time, things are moving again," she said.
But the kinds of workers manufacturers are looking for are not a dime a dozen. Brigham said a lot has changed since she started her company 30 years ago.
It used to be that manufacturers wanted, "reliable workers with good, strong backs that could learn on the job," she said. Now they're looking for people with specific degrees from certain kinds of schools with a very specific skill set.
"Manufacturers feel they can't take a chance on teaching people on the job," Brigham said. "Employers are more picky."
The kinds of skills businesses most often request are advanced tool and die work, prototyping, technical welding, and computer numerically controlled programming for manufacturing machines.
Brigham also receives many requests for machinist/engineer combinations or people with manufacturing engineering degrees.
"But sometimes electrical or mechanical engineers will work and having a background in computer programming is cool too," she said.
Brigham said that it's not easy to find the people with exact skill sets that her clients are looking for. Her company works with Dunwoody College of Technology in Minneapolis to find the people they need before the students even finish school.
According to Brigham, most students in the two-year programs have already found a job early on in their second year of school.
"These jobs just didn't exist 20, even 10 years ago," Brigham said.
It's in these new fields that Brigham sees growth - and opportunity for students.
Jennifer Brigham is a source in our Public Insight Network. What are you seeing at your work? Share your story with MinnEcon.
We've heard a lot about professions hurting due to the recession, but is it possible that consulting is one of those rare recession-proof fields? According to the U.S. Bureau of Labor Statistics, the consulting industry is expected to be one of the fastest-growing this decade.
Christopher Wright, a Minnetonka-based mechanical engineering consultant for over 20 years, sees the consulting business as counter-cyclical. "When times are good my clients hire my sort of expertise; when times are bad, specialists seem to be laid off in favor of outsourced engineering."
Judith Alnes, a nonprofit management consultant in St. Paul, has also seen business go up during the recession. She writes, "We've seen nonprofits replace their internal accounting services with our accounting services in order to reduce their expenditures. We're also providing nonprofits with strategic services because they need to re-position their organizations for difficult times. We're helping more nonprofits merge, transfer programs and dissolve."
At the same time Alnes and other consultants have had to lower their fees in order to make it affordable for clients who may be hurting.
Lisa Feder, a social media consultant in Minneapolis, has significantly reduced her rates. "Opportunity abounds, but continues to be a tough road with consulting fees significantly reduced. Overall revenue and marketing budgets continue to be reduced and that seems to transfer over to the consulting world."
Independent consultants seem to be feeling the pain less than larger consulting firms, many of whom have had to layoff staff. Even so, consulting may be an early indicator of an improving economy.
Some firms, like Cynthia Smith-Strack's Arlington, Minn., economic development firm that had to cut staff hours at the height of the recession are now seeing an uptick in business again. In June the Minnesota Department of Employment and Economic Development found that 74 percent of business service firms (that includes consultants), were expecting increasing or stable sales over the next year.
Ramon Riba, a structural engineering consultant in Rochester, thinks that the consulting field might be growing because the jobs employers have shed in the recession are not coming back.
"The fact is with so many layoffs and the huge sucking sound made by all the now professional jobs fleeing to China, India, etc., consulting may be the only realistic solution for many," Riba says.
Is your workplace hiring? Are you seeing other signs of a recovery? Share your story with MinnEcon here.
Peggy and John Palumbo once hoped their home equity would finance their dream to open a restaurant. But when home values unraveled in the recession and they couldn't find a seller at the right price, they needed a new plan.
A Craigslist devotee, Peggy dove into the site's "Housing Swap" section, thinking it made more sense than letting a house languish in the slow housing market.
The Palumbos have yet to find the perfect swap. But with so many people stuck in their homes, she's seen an increase in the people looking for this kind of option and thinks it will only become more popular.
They were planning to swap with a young couple in Oakdale but the deal fell through when the couple was unable to get financing for their new mortgage.
Besides the frustration, Peggy feels that stifled entrepreneurship is one of the overlooked consequences of the stagnant housing market.
Start-ups will often take out second mortgages and use homes as collateral in order to get their business going. But without that, and the ability to downsize and free up money, it's much harder for new entrepreneurs to start businesses.
Peggy and John are doing everything they can to make their restaurant dream come true. They recently petitioned Ramsey County to get their property re-assessed and their property taxes will be $1200 lower next year.
"You have to get creative and think outside of the box," Peggy says. "It's not business as usual anymore."
What's your housing story? We'd love to hear it. Tell us here - or leave a comment below.(1 Comments)
When Amy Hansmann's brother was diagnosed with Celiac disease in 2004, she and her mother would spend hours trolling the grocery store, reading labels, looking for food he could eat.
Celiac disease is an autoimmune disease in which eating gluten causes damage to the small intestine. Gluten is found in flour, but also in barley, malt, rye, spelt and in ingredients like modified food starch."
Because it was not easy to find products that were completely gluten-free in 2004, Hansmann and her mother considered driving nearly 500 miles from their home in Baxter, Minn. to a store in Milwaukee that sold them.
The hunt for these foods led Hansmann to open up Jewel's Food Market, a store catering to those with Celiac and food allergies, in 2008.
With Celiac disease becoming more common and gluten-free diets gaining popularity, there are more gluten-free products available than ever before. In 2004, when Amy's brother was diagnosed, the gluten-free market was worth $580 million. By 2012, it's expected to be worth $2.6 billion. It's not just small companies anymore either; Anheuser Busch has released a gluten-free beer and General Mills has gluten-free Bisquick and cake mixes.
This growth, however, doesn't translate to more business for Amy Hansmann. Customers can now go the local Cub Foods and buy many gluten-free products, often for less than what Amy can sell them for.
"People have come to expect Wal-Mart prices all the time," Hansmann said. "But they don't understand why the prices are so low."
A small store like hers can't buy from General Mills since the company requires a minimum order of $3,000 worth of merchandise per week. So Hansmann sells products from smaller companies that have higher wholesale prices.
At the end of this month, Hansmann is closing her storefront in Baxter and moving her business exclusively to her company's website. She also plans to focus marketing efforts on small town clientele across the country who don't have access to big grocery stores, but whose food allergies make shopping difficult.
Hansmann will move her inventory to a space in a shared warehouse and will no longer have to pay $2000 a month in rent.
We'll check in with her in a few months to see how the transition is going and whether she's able to tap into the expanding gluten-free market.
Hansmann is a source in our Public Insight Network. Do you have a story you'd like to share with us? Tell us here.
The website of Universal Transportation Services says it pretty clearly: "Drivers Wanted!!"
But the Minnesota-based trucking company, which has operations in Detroit, Minneapolis, Omaha and Chicago, can't seem to find them - even in a tough economy that has the nation's unemployment rate nearing 10 percent.
"It has become very difficult to find reliable and competent drivers to haul freight in today's market," the company's website says.
Trucking industry representatives in Minnesota say the labor shortage was caused in part by the recession. Unable to find work, many truck drivers became discouraged and found work outside the industry, said John Hausladen, president of the Minnesota Trucking Association.
Increased freight shipments in recent months also have trucking companies competing for a limited pool of drivers.
Hausladen said that in March, one of his members received 70 applications for an open driving position. In August, a similar position only brought in four applicants.
Universal Transportation president and owner and Public Insight Network source Brent Bois said the recession hit his company. Before the recession, they were running an average of 95 trucks a day. In February 2009, their lowest point, they were down to 45 trucks, less than half of their previous business.
