How small businesses are surviving, even thriving, in a slow economic recovery
by Scott Neuffer, email@example.com
As the economic distress of the last decade becomes the subject of history books, its effects remain.
The cataclysmic shift in demand and resources that began in 2008 and never fully corrected has shaped an entire generation of young entrepreneurs in Douglas County.
Even now, as the economy offers small gains, those hard lessons learned in the dark years of the Great Recession form a common blueprint for perseverance.
Three small business owners recently opened up to the Carson Valley Times about their experiences. Each had a story to tell of change and challenge, grit and determination, and the hard, persistent work that makes a long haul out of the American Dream.
Living in the shadow of loss
Four years ago, Gardnerville resident Jarrod Pugliese watched his career collapse before his eyes. He had been living and working construction at South Lake Tahoe when the industry convulsed suddenly, demand dried up, and jobs began to fall like shingles from a roof.
“I was losing a house and a career, basically,” said Jarrod, now 29. “Everybody I knew was losing their job and everything they had worked for. Circumstances were ugly.”
Jarrod and his wife Justine relocated to Gardnerville with their children. They had family in the small town and thought it best to regroup. By the end of 2010, they had decided to risk what they had left in a new venture.
As Jarrod describes it, he felt compelled to take the reins of destiny and build something new.
“It was a financial risk for us,” he said. “We took what little savings we had at the time. At that point, the economy was horrible. People were still losing their jobs. And we were trying to conquer this feeling of losing everything while moving forward and having a future.”
On Dec. 5, 2010, the Pugliese family opened Bounce N Play on Pep Circle in south Gardnerville.
“When we first started, it was a leap of faith,” Jarrod said. “We were completely unsure what to think about it. We knew these types of businesses in most cities did well and were profitable enterprises. But in a small town and a small economy, you never know what to expect.”
Within the first month of operation, the couple knew they had a winner. People were coming to their bounce houses on Pep Circle and requesting their services for private functions.
“The first month, we were making profit,” Jarrod said. “Most people take five years to reach profitability. That eased our fears because there was such a good response from the community.”
From their shared experience, though, the couple knew that complacency was a dangerous thing. One month’s profitability could quickly turn into another month’s loss. So they became vigilant in their own adaptability, matching the customer’s ever-changing needs.
“We’re adding to inventory and changing things constantly,” said Jarrod. “Glow parties, disco balls, strobe lights—we’re trying to meet the interests of a wide range of people who enjoy this.”
The Puglieses also made a Herculean effort to communicate with each other, letting no detail of the business escape their awareness.
“It takes the ability to communicate about everything, every detail,” said Jarrod. “We’re both involved in the decision-making process and just confer to one another, from the numbers all the way down to our routine. To build self-awareness in a company, you have to have communication throughout.”
Farmers markets, donations to schools and nonprofits, and a business block party this summer have all helped lift the profile of Bounce N Play in the community.
The business has seen estimated annual growth of 20-30 percent, with 2013 the strongest year so far, Jarrod said.
“No one is there to tell you the ‘dos’ and ‘don’ts’ of business. You try what works and whatever you get a good response from, you go with it.”
The couple’s scrupulous oversight has helped them avoid pitfalls as much as achieve success. For instance, last summer they bought out a similar bounce house operation in Carson City. Soon realizing they were stretched too thin, though, they sold the interest to another party.
“You have to think outside the box. You can’t just run business as usual all the time or you tend to get complacent. If you do have competition, they will pack you up,” Jarrod said.
How the Pugliese family has managed to get from point A to point B is a lesson in optimism—not blind self-delusion, but conscientious forward-thinking predicated on the basic desire to do better.
“Expenditures in our industry are not a necessity,” said Jarrod. “That they’re going up is really a telltale sign that people are sick of feeling melancholy. They’re just going to have fun and not worry about it. Everyone’s so tired of living in the shadow of losing everything. We’ve all been through so much. We’ve got to move forward, be positive, and good things will happen.
“I’m not going to have my life be in someone else’s hands. I’m going to take the reins myself and build something. You have to know there are doors open. You’re not always going to win. It’s a gamble. But the fact is you tried.”
Survival of the fittest
Gardnerville resident James Jackson, who manages Jackson Quality Drywall with his brother Cheyne, knows first-hand how competitive the construction industry can be.
“By the end of 2009, the people who had survived were those who had smart practices,” he said.
Put another way, Jackson routinely asked of himself, “What do we need to do to squeeze every last drop of productivity and profit out of a job?”
The 2000 Douglas High graduate, now 31, actually holds a degree in education. He was planning to be a teacher when his father’s decades-old drywall company needed help in 2004 managing significant growth.
While the company is still owned by their father, the two brothers effectively run operations out of their Business Parkway headquarters in Minden.
A pre-recession decision to focus on commercial and public projects proved beneficial.
“There had been such tremendous growth in the last 10-15 years that infrastructure, both commercial and government, schools and Costcos, really had to play catch up years after things went south,” Jackson said. “These projects were funded when things were going great. That funding was secure and couldn’t be touched later.
“We were lucky to basically ride it out. We weren’t making anywhere near the margins we had in the past, but the work was there. Things didn’t get catastrophic for us.”
Business was still tough. Nothing could be taken for granted. Jackson himself was raising a large family.
“When things got slower, it forced us to focus on our managerial aspects, on the way we were running things,” he said.
Lower margins brought everything under the microscope, including some long-time employees whose efficacy had not been questioned when times were rich.
