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ACCESS TO CAPITAL, ECONOMIC UNCERTAINTY STILL TOP CONCERNS FOR ARIZONA SMALL BUSINESSES
Phoenix Program Teaches Businesses How to Compete for Cash
Access to capital is tied to small business growth. Though some banks claim an increase in business lending, many small businesses report they are still having difficulty securing funds. In the last few years, small businesses have struggled to find practical, affordable capital to sustain growth and create jobs.
According to a recent report by the National Small Business Association (NSBA), cash flow issues continue to plague a significant number of America’s small businesses. Among the findings: nearly half (43 percent) of small business owners report that they needed funds at one point in the last four years and were unable to find any willing sources.
In a June, J.P. Morgan released survey of the Phoenix Metropolitan Area Small Business economic climate where 49% of small businesses surveyed indicated they thought the economy was getting better (as compared to the national number of 34%). Among those surveyed, 72% said they believed their revenue was expected to increase over the next twelve months. The good news is that in March, the Small Business Administration released its quarterly report showing loans to small businesses have increased for the first time in more than two years, a potential sign that some companies are coming out of the economic recession.
Access to Capital Academy
In its second year, a new effort is under way to help Phoenix-area small business owners gain the knowledge necessary to approach potential lenders with confidence and an increased chance in landing loans. Sponsored by the Phoenix Community Development and Investment Corporation (PCDIC) and facilitated by Stoney-Wilson Business Consulting, the intensive thirteen-week program covers the details of how to approach a lender by having the right documentation, plans and forecasts prepared in exactly the right way to be positioned to get a yes.
The focus of the program is to educate and assist small businesses in acquiring financing for working capital purposes, equipment or real estate. Experts in various areas of the professional community have been enlisted to conduct classroom training, provide workshops and offer one-on-one coaching to assure that each participant is fully prepared to professionally request funding from lenders.
“Last year our program was very successful with all small businesses getting their financial house in order which naturally made them more attractive to secure that small business loan,” said Kristine Beaird, economic development specialist, PCDIC. “Access to Capital is meant for small and emerging businesses that encounter challenges securing credit that they desperately need to grow. When one starts a new business they oftentimes are faced with running the day-to-day operations and neglect their financial state. We are here to help.”
Though the focus of the program is on securing capital, participants will receive information on all facets of their business, from planning to marketing and sales, to operations.
“Covering all aspects of a business is important because bankers and loan officers look at all facets of a company to make a determination on a loan,” Julie Stoney, partner Stoney-Wilson, whose firm helped craft the curriculum. “What participants found last year is that it’s a lot more complicated than asking for money to grow and add employees; there are many components that lead to a yes and many small business owners have no idea how to get there.”
Jeff Liesner, owner of Phoenix-based Topline Foods was a participant in the 2012 graduating class. He signed up for the Access to Capital Academy because he did not have the basic financial knowledge needed to navigate toward a loan. What he found was not only was he eligible for a loan at the end of the process but he also was taught important business life skills that have grown his business quarter after quarter since graduation.
“The capital academy helped me take my own business plan and really expand on it and incorporate elements that provided me with the knowledge on how to raise capital,” said Liesner. “It seemed like a perfect fit in terms of where my business was at the time and where I wanted to take it.”
This program, is now accepting a limited number of applications. It will run from late August to mid-November 2013. Candidates must live or their businesses be located in the New Markets Tax Credit census tracts (low to moderate income census tracts). Candidates must be in business for at least two years but there is no minimum revenues earned or number of employees. After the initial review of the applications, interviews may be conducted. The new class will meet weekly for 13 weeks. Each company will also be assigned advisors and meet with their advisors as needed. It is estimated that a commitment of at least 12 hours each month is required to be a participant and that only company owners may participate. There will be a graduation ceremony held in November 2013.
Application deadline: July 19, 2013
Census Tract Eligibility: determined by calling Stoney-Wilson at 602-370-1776
How to apply: www.phoenixnewmarkets.
Class period: August 22, 2013 through November 14, 2013 on Thursday evenings
Time: 3 to 6 p.m.
Cost: $100 fee for participation
We are surrounded by small businesses in Downtown Phoenix, and we know much of Downtown’s success rests on the shoulders of these business owners. As we survey the current economic climate, it is critical to understand the impact a national retailer can have on the health of our local economy. Kimber Lanning, founder and executive director of Local First Arizona, provides insight on the ramifications of the current sales tax impasse between the State of Arizona and Amazon.
Last week at the Arizona State Senate subcommittee hearing Don Isaacson, the lead attorney for Amazon, took the podium to make the case that economies change over time. “We all remember the days of mom and pops,” he said, “and then there were the days of the big box retailers….” I surmise this to be a very honest glimpse into the world vision Amazon holds, but what does it mean for Arizona?
For the moment, let’s forget the fact that there are over 40,000 independent businesses operating in Arizona today, with a payroll of around 21 billion per year, and let’s focus on our state’s economy and what would be left of it if Amazon’s vision becomes reality.
“For every book store or hardware store that closes, one more accountant loses a job, one more web developer loses a client, one more graphic designer loses a project.”