But starting in March, companies were starting to want more freight delivered. Bois said shipments are back to pre-recession levels. His fleet of 75 trucks has been so busy that he's looking for more drivers to take on some of that load. Bois said his company could be handling 30 percent more business if they had the truck power.
Another contributing factor is a new set of safety standards adopted by the federal Motor Carriers Safety Administration. The new, more stringent rules have made trucking companies more picky and Hausladen said this is discouraging some drivers from applying.
Minnesota is one of nine pilot states who are using these new federal guidelines, which will be implemented nationally in November.
Under previous federal regulations, when drivers received violations, the companies would be assessed points and the driver's would not be penalized. Under the new rules, violations committed by drivers will follow them no matter who they are working for. If companies or drivers have enough points against them, federal authorities will assess fines.
Companies like Bois' are looking for drivers who will be able to meet the new safety standards. Increasingly they're turning to truck driving programs like the one at Southeastern Technical College in Winona, where a new group of students, usually numbering between 18 and 30, starts the 16-week certification course every eight weeks.
Tom Gierok, a veteran truck driver and instructor who still hauls freight during the summers and weekends, said it was tough to place students in jobs last year. But this year, he said, the college is "close to 100 percent placement after certification."
That's made truck driving an attractive option for those who are retraining for new jobs after losing their old ones.
Gierok's students, who range in age from 18 to 70, can leave after eight weeks of classes and an eight-week internship. First year drivers can earn between $37,000 to $45,000 a year and their salaries will go up as they gain more driving hours.
Gierok, Bois and Hausladen all see trucking as a good economic indicator. With 68 percent of goods transported by truck, Hausladen said, "If you got it, a truck brought it."
What other economic indicators are you keeping an eye on? Tell us what you're seeing here.
Photos courtesy Brent Bois, Tom Gierok(2 Comments)
A growing market for goat cheese presents an opportunity for central Minnesota's goat producers, but they are unable to help meet demand now that a Canadian company has stopped processing their milk.
Woolwich Dairy Inc., a Canada-based company that makes goat cheese, told 20 central Minnesota dairy goat producers last month that the company would no longer pick up their milk to process.
That's a serious issue for the state's goat dairy farmers, many of whom are not close to processing facilities, said Georgia Raymond, the cheese buyer for one of the Mississippi Market Natural Foods Co-ops. In Minnesota, processors are few and far between. That's why most of the local goat cheese the co-ops carry is produced in Wisconsin.
One of these farmers who depended on Woolwich is Missy Isder who has a small dairy farm just north of Little Falls. Since Woolwich ceased its pick-ups, Isder has been feeding some of the milk produced by her 140 milking herd to calves and dumping the rest.
Isder would be interested in processing the milk herself but has not seriously looked into it because it's prohibitively expensive to install the equipment and obtain inspections. A pasteurizer alone can cost over $12,000.
Next week, Isder will begin paying Eichten's, the Center City, Minn. cheese producer, to process some of her milk (though she'll still have a good deal left over). She and four other goat dairy farmers have come together to split the $1,200 that Eichten's will charge them to process 5,000 pounds of milk. Eichten's will process the milk into cheese and then she and the other farmers will be responsible for selling it.
Anna Severson, a goat farmer in Swanville, Minn. said part of the problem is that while there is plenty of support for cow dairy farmers looking to start similar projects, this help does not exist for goat dairy farmers.
Swenson used to be a goat dairy farmer but has since moved on to breeding goats since she had no outlet for the milk she was producing. What really bothers her is that she's been watching demand for goat cheese rise while she isn't able to pursue the market.
"I go to the store and see imported goat cheese selling for $6," Severson said.
Georgia Raymond, the cheese buyer for one of the Mississippi Market Natural Foods Co-ops, said demand has just been going up since she started working there in 1994. Three years ago they had four varieties of goat cheese and now they have 25.
Although the lack of processing facilities remains an obstacle, she would love to see more Minnesota goat cheeses on the market.
"I'm always looking for good goat cheeses to sell," Raymond said. "Send them my way."2 Comments)
My colleague Molly Bloom this week has been asking small business sources in MPR's Public Insight Network if the credit crunch is easing.
We want to give MinnEcon readers a chance to weigh in, too.
Nationally, there are a few cautious signs the business credit climate is improving.
The Federal Reserve's newest survey of officers from large banks found standards easing this spring on commercial and industrial loans to small firms for the first time since late 2006.
Small firms are those with less than $50 million in annual sales.
That report gave the National Small Business Association hope that conditions were improving, though the group called it only a glimmer and said "access to sufficient credit remains a pronounced concern for America's small-business owners."
Last year MinnEcon got schooled by Minnesota small business people on the challenges of surviving in the recession.
Our sources then were telling us it was difficult to impossible at times in this recession to get the credit needed to run a small businesses.
So tell us now what you're seeing and help us put together future posts and stories.
Are you seeing credit easing? What could help strengthen your business? Post something below or contact us directly.
We're perpetually intrigued by entrepreneurs willing to roll the dice and start a business in bad economic times. In prior posts we've focused mostly on data and haven't done enough to explore the stories of individual entrepreneurs.
So today, we're highlighting Greg Jenum, who's going for it. If you're in the same boat, you'll see yourself in his story. If you're thinking about taking the leap, you'll find something of a road map.
Jenum, 42, was laid off last summer. He'd been working in sales for a metal fabrication company west of the Twin Cities. After he was cut, he spent several months looking for another sales / operations management job, "but came up with nothing."
What he did have, though, was a degree in industrial engineering and an idea.
Six months before the layoff, he'd started a part-time business out of his basement creating specialty, heavy duty tarps, including fitted coverings for catamarans.
He had some history in this area. "I have worked in manufacturing companies since I was a teenager. My dad is a partner in a similar heavy duty sewing company. That is where my background in this type of manufacturing comes from."
So the layoff brought an opportunity -- a chance to take a trade he knew well and build it into a business.
His company, Atomic Tarp, is running now out of a shop on Highway 7 east of Hutchinson.
We asked him to share a few thoughts about the challenges. "Doing all the work myself," was the first thing he mentioned.
Then he clicked off some more.
I think I was prepared for it but it takes a lot of organization and planning being everything from the janitor, to production, to the president. I am self taught in most of the things I do, including learning to sew.
Marketing and getting the word out on the company and our capabilities.I have created and manage my own website. My younger brother designed the logo and helped setup the initial site.
Living lean and supporting a family of 7 (5 boys ages 14 -4). My wife has a part time job at the middle school.
I have spent the past 10 years or so moving myself into different positions within companies (Engineer, project manager, operations manager, sales, marketing) to give myself the experience of eventually owning my own company.
So the first thing to take away from Jenum's experience in starting a new business -- do something you know.
The second thing to take away: Find a local funding partner.
Jenum said about 70 percent of the funding for Atomic Tarp was done through a local bank. The remainder came through a less likely source: the Southwest Initiative Foundation, a non-profit that among other things makes micro loans of up to $35,000 to businesses in western Minnesota counties.
The foundation loan helped him move the business out of his basement and into a shop and buy more equipment. It's also provided him with a business consultant once a month with classes throughout the year.
Bernadette Berger, the foundation's micro enterprise program coordinator, ran some numbers for us that indicate there are others like Jenum trying the same thing.
I just ran our statistics to get new numbers of unemployed that received a loan from us to date, since July 1st, 2009 (the beginning of our last fiscal year).
We have made 30 micro-loans since 7/1/09, and 9 of those loans were to people that had lost their jobs to the recession. (Two of those 9 were to one borrower).
