Thinking outside the big box

Small businesses are often looked upon as highly risky, if not foolhardy, ventures. Everyone’s heard the horror stories about price-slashing “big-box” chains like Wal-Mart forcing mom-and-pop stores to shut their doors. Even so, 2003 saw the opening of a crop of new businesses in the Reno-Sparks area, from bookstores and boutiques to tearooms and tattoo parlors. What motivates these entrepreneurs to start up businesses in the shadow of nationwide mega-stores? And what, realistically, are their chances of making it?

Statistically, small businesses are on the rise, according to the Small Business Administration (www.sba.gov/advo/stats/data.html). In 2001, there were 22,919 establishments in Nevada with fewer than five employees, a 29 percent increase from 1995. (An establishment is a single physical location where business is conducted; one firm may have multiple establishments.)

Within Nevada, small business is a big deal. In 2002, says the SBA, small businesses accounted for 95.6 percent of all businesses in the state. But it’s hard to reconcile that encouraging statistic with the retail skyline of south Reno, where national chains dominate the landscape and big-box stores are a common sight. Is there room in Reno for more successful small businesses?

One key to success may be providing services that bigger competitors can’t. “Creative entrepreneurs may start small businesses because they notice an under-serviced market niche overlooked by established firms … or fill a market niche that is too small to attract larger firms,” comments Dr. Jeanne Wendel, professor of economics at UNR. “This type of entrepreneurial activity is critical for dynamic economic growth and flexible adaptation to change.”

Leigh Ganley knows firsthand about the challenges of starting a small business. Her well-known hippie store, Art Dogs & Grace, almost failed in its first year of operation.

“I started Art Dogs & Grace in the spring of 1990,” she says, “just a few months before the Gulf War began. People didn’t want to shop, and retail ground to a halt.”

It was a hard lesson, she says, to learn how global events can affect the local economy. After just 10 months, Ganley was ready to quit. She’d just closed the store when her ex-husband arrived with an inventory of Guatemalan clothing he wanted to sell. Working together, they got the business back on its feet. After 12 years, many location changes, and a satellite store or two, Ganley finally sold Art Dogs & Grace, a successful shop at the time.

“You’d better love what you’re doing because you’re going to be doing it a lot,” says Ganley. “The first five years are a startup—the IRS doesn’t expect you to show a profit for the first five years.”

Although she’d had her fill of the hippie business, Ganley was still enthusiastic about running her own store. That chance came again when she opened Rad Betty’s Clothing Company in 2002 with co-owner Elizabeth Ganley. (Leigh and Elizabeth share the same last name as they are both ex-wives to the same man.) They specialize in “fresh thrift,” or contemporary used clothing, but they also carry vintage items. This puts them in competition with such big-name thrift stores as Savers, as well as smaller vintage boutiques.

“I was intimidated by the thought of going up against Savers,” Ganley admits. “People would ask if they could put an item on hold and then go and see if they could find something cheaper at Savers.” But she’s never had a customer who didn’t come back for his or her stuff. Ganley attributes this to the extra service Rad Betty’s offers; clothes are washed and checked for damage before they’re put in stock, saving customers time and creating a more pleasant shopping experience.

As for the other vintage boutiques, Ganley says they work together, rather than compete for their clientele. Each store has its own specialized niche market—Rad Betty’s gets a lot of business from people seeking costume-party outfits—and they frequently refer customers to each other.

In fact, many of the small businesses in Reno seem deeply intertwined. Tracing the history of a store’s owners, locations and incarnations is not unlike mapping out a convoluted family tree, complete with marriages, offspring and the occasional death. Indeed, Ganley says she has maternal feelings toward her stores.

“The store is like your child,” Ganley says. “You work hard to take care of it, but eventually you have to let it grow up and be on its own.”

There’s a “statistic” that nine out of 10 small businesses fail in the first year. Although economists Bruce Phillips and Bruce Kirchhoff debunked that myth in 1989, says Brian Headd in Redefining Business Success: Distinguishing Between Closure and Failure, people still call the SBA asking if it is true. On the contrary, Phillips and Kirchhoff found that 76 percent of businesses are still open after two years, 47 percent after four years, and 38 percent after six years.

If this doesn’t sound that impressive, it’s important to remember that closure is not the same thing as failure. Headd points out that, in the past, researchers have not distinguished between failed businesses and closed businesses. Businesses can close for a variety of reasons that don’t necessarily equal failure.

“The Commerce Department definition of failure includes closing with debt to at least one creditor,” says Dr. Wendel. “This differs from small business closures in response to more positive economic events, such as sale to a larger firm or retirement of the proprietor.”

That’s not to say that all small businesses will end up as success stories. “A small portion of small businesses grow into highly successful corporations,” Wendel says. “However, predicting which small business will succeed at this unusually high level is a risky venture.”

Tara Hamilton belongs to the latest generation of local small-business owners. After moving to Reno from the Bay Area to escape the congestion and high cost of living, she and her boyfriend, Colin Fisher, opened The Attic, a clothing boutique, in May 2003. Hamilton runs the store. Fisher handles the money.

The Attic, in turn, supports other small businesses: It carries clothing from smaller, up-and-coming designers such as Kali Wear and sells accessories and paintings made by local women entrepreneurs, such as I Do Declare, two teenaged girls who turn recycled fabrics into jewelry. In addition, Hamilton works with other local businesses such as the Zen Den and La Bussola, organizing fashion shows and other events to attract customers.

“We know we can’t compete with the mall,” says Hamilton, “but we try to stay affordable for a boutique. I don’t mark things up so that I can mark them down on ‘sale.’ We offer different brand names and different items from what you see in the mall.”

It’s been a lot of work so far, harder than Hamilton ever expected it to be.

“You have to eat, breathe and dream the store,” she says, “and on your days off, you’re researching how to make the store better.” Still, she’s optimistic about The Attic’s chances.

Although there’s no guarantee of long-term success, the owners of small businesses such as The Attic and Rad Betty’s Clothing Company hope that such strategies as offering specialized services and targeting specific demographic groups will keep the customers coming back—and keep their stores successful for years to come. Nationwide chains and big-box retailers may pull in more profits, but these locally owned stores serve as proof that good things come in small businesses.