Let’s say Amazon is successful in eliminating 20% of the independent businesses in Arizona. Most people understand the immediate job loss and can easily process the thought of, say, 5,000 people losing their jobs because businesses closed. “Amazon is hiring,” some people will say, and that’s true. So let’s be fair and say Amazon will create 1,000 more jobs over the next couple of years, leaving a net job loss of 4,000. But now, let’s move on to calculate the secondary jobs that were supported by the 20% of now defunct independent businesses. For every book store or hardware store that closes, one more accountant loses a job, one more web developer loses a client, one more graphic designer loses a project. Soon these supporting businesses will close down, because, well, Amazon isn’t hiring them for their services.
Now let’s measure the impact on real estate. How could we put a number or real value on the blight caused by over 8,000 closed up businesses littering our state? With no new start ups looking to rent commercial space, how many building owners would be forced into bankruptcy? What exactly would the world look like if we all decided to buy everything from Amazon? Where would we all work and how would we earn enough money to keep shopping on Amazon?
“With no new start ups looking to rent commercial space, how many building owners would be forced into bankruptcy?”
Given this bleak picture of the world, which may or may not come true, it’s unfathomable that Amazon has convinced so many people that they should not have to collect sales taxes as every other business has in the history of this country. Sales taxes, or transaction taxes, are collected to pay for services we all enjoy like police and fire protection, libraries, neighborhood services, parks, transportation, and additionally, a small percent of sales taxes are dedicated to education. Anyone interested in improving education in Arizona should be screaming for consistent sales tax collection.
The word TAX has become such a political lightening rod that people are not thinking clearly about which tax we are talking about. This is not a corporate tax that causes companies to have to reach into their profits to pay, nor is this a NEW tax. This is the tax that consumers have always paid on their purchases in order to be able to enjoy the services I outlined above. We could revisit our founding fathers’ logic and decide that we all want to opt out of fire protection or any other services provided by the city, county, or state, but it’s a safe bet that most people are not ready to fight their own house fires with garden hoses.
“Anyone interested in improving education in Arizona should be screaming for consistent sales tax collection.”
Recently the Arizona Department of Revenue handed Amazon a bill for $53 million to cover part of the taxes they failed to collect between 2006 and 2010, and there was some public outcry about this being “unfair” to Amazon. Think of this bill as a simple fine for breaking the law. With four distribution centers located here in Arizona totaling over 4 million square feet of space, Amazon is and has been refusing to collect transaction taxes on sales conducted to the people of Arizona.
Every other retailer operating in this state collects these taxes, whether they are on-line or bricks-and-mortar businesses. Order from Walmart on-line and you will pay AZ transaction taxes. Order from Land’s End and you will pay the same taxes because their parent company, Sears, has stores here in Arizona, even though Land’s End does not. They are law-abiding companies doing business here and enjoying a comfortable profit.
I have heard many Amazon defenders claiming that forcing their company to collect sales tax flies in the face of free markets. In reality, allowing one company to be exempt from a law requiring all transactions to include a tax for municipal services is absolutely anti-free markets. I don’t know a single independent business that wants a government hand-out. In fact, most are happy to compete as long as the playing field is level.
“Amazon is and has been refusing to collect transaction taxes on sales conducted to the people of Arizona. Every other retailer operating in this state collects these taxes, whether they are on-line or bricks-and-mortar businesses.”
Amazon will most definitely take Arizona to court over their $53 million bill, not because they feel they have a case, but just to drag the battle on longer. Meanwhile they continue to ignore the tax, which gives them a 9.3% advantage over all other businesses. They may offer the Arizona Department of Revenue a bargain and agree to collect the taxes starting in 2014, which is what they did in California, but in the duration how many other Arizona businesses will be lost?
Arizonan’s are currently the 7th LEAST taxed people in the union. If we fail to pay sales taxes our services will decay rapidly. Already it is estimated that Amazon has failed to collect upwards of $750 million in sales taxes, so let’s not be surprised when we get our next property tax bill and it’s double what we expected. The taxes have to come from somewhere. It’s in our best interest to stick to the agreement we have and pay our sales taxes and to require businesses operating here to collect the exact same taxes.
Senate Bill 1338 is currently moving through our legislature and will close Amazon’s last loophole by specifically requiring businesses with warehouse space OR retail space to collect the same amount of sales tax. This initiative, which supports the very fundamentals that makes capitalism work in this country, is nothing short of the only solution to save jobs in Arizona.
For the past four years, Shaun and Brady Breese have brought smiles to the residents of Central Phoenix with their Urban Cookies bakery. Their secret to success has included a mixture of high-quality ingredients, unique gift packaging and passion for their customers and community. But, perhaps the most important ingredient that they sell is happiness. “Cookies and cupcakes make people feel good,” says Shaun.
Shaun and Brady are pretty much Arizona natives; Shaun has been here since she was 3 and Brady since he was 6. They met in grade school, followed each other to high school and then to ASU. After graduating, they worked in various Central Phoenix neighborhoods, Brady working as a life insurance agent and Shaun working in marketing, including a stint at the Greater Phoenix Chamber of Commerce.