Those loans were all made last fall and last winter. Right now the job market has probably picked up locally for the summer, so we are not seeing many unemployed coming to us to start a business.
Because of what happened with the recession and layoffs, most of our loans were made to male owned / managed businesses (23 of 30 loans, or 76%).
Over the 9 full years we have had the program, our portfolio had typically been made up of 60-65% loans to women, and 35-40% loans to men.
Because of the recession, more of the layoffs seemed to affect men, and more of the wives still had jobs (and are holding tight to them), thus the switch in our portfolio statistics.
There are some interesting cross-currents when we talk about entrepreneurs and recession.
The national outplacement firm Challenger, Gray & Christmas said recently its survey of job seekers showed only 3.4 percent opting to start a business in the first three months of 2010 and 3.9 percent in the second three months -- the lowest two-quarter average since the firm began tracking in 1986.
Its headline: LOWEST START-UP RATE ON RECORD AS JOBS, FRAGILE ECONOMY DETER ENTREPRENEURISM
On the flipside, we have data from the Minneapolis Fed showing the rates of new business formation in Minnesota, at least, stayed consistent despite the economy.
Jenum acknowledges it's been a slow start at Atomic Tarp, "as I have been trying to establish our own line of heavy duty sewn products, along with landing some consistent production contract sewing business. The summer has been better as this is the sailing season in the US and many purchase their replacement parts (catamaran trampolines) that we make here.
Jenum's reluctant to pass on advice at this point to would-be entrepreneurs.
"There is a lot of stress and uncertainty with being self employed. There is also a great deal of satisfaction in having shaped the business out of a few ideas, experience and good old hard work."
The long term plan, he says, is to "keep the company small (4-8 employees) and manufacture high quality, heavy duty products that are built to last."
Maybe the most important ingredient: "My wife has been very supportive and trusting that I can pull this off."
Got a story or some insights to share about entrepreneurs or start-ups in Minnesota during the recession? Drop us a line.
We've been looking and thinking recently about entrepreneurs in Minnesota.
We wanted to try to keep that discussion going and wanted to hear from Minnesotans who've taken the leap. They're self employed. Some are rolling the dice as older entrepreneurs in a recession.
None of it's easy. Many of the sources in MPR's Public Insight Network who responded to our query on entrepreneurs weren't making a ton of money from their independent gig and still held on to a job that could pay the bills.
(Tell us your story.)
"I have an office management business but currently have no clients. I also raise German Shepherds dogs but can't afford to buy a new male so there are puppies,"
said Suzette Riches, a Network source from Holloway in western Minnesota.
"I work one day a month as a finance manager for a manufacturing company," she added. "Without social security and unemployment, I would not be able to live."
Click on the map icons below to read what dozens of other Minnesotans told us about the dreams and realities of being self-employed.
Philip Lacher of Brooklyn Park told us about working full time while trying to pursue his wood carving passion as a small business.
After I came back from Iraq I really delved into my wood carving as a hobby. I had been carving since the age of 12 when my grandmother taught me. However, it really helped me with my transition back to civilian life in that I was able to relax and focus on creating something, rather than breaking/destroying something.
During my transition, someone stated that many vets coming home start their own businesses, because they want to be in control of their own work lives, rather than doing some other person's bidding. Someone in my family suggested I start selling my carvings, so going online was the logical next step. It required very little in terms of start up costs, as I already had most of my tools already.
This business does not sustain me, but really helps support my wood carving. My dream job would be to open up a shop on the North Shore and carve full time. However, with the economy the way it is I really have no illusions that someone buying something artistic is much lower on the totem pole.
There's been a healthy discussion lately about how entrepreneurial we really are in Minnesota.
Much of that discussion, though, has been tied to high tech business creation. Minnesota has a new "angel tax credit" providing tax incentives to investors willing to take a risk on high tech start-ups.
But should we paying more attention and doing more to support the entrepreneurs that are helping rebuild the economy but don't have the sexiest business?
A lot of the folks we've heard from are people with great plans who might not get the attention they deserve. People like Chuck Waibel from Milan.
"We run a winter-only CSA (community sponsored agriculture business) operated out of a special greenhouse that I designed," he wrote us.
My wife still has a full-time job, and I two part-time ones. In the next few years we intend to transition to complete self-employment.
Our business is unique, offering fresh Minnesota vegetables in the winter. We also have published a book on our efforts, and have spoken widely in the Mid west and Canada on our techniques.
We plan to greatly expand our efforts- it's just a matter of time, funding and effort.
Why's he doing it?
"We saw a need that wasn't being met,"Waibel said, "and realized that it was our task to meet it."
But "everything, from insurance to supplies, assumes that a person is in effect indentured to some big corporation," he added. "We can work around this, but it's annoying."
Tell us what you're seeing when it comes to small business, entrepreneurs and the self-employed dream. Post below or contact us directly.
The research group EMSI. recently looked at the number of micro businesses by state for 2007. Here's their graphic showing the states with the greatest and smallest percentages of micro (fewer than 10 employees) and small businesses (click on the graphic for a larger view).
Minnesota came in with 72.6% micro businesses, just below the national average.
A year ago, we asked: Is the Great Recession growing Minnesota entrepreneurs?
We didn't have a lot of numbers then, but we had anecdotal evidence it was happening and pretty solid data from that last recession that downturns bring out our inner entrepreneur.
We still don't have definitive answers. But new research by the Federal Reserve Bank of Minneapolis is opening a window on entrepreneurs and recession -- and poking holes into some conventional wisdom.
Minnesota can be a tough place to talk about entrepreneurs. This is the region that helped create the medical device industry and develop super computers. But the state doesn't look great in some comparisons of entrepreneurial activity.
But we have seen a flurry of people at least trying in the recession. The Minnesota Secretary of State's office reported a big jump in new business filings in 2009, 15 percent more than 2008 and the largest one-year gain in new business filings since 2002.
The Fed went looking for people who started new businesses in Minnesota in 2008 or 2009. They ended up talking to about 20, not enough to be scientific but enough to get a sense of what's happening.
When it came to funding their business, the owners who talked to the Fed said much of the money came from personal savings and credit. "They did receive funding from sources such as community banks, credit unions, government agencies, family members, and friends, but only after using their personal savings to provide an initial equity injection."
The Fed also found that, "of the 32 Minnesota-based companies included on the Fortune 1,000 list, well over half were started during tough economic times."
Maybe the most surprising finding is that the failure rates of new businesses are remarkably consistent in good times and in bad.
Generally speaking, new businesses struggle, whether they are started during a recession or an economic boom. In fact, most studies agree that the majority of new businesses fail.When we look at five-year survival rates for the new firms started in Minnesota in any given year during the period from 1982 through 2005, the pattern for each year's batch of new firms is the same: the survival rate drops sharply in years one and two and flattens in years three to five."For any given year," the Fed wrote, "an average of 45.1 percent of new firms survives to age five. In other words, companies founded during recessions are no more likely to fail than any other new company. "One other nugget that should keep us hopeful: The Fed reported, "All of our survey group members indicated that they believe the economic woes are not over yet. Still, they are optimistic about the future."
If you're trying to start a Minnesota business in this recession, please drop a line and let us know how things are going.
If you were a Minnesota teenager in the Old Economy -- year 2000 -- the odds were good you were part of the state's workforce. If you were a young adult in that economy, you had a decent chance of getting a job without prior experience or a college degree.
But those entry level opportunities seem to be slipping away.
New research from the Minnesota Department of Employment and Economic Development showing the recession widening the gap between people with some work experience and those without.