“Some we retrained. For others, it was time for them to move on,” Jackson said. “That was hard.”
The company also revised its bidding practices to be more competitive with large California firms which, when projects grew scarcer, began targeting the Eastern Sierra market.
“A lot of customers we serve, like school districts, have become more selective about whom they hire for jobs, and that’s beneficial to a company like ours with our experience, reputation and resume,” Jackson said. “But those jobs don’t come around often.”
He said revenues have remained fairly flat during the recovery, though he hopes for moderate growth in the future.
“The first six months of 2013 have been as slow as any work period we’ve had in the last 15 years,” he said. “It’s not back to normal. But things aren’t as dramatically bad today as they were three years ago in our segment of the market.”
The fact that construction in the Bay Area is picking up steam portends similar activity in Northern Nevada, he said.
“I hope we continue to grow, and I hope to pick up jobs with a high level of profitability and to be as productive and as fortunate as we have been,” he said. “It’s going to get better. We’re never going to get back to the good old days. This is how it could be. And that’s alright.
“We survived, and we’ll continue to do so.”
One thing Jackson said, however, belies the purely Darwinian nature of survival:
“We figured out how to be smart enough. But in reality, we were fortunate enough,” he said. “For a lot of companies in our industry, no amount of brains or good operations could beat the recession.”
Thirty-year-old Sean Gillespie was looking for a turnaround venture when he bought out Wheeler Screen Printing in 2006.
The Gardnerville firm had been losing money, which produced an attractive valuation and purchase price for the aspiring entrepreneur.
“I wanted to be a business owner and found a good deal on a business,” Gillespie said.
Of course, the 2001 Douglas High grad couldn’t have foreseen the financial crisis to come.
“Probably 80 percent of what I bought was the clientele base,” he said. “I have four of those 200 customers who are still active. What I had purchased wasn’t the same within 24 months.”
The recession decimated small companies in Carson Valley. Gillespie estimates that 75 percent of his inherited clientele were out of business within a few years. And he was left standing with a business model that no longer worked.
“It definitely was not easy,” he said.
But he rallied his confidence—not to beat a dead horse and make a go of a failed premise, but to wholly reinvent himself and his company.
“We diversified,” he said. “We weren’t content just being an in-house screen printer with low quantities of production. We started doing vinyl graphics in-house, embroidery and promotional products, making a much wider array of products we could offer, and hitting the ground running as far as going after customers, versus sitting around waiting for them to come to me.”
Now, Wheeler Screen Printing can print customers’ logos on T-shirts, button-up shirts, hoodie jackets, promotional products, vehicles and site signs.
“I wanted to become the one-stop shop for start-up businesses or businesses pursuing a marketing presence,” Gillespie explained.
He also wanted to expand his online business. But first, he had to improve his printing capability overall.
Gillespie invested in a new automated press that could produce 300 shirts an hour, lowering production costs and allowing for more competitive pricing in both local and national markets.
“I don’t want the company to stop growing until I’m done with it, and I’m not even close to being done with it,” he said. “I want to be one of the bigger shops in Northern Nevada for sure, and I’m working with bigger clients all over the country to make it happen.”
The reinvention has proved successful. Gillespie estimated annual average growth of 9-10 percent.
“Pursuing a certain amount of growth every year, it’s really about sticking to your goals,” he said. “Being hardheaded is the biggest thing, refusing to lose. There were definitely times when the numbers weren’t good enough to validate continuing with this company, but being hardheaded got me to stick around, and I’m still working.”
Gillespie said it’s difficult to gauge how the slow recovery has affected his operation. In a way, he has created his own momentum, his own recovery, and knows that the direction is up instead of down.
“People are so used to being in an economic downturn that they’re shopping harder, going further,” he said. “If I had continued down the same path, it wouldn’t have worked. Aggressively going after customers, showing them what we can do for them, is what has helped and what has led to all the success of the business.”
What the numbers say
Although by most accounts the recovery has been sluggish, economic growth accelerated in the second quarter of this year.
According to the U.S. Department of Commerce, real gross domestic product in the country, meaning total output of goods and services, leapt from an anemic 1.1 percent growth rate in the first quarter to a much healthier 2.5 percent rate in the second quarter. The Bureau of Economic Analysis largely attributed this growth to a marked increase in exports.
In Douglas County, sales have been climbing. In the most recent fiscal year, which ended June 30, local merchants generated $592.8 million in taxable sales—a 6.3 increase from the previous fiscal year, according to the Nevada Department of Taxation.
By the same measure, several categories posted tremendous year-over-year gains: wholesalers of durable goods up 10 percent; wholesalers of nondurable goods up 7 percent; general merchandise up 9.1 percent; motor vehicle and parts dealers up 9.6 percent; and food services and drinking places up 4.7 percent.
Not everyone fared as well. In fiscal year 2012-13, taxable sales at electronics and appliance stores fell 12.5 percent from the previous fiscal year. Sporting goods, hobby and book and music stores saw a slight dip of .1 percent. Growth in some categories is still offset by store closures that occurred in the recession, such as the closure of Borders Booksellers in north Douglas County in the fall of 2011.
But overall, economic signs are positive.
In August, the unemployment rate in Douglas County dropped to 9.4 percent, having steadily declined from 11.8 percent in January.
The figure represents real improvement in the county rather than merely a shrinking workforce. According to the Nevada Department of Employment, Training and Rehabilitation, July had the highest total labor force of 22,010 workers in the calendar year thus far. August had the lowest unemployment of the year at 2,010.