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Unemployed workers launching their own businesses during downturn

Sharon Hayes • Oct 31, 2009 at 12:00 AM

KINGSPORT — Wayne Patterson worked for the same auto dealership for nearly 30 years and expected to retire from the business.

But last summer the certified master mechanic was told his job was being eliminated.

Patterson, 51, started searching for a comparable job, but no one was hiring. So he did what hundreds of thousands of unemployed Americans are doing across the country — he started his own business.

On Sept. 10, Patterson opened DP Automotive on East Stone Drive, specializing in automotive repair and service.

“I thought, at this time in my life, I’d give this a go,” said Patterson. “Anybody can fail, but if you never try, you never gain.”

Out of the recession

Small business counselors say they’ve been busy during the recession — not only trying to help existing businesses stay afloat, but also working with would-be entrepreneurs, many of whom have lost their jobs and are trying to start a business for themselves.

Aundrea Wilcox, executive director of the Kingsport Office of Small Business Development & Entrepreneurship, said she’s met with lots of people in the last year who’ve looked into starting their own business. Some have already lost their jobs; some are still employed but want to create a backup job “just in case,” Wilcox said.

“People are smart,” she said. “They’re thinking — ‘What can I work on as my backup?’ Lots of people are starting businesses of their own.”

Chip Bailey, manager of the Holston Business Development Center small business incubator and counselor with the Tennessee Small Business Development Center, said lots of folks have ideas for a new business, and many of them proceed with their plans during an economic downturn.

“At any given time in America, 70 percent of the adult population has a small business idea in the back of their heads. And they want to go forward with it, if they can figure out a way to do it,” Bailey said.

He teaches a monthly class titled “So You Want to Start a Business” to help people realize their dreams.

In his classes, Bailey tells would-be entrepreneurs what they need to do to pursue their plans, such as where to get a business license and types of insurance they may need.

He also tells them to prepare a written business plan, and gives them advice on financing their new venture.

Too often, Bailey said, people who want to start a business assume they can get government grants to do so, and that just isn’t true.

“It’s just an urban myth,” he said. “People come in and say, ‘I’m here to sign up for that grant to start a new business.’ We had to print up a pamphlet on that, explaining to people that there is no such thing as free money.”

He said most banks want the entrepreneur to come up with at least 20 percent of what it will take to start the business, plus collateral for the other 80 percent.

Bailey said some people also have misconceptions about Small Business Administration loans, thinking those are given directly to individuals.

“The reality is, they loan to banks. They make it easier for banks to loan the money,” Bailey said.

He said SBA loans are good to get, but they have strict requirements. For instance, the borrower must have a good credit score of 740 or more, and he must have collateral to back the loan.

Bailey said he also tries to get people to put themselves in the banker’s shoes.

“He’s thinking, ‘Can this person pay this loan back with interest on time? Is this business plan feasible? Is this business needed in Kingsport? Is the customer base there?’

“A lot of what we do is a reality check. And I probably run some people away simply because I tell it like it is,” Bailey said.

“Just because somebody tells you you make good salsa at home doesn’t mean you need to start a Mexican restaurant,” he added.

Making the transition

For Wayne Patterson, starting a business came as a necessity.

Patterson began working at the local auto dealership in 1980 and received certification as a master mechanic. He worked there until 1990, when he got a job at Mead Corp. in downtown Kingsport. When Willamette Industries acquired the Mead paper mill in 1995, Patterson returned to the auto dealership.

“They were like family,” Patterson said.

But the recent recession hit the business hard. Employees were notified last summer that their jobs would be eliminated.

Patterson didn’t waste any time. Before he was given a pink slip, he decided to start his own business with help from Daniel Durham, who had worked with Patterson at the auto dealership for 10 years before being told his job, too, would be phased out.

Patterson and Durham attended the “So You Want to Start a Business?” class led by Chip Bailey.

For Patterson, the hardest part of getting his business started was trying to find financing. He was turned away at bank, after bank, after bank.

“Everywhere you go, the first question they ask is, ‘How long have you been in business?’ And that was it,” Patterson said.

Left to his own resources, Patterson pooled his money and took out a loan against his motorcycle to raise $15,000 to start the business.

Handling the day to day chores of operating a business has also been a challenge.

“Before, you just turned the wrench and did the work. Now, you have to greet the customer, write the work order, call about the parts, work up an estimate with labor and parts, call the customer, do the job, handle the money,” Patterson said. “It’s a little more stressful, a lot we never anticipated.”

Still, business is going well, he said.

“It’s going to take some time, but we’re paying the bills and we’re growing. We’re not booked up everyday but we’ve had something to do every day. I think we’ve done well for just starting out. We’ve been blessed,” Patterson said.

Home-based business

Wayne Patterson rented a storefront to start his own business. But many people nowadays are launching home-based businesses to save on overhead.

That’s what Lynn Jobe did after he lost his job in February.

Jobe had worked at Holston Builders Supply for more than 35 years when the company announced it would close earlier this year.

“I drew unemployment and looked for another job. But I had always wanted to start another business,” said Jobe, who had operated a lawn service on the side since 1993.

After being laid off from Holston Builders Supply, Jobe decided to start an office cleaning business. He set up a limited liability corporation (LLC), got insurance, and started working out of his home.

“It’s real hard to get started, and in this down economy, more businesses are using their own people” to clean offices, Jobe said.

In addition to the office cleaning business and lawn service, Jobe went to work as a temporary employee last summer, and got a job with the Kingsport Area Transit System (KATS). Last week, he was hired full time as a van driver with KATS.

Even though he’s now working full time, Jobe said he plans to continue his office cleaning business and lawn service on the side.

Jobe said people who have second jobs need to keep motivated.

“One of the most important things is being motivated enough to go out and do it when you’re tired,” he said. “I think everybody has talents and things they can do. But you’ve got to be willing to work.”

For more information on starting a business, visit the Kingsport Office of Small Business Development & Entrepreneurship online at www.kosbe.org or call KOSBE at (423) 392-8801.

You can also go to tsbdc.org for advice from the Tennessee Small Business Development Center, or contact Bailey at [email protected] or (423) 578-6235.

The Holston Business Development Center is online at www.hbdc.org.

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