It also shows the recession accelerating the retreat of teens from the workforce while their jobless rates skyrocket.
Together, those facts ought to keep us up at night.
There's great value to that foot-in-the-door job. It gives teens a first taste of the responsibilities of work. It provides important training for adults. We need teens and young adults to help rebuild the economy. But the recession's leaving people behind.
In the Twin Cities, nearly 55 percent of job openings in fourth quarter 2009 required some form of post-secondary training, compared with 31 percent of openings during fourth quarter 2001. Likewise, the number of entry-level opportunities--those requiring no previous experience--declined from 38 percent in the fourth quarter of 2001 to 26 percent in the fourth quarter of 2009.Here it is in a DEED graphic (click on the chart for a larger view).
One more piece of data from DEED shows the rise of people 55 to 64 years old in the workforce as the teen workforce numbers decline (click on the chart for a larger view).
Youth labor force participation rates declined by more than 16 percentage points in the past 10 years, as Minnesota's youth opted for other opportunities, such as additional education. Those who choose to search for part-time or summer jobs are now forced to compete with a larger pool of job seekers, some with more skills and experience. As a result, average unemployment rates for youth ages 16 to 19 topped 21 percent in 2009.We've been writing a ton about education and the demand for youth jobs during this recession and we know the problems out there.We saw 4,000 kids apply for 1,300 jobs this year in a popular Minneapolis paid summer internship program.We also know that teen jobs have become a crucial piece of family income for some families in the Twin Cities hurt in the recession.The current troubles that are squeezing job chances for teens and people with no experience or a college degree may simply be a fact of life in the Great Recession. Or we may be seeing a shift in the labor force that will be widening the haves and have nots even as the recession ends.Tell us what you're seeing. We're interested especially in businesses that hire teens and entry levels young adults. Are your hiring practices changing? Drop us a line and make us all smarter. (1 Comments)
MinnEcon note: My colleague Dave Peters has been doing great work leading an MPR News project called Ground Level, bringing reporting and citizens together in new ways. Today, he gives us a heads-up on microlending in greater Minnesota.
I mentioned here a couple weeks ago that I was hearing more about interest in microlending in Minnesota and I've been sorting through some data to get a better handle on it. There's no question interest is rising in using small loans as a tool to get entrepreneurs off the ground.
The Aspen Institute for almost two decades has been surveying organizations giving the small loans, and when it conducted another round of research last summer and fall, it found more such organizations than ever.
It compiled the results in a report you can read here. There's even a searchable database here, which identifies 10 organizations in Minnesota that responded to an Aspen survey about their 2008 lending activities.
The biggest one, with 47 microloans disbursed for a total of $550,000, is the Northeast Entrpreneur Fund, which serves 11 counties in northeastern Minnesota and northwestern Wisconsin.
In all, the Aspen study identified well over 100 microloans given out by Minnesota organizations in 2008, totalling more than $1.5 million. A lot of the activity researchers found was outstate -- other active microlenders were non-profits like the Southwest Initiative Foundation in Hutchinson and the Northwest Minnesota Foundation in Bemidji.
Given those numbers, it's clear we're not talking about the kind of 22-cent or $5 microloans that gave the field great visibility and one of its promulgators, Muhammad Yunus, a Nobel Prize a few years ago. The Grameen Bank in Bangladesh gave very tiny loans to people, mostly women, to let them invest in small-scale operations in their homes in an effort to alleviate their poverty.
In the American microenterprise world, the definition of a microloan can go as high as $35,000, but the targets still tend to be low-income, inexperienced people unable to get credit through normal banks.
Mary Mathews, president and CEO of the Northeast Entrepreneur Fund in Duluth, says "demand is through the roof." The number of loans her organization provided rose to 65 last year, she said. This year demand is still up.
A big reason is that bank credit is hard to come by, and microlenders fill a gap. It's hard to know when bank credit might ease, but the state and non-profits are increasingly exploring microlending.
The Minnesota Department of Employment and Economic Development got approval in the legislative session just ended for a plan to make $500,000 in federal money available to outstate Minnesota communities.
The communities need to contract with non-profits to give small entrepreneurs technical assistance. DEED's Bart Bevins says the department has been hearing from organizations who say there's a need and "we'll test that. We're going to find out if there's interest."
At the same time, two regional development commissions serving 10 counties in central Minnesota are conducting a feasibility study and expect next month to roll out a plan that would address any microloan needs they identify.
There's been debate over the effectiveness of microloans in alleviating poverty in Asia and Africa and whether it feels right as for-profit investment operations get into the business. And, as microloan providers will tell you, the need is great for, not just money, but technical assistance to help new entrepreneurs.
(For an interesting look at what those microloans do and don't accomplish, check the May 17 New Yorker profile of Esther Duflo, a young economist who conducts research into Third-World development ideas.)
Are these efforts working in Minnesota? Are small new concerns actually getting going?
Mathews says 85 percent of the small businesses her organization helps are still in business two years later.
What other evidence is there? What are the right ways to measure success?
The corporate jet's taken a public beating during the recession, becoming the symbol of greed after the nation's auto titans jetted in to Washington to beg for bailouts.
Push that hype aside and we can learn something from the jet business, where traffic is starting to recover and that means businesses doing deals, which, hopefully, bring economic growth.
We got a view on this recently from Kristen Wasyliszyn, an entrepreneur who depends on business aviation. She owns Atikis Flight Catering, supplying food for corporate flights out of St Paul, Anoka and Flying Cloud airports.
Her niche took a big hit this year, but now she's seeing a "slow but steady increase in business prompting me to hire more people."
When the full on recession hit my business went down about 40 percent (a few months 60). I was forced to let go of quite a few people and work the hours myself. The FBOs (flight based operations) were laying off their people as well, back to bad trickle down days...Planes were not coming to MPLS as they once were. When the big three auto maker CEOs had the "private jet" scandal, they didn't handle it well and hurt our entire industry.In the last few months I have seen a slow but steady increase in business. I think the increase is A. the economy is getting better- B. My "competitors" not being able to weather the economic storm and possibly like many others going the way of the powdered wig.
That jibes with what Wasyliszyn's vantage point.
"Lately, Ive been seeing more airplanes," said Wasyliszyn, a source in MPR's Public Insight Network. She feels like she'll be "back to full force in the upcoming year. That said, Ive always had rose colored glasses on..."
We got in a bit of an extended email conversation about business jets and elitism. Despite the champagne-and-caviar image it evokes, "I'm here to tell you no one is eating lobster," she said.
"A quick turkey box lunch to slam down while flying to meetings is the order of the day."
Tyler DeArmond's story started like many we've heard in this economy -- a would-be entrepreneur launching a new e-commerce business to supplement a pay cut at his full-time job.
Then he started talking vacuum tubes.
What kind of online market could there be for a turn-of-the-20th century invention, largely extinct? Turns out there's a pretty good one, fed by musicians.
"I've had a hobby of playing with old electronics for years and as a result I've accumulated literally thousands of vacuum tubes," said DeArmond, an associate pastor at a local church and a source in MPR's Public Insight Network.
"It used to be that pretty much all electronics (60's and earlier) used vacuum tubes," he said, kindly suggesting that I might not be old enough to remember that era (I am!).
The transistor pretty much did in the vacuum tube. But there's still a music industry niche: Guitarists who use tube-based amplifiers, and recording studios who use high-end tube gear, DeArmond says.
After collecting vacuum tubes and tube related gear for more than a decade as a way of supporting a Hi-Fi hobby, he and his wife Chelsea decided to see what they could do online, selling vintage tubes.
