New businesses gamble on the economy
FARIBAULT, Minn. -- Who would start a business in this economy?
Chuck Mooty and his cousin Paul Mooty did. In September, they began producing blankets at Faribault Woolen Mill, which had been closed for two years. They have about 35 employees and hope to have 100 next year.
Ed Maier, his son Fred and Mark Nobile are opening a brewery in Pittston, Pa. They hired 15 workers and expect that number to increase.
Brent and Michelle Deatherage opened a small grocery a few months ago in downtown Tampa, creating four jobs.
And in Montclair, N.J., Marc Ronches and Russ Teitsma recently opened a personal-training studio. They have five employees and plan to hire more.
They and other entrepreneurs are bucking long odds: More than half of small businesses fail within the first five years, the Small Business Administration says, and the lingering economic downturn can make credit difficult to obtain and consumers stingy with their dollars.
The new start-ups come amid some signs that consumer confidence is rebounding. Retail sales broke records during the Thanksgiving weekend. Online sales on Cyber Monday were up 33% over last year, according to data from IBM Benchmark.
An October survey of small-business optimism by the National Federation of Independent Business, however, found that 26% of owners called poor sales their top business problem. "This is not a level of economic activity that will support job creation," the report said.
Bill Dunkelberg, the NFIB's chief economist and an economics professor at Temple University, says the outlook for new small businesses remains poor.
"On the cost side, you couldn't pick a better time," Dunkelberg says, "but two-thirds of new starts are financed almost entirely by the savings of the entrepreneur and their family. How long that lasts depends on cash flow from customers."
None of that deters the people who have an idea, determination to fulfill it despite the risks and the belief that they can improve their communities by creating jobs when they are desperately needed.
"We don't have the luxury of waiting out the economy," Ed Maier says. He and his partners are investing up to $10 million to retrofit their former beer distribution center into the revived Susquehanna Brewing, which Maier's great-great-grandfather created. It closed in 1920. They're doing it without government assistance and have hired several people who worked for them at the distributorship. "Keeping people working is a very motivating factor," he says.
Rescuing jobs for the USA
When Chuck and Paul Mooty bought the Faribault Woolen Mill, they literally saved jobs from moving overseas: Most of the equipment was about to be shipped to a company in Pakistan.
The cousins knew nothing about turning raw wool into blankets, but they knew a lot about business and wanted to manufacture a quality product, create jobs and revive the historic brand, which dates to 1865.
"There were big hurdles," says Chuck Mooty, 51, a former International Dairy Queen CEO who is Faribault Woolen Mill's president and CEO. "You're looking at a business you don't know anything about. It needs significant capital to refresh it. There were no customers. We didn't know what cost and revenue structures would make sense." Still, he says, "we were stupid enough to think we could do it."
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