In 2005, Shaun and Brady had an idea to start a business. By November, they had secured a deal with the Florence Crittenton Center to use their kitchen facilities in the evening. In exchange for using the Crittenton baking facilities in the evening, the Breeses agreed to train at-risk girls in the kitchen as well as in marketing and customer service. For the first year, they kept their day jobs, working at night. During that time, they only sold their goods online. On weekends, they went out to the community and began giving samples at the historic home tours in Central Phoenix neighborhoods such as Willo and Encanto-Palmcroft. They also began selling their cookies at the Saturday Downtown Phoenix Public Market.
The Breeses found that these samples and local sales encouraged their business to spread virally through word of mouth — still their best way to get new business. In 2006, they opened their first retail store next to Melrose Pharmacy in the Wagon Wheel building just down 7th Avenue from the where they baked their cookies at Florence Crittenton. In 2007, they found they needed a bigger space and wanted their own kitchen, so they moved to their current location on 7th Street near Highland Avenue. Consistent with Shaun and Brady’s vision, their storefront is not only hip, but also green, featuring bamboo flooring and low-emission paint. As well, the ’50s-era building is a classic example of adaptive reuse. Previous tenants included a café and pizzeria.
Shaun and Brady have always enjoyed living in Central Phoenix, so it was natural to open a business here. There is also financial motivation for being in Central Phoenix. The Urban Cookies “brand” speaks to those living in and around Central Phoenix (their most-trafficked ZIP code for their online business is 85020, in North Central Phoenix). Another draw of Central Phoenix was that retail leases were more affordable near Downtown than in the strip malls further out. While they do not have the benefit of the foot traffic that the strip malls offer, they are able to make up for this through their online sales (another example of the benefits of a diversified business model).
Despite the poor economy, the couple has managed to keep their business growing. A decline in higher-end gift box sales has been offset by increased retail sales. “Even in this economy, $1.99 is an affordable break from the ordinary for people,” notes Shaun. This points to the importance of diversity for small businesses, especially in this economy. What started out as a completely online endeavor has morphed into a business model that is now about 50% online and 50% retail through growth and various efforts to weather these tough economic times.
Urban Cookies is always looking for new business ideas and partnerships. It recently began selling cupcakes, affectionately coined “OllieCakes” after Shaun and Brady’s 8-month-old son, Oliver. They have also added two layer cakes to their retail selection. During the summer, they offer ice cream cakes to their retail patrons, and have also begun selling organic dog treats. In addition, they are entering the wholesale market, providing cookies to the recently opened Urban Wine Bar and Grocery at the Downtown Phoenix Market. They are also approaching other restaurants and grocery stores around town and offering catering for parties and business meetings.
Currently, Urban Cookies offers four different types of cookies, as well as four types of cupcakes. As well, each month, they feature unique seasonal items. For November they are offering a pumpkin pecan cookie and a cranberry orange cupcake. For Christmas, they are bringing back the popular coco-mint cookie. This holiday season, Urban Cookies is partnering with Danielle Librera and Brian Coonce at the Sweet Pea Bakery to offer pies and tarts to their customers. In addition, they sell a variety of custom gift boxes, small “signature” gifts and individually wrapped favor gifts. These gifts have become popular for business clients, birthday gifts or simple pick-me-ups for somebody who’s had a bad day. OllieCakes have quickly become popular for baby and toddler birthdays.
Urban Cookies’ notion of Central Phoenix community extends to local businesses as well. Proud members of Local First Arizona, they work together with other nearby independently owned businesses through cross promotions, joint events and business referrals. It is important to have a network, says Shaun, although she notes that this network is being challenged by the economy, and lists of several small businesses that have recently closed, including Lisa G and Palatte. Meanwhile, they are happy to see the growing conglomeration of new independent business near Central and Camelback, including Maizie’s Cafe & Bistro, Lola Coffee, Oliver and Annie and Smeeks, among others.
Some examples of how local businesses are working together include publications such as the Small Wonders map, as events such as Local First Arizona’s Certified Local Fall Festival at Duck and Decanter, a “Champagne and Shopping” event at nearby Roots Salon, as well as TwitterHunt. During First Friday on December 4, Urban Cookies will be participating in “Sweets Alley” as part of the second annual “Crafeteria” being hosted by Frances Boutique in their parking lot near Central and Camelback.
In their limited free time, the Breeses enjoy spending time with their son at local treasures, such as the Children’s Museum of Phoenix, or feeding the ducks at Granada Park. Oliver also enjoys playing on the grass and people watching at the Biltmore Fashion Center. “After hanging out with us all week in the store, he’s excited to see other people and places,” notes Shaun. When Shaun and Brady are looking for more grown-up fare they like heading to Bomberos Café and Wine Bar, which is within walking distance from their home, or Aiello’s, a favorite for Italian food.
You can meet Shaun, Brady and Oliver at the Urban Cookies retail store (602.451.4355), located at 4711 N. 7th St. It is open from 11 a.m. to 6 p.m. Monday through Thursday and 11 a.m. to 7:30 p.m. Friday and Saturday. Online orders can be placed here.