On the site, Tyler makes it clear, "Starting this small business is our response to the challenges of this economy. We hope to gain enough momentum to be able to hire some folks in our neighborhood who are looking for work."
He told us he's taken a voluntary 20 percent cut this year and Chelsea has taken an involuntary 10 percent cut at her job.
"We've been trying not to take any money out of the business and so far we've succeeded and as a result the business is growing pretty steadily," he said.
We asked Tyler for a little more detail on the business.
We launched this business in January of 2009 but didn't go live online until March. We have seen a steady increase in sales over the first 9 months but actually, we've run ourselves out of inventory as a result of a higher than expected amount of demand this fall. Because we're very small and we're "paying as we go" (no small business loans other than what we can pull together from our own resources) it will take us a little time to recover and get stocked up again. We expect a stronger year in 2010. So far, we have not taken any money out of the business (yes, we're working "for free" right now), we are simply reinvesting it back into inventory so that we can expand product lines and grow the business as quickly as possible. Of course, for us, this also means that we both are still working our day jobs and we do this business in the evenings and on weekends. One other aspect of this that is a little unusual is that we are willing to take international orders that most other businesses shy away from. They are typically a bit more risky and always more work due to the added complexities of shipping overseas (to say nothing of potential language barriers, misunderstandings, currency exchanges, etc.).He also shared the basics on why musicians still dig the vacuum tube:
Musicians who play bass and electric guitars often use vacuum tube-based amplifiers to achieve a desired sound. Mullard tubes from England can help you get a Beatles sound, and so forth. Happily, vacuum tubes by their very definition keep all of the functional components in a vacuum so as long as the vacuum is intact the tube remains good until used up, much like a light bulb. So, we provide vintage tubes to musicians seeking to mimic a certain sound or creatively establish a sound of their own by swapping out various tube types to see how they sound together.
It wasn't to be. The Mankato entrepreneur found out late this week she was a runner up in the competition. But she's already looking ahead.
We featured Femrite in a Tuesday post that looked at her efforts to start her business. Local, entrepreneurial, socially conscious. Minnesota, we argued, has a lot riding on April Femrite and others like her.
Late Friday, Femrite dropped us a note with her next steps.
I will continue a grass roots effort to increase both on-line and retail store sales. I have submitted several investor applications through a software program called angelsoft.net in hopes to attract angel investors who believe in my mission. I will continue to develop and test new products.Naturally Bamboo is currently a finalist for the ISPO Brand New Awards. Winners will be notified in January and receive a free both at the world's largest sports show in Munich Germany.Femrite recently blogged about her Forbes experience. "2009 has been quite the trying year, as it has for many small businesses," she wrote, "but somehow we still survived it." (1 Comments)
Wheels move the U.S. economy. Mark Padellford sells all kinds of wheels. So when the recession hit, he felt it. These days, though, in some parts of his business, he's starting to see a turn for the better and that could mean good things for the economy.
Padellford, a source in MPR's Public Insight Network, is director of product and marketing for Pioneer Rim and Wheel, a Minneapolis-based company that distributes wheels for trucks, trailers farm equipment and other machines as well automotive repair parts across Minnesota, North Dakota and Wisconsin.
We asked him to share what he's seeing. He broke it down for us piece by piece.
"The business started to change first in the truck wheel segment," said Padellford. "When there's no freight to haul, people park their trailers. When they're not driving their rigs, they're not bumping into curbs and needing wheels."
With a big chunk of the nation's truck fleet parked, that business has dried up. The forecast is bleak, he said. No one's looking for big increases in 2010 but the decline's expected to stop, he added.
Industry research bears that out. The Freight Transportation Research group declared in November that the recovery had begun but cautioned against expecting any "near-term major improvements for freight companies and their suppliers." The trucking business is starting to pick up more freight but it's a bumpy ride.
"The Ag business has been down considerably from '08, but '08 was a great year," said Padellford. "This business seems to have flattened out. As the farmers go, so does this business segment." Tractor wheels and attaching components make up the bulk of this segment.
Padellford's company distributes car and light truck replacement parts to repair shops. From prior reporting, we know people put off car repairs in a recession.
The market's been down for about a year but there are signs of a turnaround. The number of vehicle miles driven is starting to see a small increase, he said.
Players in the automobile parts after-market are starting to see an uptick in comparable store sales, Padellford said, adding "You can only put off needed repairs so long."
Wheels and parts that make up work and construction trailers (think of the trailer that holds up the flashing "construction work ahead" signs on the highway or any other piece of equipment that needs to be mobile) tanked in the recession along with the construction business.
But the trailer repair parts business seems to be picking up as construction, municipalities and fleets seem to be holding onto equipment longer.
Padellford says the federal stimulus bill can create some upside if money gets to the projects that really are "shovel ready."
"I'll believe the recession's over..." or "I'm feeling a recovery now because..."
Finish one of those sentences and help us understand where the economy's headed.
And click on the map icons below to read what sources in our Network have been telling us about the jobs climate around them.
At stake is $50,000 in Forbes advertising and another $50,000 in investment capital. Forbes unveils the winner this week.
Win or lose, Femrite, 34, caught our interest on a bunch of levels.
She has an interesting story to tell. She manufactures clothing from bamboo fibers. She's passionate about her ideals and working to find the financing and momentum to keep it rolling. Married with two small children, she also juggles family life.
I interviewed her recently as she waited for her child's pre-school to finish up.
Ticking off a long list of the ecological benefits and comfort of bamboo fiber clothing, she adds, "What I'm trying to do is potentially huge for the U.S. economy and the planet."
I broke the interview up into chunks below. As you read, keep in the back of your mind: Can Minnesota build its its economic future around entrepreneurs like Femrite? Can it capitalize on the "green," sustainable movement? What if it can't?
Family of entrepreneurs
Femrite didn't plan to be in business. Her background's in education and counseling. She was a career counselor at St. Olaf College. But she comes from an entrepreneurial family. Her father had several companies, including a tank car cleaning operation.
Her older brother buys walnut trees and sells them to companies for furniture. They were mulling over new ideas in 2007 when he came over with a newspaper article on bamboo fibers and how they could be made into all kinds of breathable, hypoallergenic clothing. "It just kind of snowballed," she said, "almost like a calling. I was supposed to do this."
She spent the next few months researching bamboo fiber, fabric and sewing manufacturers then started producing clothing using a "fair labor facility in China. " Since then, she's moved production locally establishing partnerships with "ethical sewing facilities in Minnesota and California who will now be making all future Naturally Bamboo lines."
Financing and marketing challenges
The business is pretty much self-financed, Femrite says. She's been able to turn some monthly profits but "it's still a struggle."
Funds come from a home equity credit line, business credit cards and a business credit line from a bank and a loan from the Southern Minnesota Initiative Foundation.
"I don't have any free money," she says.
About 75 percent of her business come from online sales but she's also picked up a retail outlet in Canada. The hardest hard part, she says, is trying to build a brand name clothing line with no marketing dollars. "I'm still pretty much doing it all by myself."
We've written a lot at MinnEcon about Minnesota's shrinking and aging workforce and asked aloud what happens if Minnesota can't keep it's best and brightest?
Femrite's staying, even though it might be cheaper to go elsewhere.
"I envision my headquarters always being here. We're not doing the bamboo planting and processing in Minnesota, but my cut-and-sew operations are in Prior Lake," she said. "Could I do it cheaper in Mississippi or South Carolina? Maybe, but probably not that much to make it worthwhile."
