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Roundtable discussion

Small businesses find a way through hard times


Small businesses navigated through the recession on different paths — some remained stable and some thrived, while others struggled to obtain loans and land clients.

Local business owners discussed the recent bright spots and rough patches their companies have seen in the past few years during an executive roundtable May 24 at The Daily Transcript, sponsored by Voice Smart Networks and Silvergate Bank.

During the recession, both Paul Wyandt and Gary Fisher saw an increase in sales. Wyandt is the CEO and owner of ZOIC Clothing, a line of cycling clothing and accessories.

“Our company has been growing every year for the past five years,” Wyandt said. “The economy is causing people to look at alternative means of transportation. We make products complementary to people who bike commute, and who like outdoor adventures close to home. Cycling as a category was up 21 percent in the first three months of this year, and our business just continues to grow by double digits every year.”

Fisher is the owner and manager of Wahoo International, which supplies a UV resin cure for surfboards.

“This is a repair product. When the economy is down, people fix what they’ve got,” Fisher said.

Alan Lane, president and CEO of Silvergate Bank, said the bank was able to navigate through the recession without losing money.

“As other banks struggled, we’ve been able to step in and fill the void,” Lane said. “We weren’t in a position to bank small businesses, but over the past three years we changed our charter and have been opening up branches.

"And more and more, the word is getting out. We don’t have to get over that original hurdle of ‘we’ve never heard of you’ — we’ve been able to step in and help small companies.”

The small business owners at the round table questioned Lane about banks’ willingness to lend commercial loans, and voiced their frustrations resulting from the process.

Dale Stein, owner and CEO of Voice Smart Networks, also started Tag National, which he said has been around for a while and doesn’t need money — “so the banks will lend to us,” he said.

“But as a startup company, a lot of my smaller companies deal with the new regulations — it’s been next to impossible,” Stein said.

Stein said when he started Voice Smart Networks, it felt the effects of the economy. He went to a bank for a $100,000 loan and said the experience was “crazy.” He then had a situation with a manufacturer who offered a 10 percent discount, if the company paid $100,000 in advance on a product ready to ship out.

“We went to the bank and said, ‘we need a 30-day term and will make the 10 grand,’ and he wouldn’t even talk to us. It was almost embarrassing,” Stein said.

According to Stein, in today’s environment, banks haven’t been there to help, and the excuse he hears is that there are regulators in the office.

Lane responded that when regulators visited Silvergate Bank’s office, a dozen showed up and stayed for a month.

“And we’re a healthy bank. We’re well-capitalized, profitable, and they came in late February and were in for a month. So it’s not just a story, it’s true,” Lane said. “In defense of the regulators, they’re only coming and looking in hindsight. It’s a natural tendency for the pendulum to swing from one side to the other because they come in and, ‘oh gosh, we missed this and we weren’t strict enough so now we’re going to be overly strict.’ Over time, I think that will moderate a little bit.”

Lane said small businesses should research a bank to determine if it is healthy before asking it for help. And, to make sure expectations are realistic.

“Don’t forget that the bank doesn’t get an equity return,” Lane said. “The bank gets a very thin margin. You might not think it’s thin, but banks have costs as well, so we do have to look and say, ‘OK, if this is wildly successful all we get is this.’ We get our interest income and you, as the business owner, get all of the upside, so we have to protect our downside.”

Cheri Carroll, an adviser at SCORE San Diego, a business counseling service, said this is an “exciting time” for new businesses. She said she meets with female entrepreneurs, most of whom are looking for a career that’s fulfilling and not just the usual day-to-day grind.

“All of my clients are so interesting. There are a lot of opportunities. It would be nice if it were easier to get the money to do them,” Carroll said.

Gina Franklin, president of Grahovac Construction Inc., said this recession negatively affected her company unlike the previous two recessions she worked through. In the past, she said she was given an “abundance” of work from public companies, but has found it “very difficult” during this recession to find the public work to sustain and build on.

“We took a hard hit for the last couple years, but this past year has put us back to almost where we were four years ago,” Franklin said. “A lot has to do with private clients who have decided to start moving and doing projects that are more than just a little maintenance here and there.”

Jamie Hewitt, president and CEO of intelliSolutions Inc., said budget cuts and sequestration threaten the future of her company, which is a defense contractor for software and systems engineering, program management, test and evaluation, tactical data link systems support, and engineering services.

“It’s been a relatively stable industry for a couple of years, now we’re hitting a pocket of uncertainty,” Hewitt said.

She added that administration has been supportive of small business opportunities.

“In the threat of uncertainty, hopefully we’ll be able, as a small business, to find some opportunities because of that increased focus. It’s kind of a bright spot in a kind of uncertain, cloudy future of defense.”

Stein said Voice Smart Networks was also challenged in the past few years, but has seen a noticeable increase the past six months, due to a shift in technology and a shift in how companies are managing infrastructure.

“Voice Smart Networks did as much business in the first quarter of this year as we did in all of last year,” Stein said. “We’re out trying to hire, and we’re looking for real estate now. Our business is seeing growth, and I think it’s going to be a little more sustainable than it was in the past. ... We’re seeing it on a national basis. The economy is definitely at an uptick, at least in our industry.”

Stein, who works with about 150 companies across the country that sell infrastructure to small businesses, said companies held off on buying new technology in the past few years, and it now needs to be replaced.

“Auto dealerships are finally coming back to life and spending some money,” Stein said.

Stein added that his company has been trying to hire new employees, but has been challenged to find qualified candidates.

“We’re hiring, and it’s one of the most frustrating things right now to find the skill level that we’re looking for,” he said, noting that he used three headhunters for a project and used the Internet to find applicants. “We get lots of applicants, but it’s not at the level you’d hope you’d be able to have. They don’t have enough education or knowledge of the technology.”

He said it’s likely a result of the technology shift and people not staying up to date with the changing technologies.

Hewitt has also had difficulty finding applicants who fit the skill requirements in her industry.

“On the defense side, we’re having a very difficult time hiring as well. We’re searching and talking to our networks and utilizing online tools, and going to job fairs. It’s not easy finding people with the job sets required to do the job we need them to do,” she said, adding that her employees must be U.S. citizens.

Business owners face the options of training an employee with limited experience, or hiring an employee with the experience for the job, if he or she can be found.

Michael Labelle, senior vice president and co-branch manager at Studley, said the firm is always recruiting.

“If we grow organically, the risk there is that you train someone for two or three years, and your competitors then see their value and recruit them right out,” Labelle said.

Hewitt also said it is difficult to retain younger employees.

“You get them when they’re young. They’re learning and they want to grow; they want to be challenged. And they get recruited or they seek other opportunities to keep moving up the levels,” she said.

Labelle said his industry is “aging,” allowing an opportunity for people coming out of school to “make their mark” in the industry.

Roundtable Participants

Cheri Carroll, Adviser, SCORE San Diego

Gary Fisher, Owner/Manager, Wahoo International

Gina Franklin, President, Grahovac Construction Inc.

Jamie Hewitt, President & CEO, intelliSolutions Inc.

Michael R. Labelle, Senior Vice President, Studley

Alan Lane, President/CEO, Silvergate Bank (roundtable sponsor)

Dale Stein, Owner/CEO, Voice Smart Networks (roundtable sponsor)

Paul Wyandt, CEO/Owner, ZOIC Clothing

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