What about the tax climate? "It's not going to sway my decision," she said. "It's more about labor pool, quality of life, family, outdoors. You're not going to see us move someplace that doesn't have lakes and rivers," she said. "It would be really hard to go somewhere else."
Here's a post from my colleague Mike Caputo:
When economic times are good, people tend to function on auto-pilot. Who needs deep introspection when salaries are rising and profits are rolling in?
But hard economic times can force people to re-engage, and ask tough questions about what they do for a living, and how they do it.
"This recession has caused me to step back and rethink my business," says Public Insight Network member Kevin Stirtz. He runs a customer loyalty consulting business. The recession is forcing Stirtz and others to ask core questions about their business strategy and personal commitments.
I've asked the questions: What do I really love to do? What do I do very well? What do my customers want most? " he says. "Where these answers intersect is where I am pointing my business. The recession has caused me to ask the questions. But the answers are based on the lifestyle design I want, NOT the current economic climate.
Others have to reconsider how they bring their creative side to their venture.
"I've been stunned into new activity," says Georgia Gould-Lyle, a freelance publicist from Golden Valley. The recession has made her scrappier and more willing to try something off the wall as a way to attract potential clients.
In contrast, Minneapolis graphic designer Lori Gleason says she has had to pull back on the more creative aspects of her work.
"The nature of my work is highly customized and many clients cannot afford this right now," Gleason says.
I am "streamlining" all of my products (logo design, printed materials and web design) to offer small packages that clients can afford. It's quite a challenge and is not very satisfying creatively right now. I must learn to "shut down" the creative process of generating ideas to stay within time constraints that are practical. But necessity is the mother of invention and I plan to develop a leaner but smarter business over the next few months.
Getting back to basics is a major theme of these economic times. So much so that, in September, Minnesota Public Radio will host a forum with small business owners, freelancers and entrepreneurs to explore how the economic climate has challenged their fundamental values.
Would you like to participate? Start by sharing your story about the challenging economic times and your values.
Mark Tuveson likely spoke for a lot of Minnesotans when he told us recently that he was starting to see some positive signs in his corner of the economy. But he wasn't sold yet on a recovery.
Tuveson, 53, a source in MPR's Public Insight Network, works for a small welding and machining job shop in Northeast Minneapolis. He runs the bridgeports, lathes, boiler and, lately, he says he's been shop foreman.
He told us:
YTD we have laid off 7 workers (basically half the crew) with hours reductions for everyone else. We won't be hiring anytime soon, but would like to get everyone's hours back up. We would like to see more business, obviously: more jobs to quote on and more work coming in.
He added he was "somewhat optimistic about the immediate future. We have had a few more jobs come into the company -- the most backlogged hours since May of this year."
That alone may be good news given the hit that manufacturing's taken in Minnesota.
The state's lost 40,000 manufacturing jobs over the past year, more than any other sector in Minnesota, accounting for about a third of the state's total job loss in that time.
Those 120,000 cuts are an unhappy record for over-the-year job loss dating back to 1950, according to the Minnesota Department of Employment and Economic Development.
With any luck we'll see positive numbers this morning when the state releases the most recent jobless data.
But it may not feel like a recovery here until manufacturing feels it.
As Tuveson says: "Don't want to hear the recession is over... want to see it."
"I'll believe the recession's over when... " Finish that sentence here. Tell us when you'll be convinced things are turning.
Also check the map below to see what Minnesotans in our network are telling us about the jobs climate around them.
Good health coverage became a luxury for many small businesspeople in this recession. So imagine owning a small business in one of the nation's most dangerous sectors.
That helps to understand the results of a new report showing the consequences of medical debt carried by some family farmers in Minnesota and six other Midwest states.
But it creates a special kind of burden for farmers. Many rely on off-farm jobs as their source of health coverage. The danger inherent in agricultural work can make good coverage expensive and force some hard choices.
"There are no fair/affordable options for farmers and other self-employed persons to access affordable health insurance or health care. Why not?" Kenyon farmer and Network source Rae Rusnak asked us last winter.
Rusnak, a widowed single parent, has insurance but told us recently,
If I take a full-time off-farm job in order to get health care benefits, then my farm business will suffer, I will have to pay child care costs, and I will not get to spend as much time with my child. I choose to be with my child and pray that my health insurance rates do not go any higher. We are already experiencing the sting of high orthodontist bills.
"I'm very appreciative that we are elgible," he said. "Over the next year our farm income may rise to the point where we may have to pay increasing premiums but for all I know we will still be elgible for health care through MNCare. I have not looked into alternatives if our coverage is dropped."
Brenda Jannsen, a small beef and dairy farmer in southeast Minnesota told us several months ago her family was considering quitting farming -- health care was one of the major reasons.
Sadly, that's coming to pass. Jannsen told us a few days ago they've begun to sell off the dairy herd.
MPR and the investigative reporting outlet ProPublica queried thousands of Americans earlier this year to find out where the health care system is succeeding and failing. More than 500 people responded.
Check out the responses mapped below, then add your own story.
In early September we brought together nine Minnesota small business people from MPR's Public Insight Network to talk about health care, finding credit and the pains and passions of running your own shop in this economy.
My colleague Mike Caputo took it another step, pulling together a face-to-face forum on small business issues. The result was a fine discussion you can hear today at noon on MPR's Midday program.
Below is the online forum. Listen in today at noon.
If you have a view on small business or want us at MinnEcon to look deeper at an issue, contact me.
Confusing economic signals make my head hurt. So I've been reaching for the ibuprofen lately every time I read something on Minnesota's hog business.
One of the nation's largest hog producing states, Minnesota is part of a crisis so big that the state ag commissioner is asking the feds to buy another $50 million in pork products.
USDA says Minnesota hog producers intend to farrow (birth) 570,000 sows between June and November of this year -- unchanged from the same period last year.
So shouldn't there be a pullback when all the economic signals seem to be yelling "Stop!"
Maybe it's just human nature not to pull back, even when you're losing $15 a head. You're a hog farmer so you keep producing hogs thinking the other guy will cut back and prices will rebound.
Plus, productivity's improved dramatically. The Minnesota Ag Department notes that big advances recently in animal health have cut death loss on farms and helped boost hog numbers. And a recent post by University of Missouri economists notes increased productivity nationally is offsetting recent declines in hog breeding herds.
One guy who knows a lot about the business is Irv Busman, a southern Minnesota farmer who's a source in our Public Insight Network and helps us keep watch on the region's farm economy.
Irv last week told us:
We have cut back our hog operation dramatically, and we are very happy we did...One individual who used to feed for us, in an older barn, has since torn down his hog barn. Another had the opportunity to feed for a large operation.....some of the larger operations haven't "blinked" as of yet...
I know of a few independent hog operations that have lost massive equity in the past year. ... I think there are some real struggles in the dairy business around here as well. One nearby 3 generation dairy was told that they have the bank's support until this fall.
I don't really know what that means, but I know the bankers are really struggling with some of these long established operations. Land is being sold/signed over to lenders in some of the dairy operations.
As my colleague Bob Collins has noted, these problems tend to run in cycles. Ten years ago, MPR News was reporting "Hog Farmers Losing Money Due to Over-Supply."
The difference: That happened when the overall economy was great. What happens now?
Nothing like a recession to get you thinking about being your own boss.
If that sounds odd, we have anecdotal evidence that's happening now and pretty solid data from that last recession that downturns bring out (force out?) our inner entrepreneur.
Crystal Pollard of Richfield was pregnant and looking for baby clothes three years ago when she got the idea of selling "gently used" maternity and newborn-to-nine-month-old gear. She launched Bellies to Babies in November, weeks after the stock market plummeted. Pollard, a source in our Public Insight Network, told us:
...Unable to get a small business loan from any bank, my fiance and I decided to hold sales out of our garage on weekends last summer. Pretty soon we had people piling in from all over the state and western WI just from ads on Craigslist.
This showed us how much this kind of store was needed. And really gave us the kick we needed to find a different location for a permanent store. we finally got a small personal line of credit through our bank, and started the store on a very tight shoestring budget.
The recession, she added, "plays a huge part in my business. Used clothing sales are up as much as 50% at some stores because of this."
UPDATE: Pollard checked in with us today to say they've also launched a special occasion dress rental business that's growing rapidly..."women love the fact they can rent one for a couple days for only $35 and save their money. I'm sure the recession is playing a huge part in this."
State surveys from the last downturn show us what we're seeing now isn't a fluke. State officials figured Minnesota workers involved in mass layoffs started more than 400 businesses, or more than three percent of all business start-ups in 2001. About 1,500 workers were weighing a new business venture.
With family and friends struggling in the recession, Angelique Montag of Plymouth recently teamed up with her mother and aunt to start an online business selling handmade purses and other goods using recycled items.
Montag, another Public Insight source, wrote:
I am a hobby crafter, my aunt has a degree in Art and my mother has been a seamstress and crafter most of her 75 years....My mother and aunt have sold stuff at craft shows and the senior center back in Wisconsin for years.
After two years of saying, I'm sorry, but my aunt lives in Wisconsin and doesn't have a store or website to sell you one, I decided to buy a few from her to sell to my friends who had asked for them.
When finances worsened this year for all of us, I bought a few more purses from her and set up a website, made some business cards, and hand them out to people when they ask about my purse.
There are downsides, obviously.
Failure is always a possibility. As an entrepreneur, you're really putting yourself out there in ways you didn't when you worked for a big employer.
Pollard, for instance, says: "At this time, we can't afford to purchase health insurance through the business. I have insurance through state coverage, we are still waiting on the state to get back to us about our sons' coverage, and my fiance has very basic coverage through his work."
Montag has been trying to maintain the business while also keeping her job as a legal secretary because the craft projects don't pay the bills yet. The overall stress, "is complicating a nerve problem I have with my arm, which makes it difficult and painful to continue crafting.
A state report called the unemployed a potential source of entrepreneurial energy, but also cautioned that, "Minnesota's relatively low business start-up rate clearly suggests that Minnesota needs to support a culture that encourages and values entrepreneurship."
If you're trying to start a Minnesota business in this recession, please drop a line and let us know how things are going.
Check out the map for what our people in our Public Insight Network are telling us about their job situation.
Posted at 3:51 PM on July 23, 2009
by Paul Tosto
Filed under: Small business
Do the work. Get paid for the work. Even in a recession, we assume people will honor that economic code. But what happens when you're a small business or independent contractor and clients are not paying you?
In this economy, it means trouble.
We thought about this after talking to Bill Turner, an independent software development consultant from Minneapolis and a source in our Public Insight Network. We were asking about the current employment climate and he mentioned, "My last client did not pay for two-thirds of the hours billed and the contract was canceled."
Most consultants I know are scraping for work and are not at all confident that they will have another project any time soon after the current one ends. In addition, we need to compete on a world wide basis.
I do know people who have been told that the payments would be held 90 days. That has become increasingly common. I know of one other person who was outright not paid.
Turns out not getting paid, or getting paid slowly, is increasingly common in this economy. A Wall Street Journal blog recently posted an expert's tips for freelancers on getting paid (Tip #1: Don't be embarrassed to ask for your money).
I'm following up with some local experts on the issue and expect to post more on this. If you have a similar story to share post below or use this form.
Interestingly, the last tip the Journal's expert offers is: Sue the company in small claims court.
As Turner tells, though, it's not that easy. When it was clear the entire payment wasn't coming, Turner told the client he couldn't work any longer until all outstanding invoices were paid and paid in advance from then on. He said the client threatened to sue him.
"I began the process to cancel the agreement. I hoped that might prompt him to pay, but it did not."
My options at this point are limited. I could sue for what is due...it is a large enough amount that I would need to hire an attorney, not being valid for a small claims court dispute. The amount is too small, however, to really justify doing that.
What do you do?
Check out the map below for other stories people in our network are telling us about the job situation around them. Then share your story.
Friday's federal minimum wage hike to $7.25 an hour may have a bigger effect on Minnesotans and Minnesota business than you think.
With the hike, Minnesota's large employer minimum is now $1.10/hr under the feds and small employer minimum is $2/hr less. Ours is one of only four states with a state wage lower than the feds (five have no law).
What does it mean? Here are some thoughts:
Statewide, it may only touch about five percent of the workforce. The Economic Policy Institute, a liberal research group, estimates the law will affect 79,000 Minnesotans directly and 44,000 indirectly.
About 2.6 million people were employed in Minnesota in June.
Dan Marshall is co-owner of Peapods Natural Toy Store in St. Paul and a board member of the Metro Independent Business Alliance. He's also a source in our Public Insight Network.
He told us today:
I think the increase in the federal minimum wage law will have very limited impact on locally owned small businesses.
Although there may be some exceptions, particularly with restaurants, most members of MetroIBA are already paying their employees well above minimum wage.
Small businesses, including ours, tend to rely heavily on quality staff and do not have the HR and training resources to accommodate the high turnover that comes with paying minimum wage. Furthermore, the law exempts businesses grossing less than $500k, which includes many of our member businesses.
The problem is that the cutoff may be trickier than people realize.
...applies to employees of smaller firms if the employees are engaged in interstate commerce or in the production of goods for commerce, such as employees who work in transportation or communications or who regularly use the mails or telephones for interstate communications.
Together, it means nearly all Minnesota businesses -- including many mom-and-pop shops -- will fall under the federal law and the higher minimum wage, says Mary M. Krakow, an attorney with the Minnesota law firm Fredrikson & Byron.
I'm hoping to come back with more on this Monday, so stay tuned.
Meanwhile, if you're a business or an employee who has some thoughts on how the minimum wage hike affects you, I'd love to hear from you.
Post below or click here and use this form. It's built by our friends at Marketplace radio, but we share the info and I'll be sure to see it.
Meanwhile, check out the detail below comparing Minnesota to other states.
Here's an interesting comparative chart (thanks to Mary Krakow and Fredrikson & Byron)
July 24, 2007
July 24, 2008
July 24, 2009
Certain exceptions to minimum wage apply to workers under the age of 20 for their first 90 days of employment and, in some states, to tipped employees and agricultural and disabled workers.
States with minimum wage rates higher than the Federal
States with no minimum wage law
States with minimum wage rates the same as the Federal
States with minimum wage rates lower than the Federal
American Samoa has special minimum wage rates
There's a lingering perception that businesses with sales below $500,000 a year are automatically off the hook from the new federal minimum wage hike. Not true.
The reality is that almost all Minnesota employers will need to pay their employees no less than $7.25 per hour, a big jump from the current state minimum wage of $6.15 per hour for large firms or $5.25 per hour for small ones.
We've been talking about this recently with Mary Krakow, an attorney and employment law expert with the Fredrikson & Byron law firm in Minneapolis. She says she's seen reports erroneously indicating firms grossing less than $500,000 a year are exempt on the wage hike.
The takeaway is that the law is not just about the $500,000 cutoff.
You can fall below that and still have to pay the higher federal rate if your employees, "produce goods for commerce or handle, sell or otherwise work on goods or materials that have been moved in or produced for commerce," says Krakow, who wrote a piece on the wage change she'll post soon on her Fredrikson & Byron page.
The law, she says:
...broadly defines "commerce" to include any trade, commerce, transportation, transmission, or communication among or between any of the states and sometimes even when the activity is only within one state.
This rule means that even if the employee's employer (doesn't meet the $500,000 threshold), the federal minimum wage still applies to the employee.
...because the (law) broadly defines "commerce," it is the rare employee who does not somehow assist in the production of goods for commerce.
In Minnesota, employers also can't use tip credit to meet the minimum wage.
Many businesses pay more than minimum wage, of course. The Economic Policy Institute, a liberal research group, estimates the law will affect 79,000 Minnesotans directly and 44,000 indirectly. That's less than 5 percent of the 2.6 million Minnesotans employed currently.
The point is that it affects a lot more businesses than you realize and, whether you support the wage hike or not, some small businesses are going to need to find a way in this recession to pay their minimum wage workers a lot more.
Some of the more unusual exemptions to the law Krakow notes:
Check out my prior post where I put up a couple of interesting regional and national comparisons of Minnesota and other states on the minimum wage.
If you're a business or an employee who has some thoughts on how the minimum wage hike affects you, I'd love to hear from you.
Post below or click here and use this form. It's built by our friends at Marketplace radio, but we share the info and I'll be sure to see it.
It's spotty and anecdotal at this point, but if you're looking for some evidence people might be willing to spend again on non-essentials, we're hearing stuff from some antiques dealers.
A source in our Public Insight Network from central Minnesota tells us she was at an antiques sale in Cambridge, MN recently and started talking to dealers who were upbeat about the business at the Cambridge event and a recent event in Grand Rapids, MN. She says:
They said the show in Grand Rapids was as good as it was 10 years ago, and the Cambridge show was good also. What does this mean?
Having been a dealer for years and now not active because of the low market, it tells me something must be getting better.
Could be that people are buying more used items, and found out they can buy furniture cheaper used than at furniture stores, she notes.
It might also be a green shoot on the economy.
"I think it's turning upward," says Bill Carlson, a Twin Cities antiques dealer and board member of the Minnesota Antique Dealers Association, who points to an antiques show at the Minnesota State Fairgrounds in early June where attendance was up significantly from the prior year.
The recession's been pretty tough on dealers, he adds. "When the economy's way down people really tighten the belt...discretionary money is tight and if you're having any kind of financial problems in your own life, you're not going to be buying antiques."
Some have dropped out, others are managing to keep going through online sales and consignments. Those "reasonably well funded and are not out on a limb" are holding their own. "Borrowing money to buy antiques is not a good thing to do," he adds.
The local antiques market will get a get a good sense of direction next week when two major shows set up in the Rochester area, including Gold Rush Days in Oronoco, MN.
"I think the signs are positive," Carlson adds. "If consumers are willing to spend money at the shows, hopefully the shop business will also turn around."
8/7 UPDATE: Richard Lee, a Network source and antique dealer from Duluth says he's not seeing a recovery in the business.
Business still sucks...there are still more sellers than buyers, and when they do buy it's generally the shelf fill and not anything of any consequence.
Check out the map below for what others in our Network are saying about money issues.
UPDATE: Forum on small business and credit is over and went great. Check out the entire conversation below as well as this follow up post.
We invited nine Minnesota entrepreneurs and small business owners to chat online about the challenges of keeping the money flowing in this recession.
You can watch it and contribute to it below.
We'll be talking about the struggle to raise capital -- are some businesspeople using credit cards to keep the business afloat? -- as well as ways to get around the credit crunch. Some businesspeople have gone to an all-cash system.
The forum starts at noon (Central Time!) today. Please check it out here and jump in. (Also, let me know what you like or don't like about virtual forums, or what we could better.)
You can also click here and share a quick story about what the economy is like around you.
Scrambling for capital. Dealing with the stress. Loving what you do.
If you want to know what it's like to be a small business person in Minnesota these days, take 15 minutes and scroll through the virtual forum below. It's a quick lesson in the joys and frustrations of running your own shop.
We asked nine entrepreneurs in MPR's Public Insight Network to talk about credit and cash flow in this economy. They did more, opening a wide ranging conversation on credit, government aid, the strain of starting a business and and what it's like to take that leap into being your own boss.
Check out the dialog below. Here are some of the highlights.
Credit. It's been difficult to impossible at times in this recession to get the credit needed to run a small businesses.
"Tight is the wrong word - non-existent seems to fit a little better," said Michael Schaffer, president of M.A. Schaffer Accounting Services. "Working capital has become extremely hard to come buy, especially for those who need the money.
Schaffer recalled when he started in 2006, :I walked into and out of the bank in less than an hour. With no business plan, unincorporated, and one client, I was given a Line of Credit, Credit Card and Overdraft Line - all based my my credit score and signiture."
"I had perfect credit when applying for my loan. But the bank kept wanting more and more liquid equity for collateral, said Crystal Pollard, owner of Bellies to Babies.
Amy Goetz, founder Bramblewood Treats told us she's dealt with the "We'd like to, but..." conversation with her banker. "I have a great relationship with my banker ... But the automatic program spits a big "no" out." The problem, she said, is that, "I have a student loan on my credit history and don't own my own home."
Joys / stresses of starting a business. The work is their passion but it comes at price in time and stress.
"It's a scary decision, especially now," said Pollard. "But if it's something you're passionate about and commited to, it is one of the best decisions you can make....This is the most stressed I have ever been, but it is totally worth it knowing I'm able to help so many women...With so many people being laid off work and losing jobs, why not start the business you've been dreaming about?
"Oh, yea, the stress ... it ebbs and flows - but I think I'm used to it now," said Shawn Sheely, founder Analog Interactive. I've been trying really hard to reduce stress in myself and my employees by working fewer hours and through simplifying our repetitive tasks and processes.
Goetz says she often calls the business, "my other baby and the only thing I'd rather do. But, the stress is on my shoulders all the time."
Solutions. We asked in various forms what if anything lenders and/or government could do to make things better.
"Somehow, we have to get low interest money to SMALL business owners for capital," said Brady Jass, president B&H Manufacturing. "Big corps have access to investors, lower rates, etc. It is in the country's best interest to fund small businesses to furnish competition to larger corporations. They have tons of advantages that we dont have."
"I'm not sure there's much more I can tell Congress," said Jason Rysavy, founder Catalyst Studios. "It really feels like success rides on my shoulders (and my employees). I'd rather be scrutinized vs handing over cash I may not be able to pay back."
"Make it easier to run a business," said Sheely. "I have to shop health, 401k, pay a myriad of taxes and matches...why can't I just pay my employees their salary and let the governement collect the taxes - I have better things to do than their paperwork.
Health Care. Paying for health care is on everyone's mind these days. But finding real solutions is an absolute must for small businesses.
"Our health care has risen 20-25% every year for the last 9 years," said Rysavy. "And we pay 100% of the employee and 75% of the dependents, so it's killing us."
"Heathcare costs are killing small business potential," said Sheely. "Large companies can manage this through economies of scale ... we're very vulnerable on this one. Can you say pre-existing condition?"
Added Pollard: "I don't offer healthcare to my employees because my family can't even afford it right now. My son is 3 and we can't afford to cover him. We're working on getting state for him.