A dad leads his son into Elysian Hair and Nail Salon on Milwaukee’s south side. After a short exchange in Spanish, the little boy climbs into the chair and sits very still while owner Ivan Rodriguez trims his hair.

The salon is located in the Layton Boulevard West Neighborhood, which covers the area bordered by Layton Boulevard, Miller Parkway, Pierce Street and Lincoln Avenue.  It sits on a section of the National Avenue corridor that consists of mostly older, historic commercial buildings.  Some buildings are empty, and some that house businesses are a little run down.  The LBWN Association, founded by the School Sisters of St. Francis, has been involved in revitalizing the area since 1995.

The diverse neighborhood, home to many homes and businesses, is typical of many Milwaukee neighborhoods. According to Rodriguez, the area is a work in progress, but has potential.

“When it comes to the community, it’s a diverse crowd,” Rodriguez said.  “You get from Hispanic to white to Asian to black, doctors and lawyers, a big range.  The community is trying to rejuvenate.  Visually, it’s not the best, but there’s an effort.”

Rodriguez took the shop over in August from the previous owner and paid for the business out of his own pocket. “It wasn’t as expensive as you might think it was,” he said.  He worked with Wisconsin Women’s Business Initiative Corporation, who sent consultants to go over the books and offer financial advice before the transaction took place.

Rodriguez is one of a too small number of aspiring entrepreneurs in Milwaukee who have bucked the trend of a decline in the number of business startups and found a way, with the help of various agencies, to go into business for themselves.

The number of startup businesses in Milwaukee has been declining since the early 2000’s.  According to The Ewing Marion Kauffman Foundation’s Index of Entrepreneurship, which tracks entrepreneurship across the United States, Milwaukee came in second to last out of 40 major metropolitan areas in the rate of business startups in 2015 and 2016.  There were 131 startup firms per 1000 firm population in 1978, trending downward to 59 in 2013.

Though Rodriguez did not get financial help from WWBIC, he credits the agency with helping him through the process of getting started.  “They made sure this was a good deal for me and they’re helping me write my business plan,” he said.

According to Mike Hetzel, Director of Lending for WWBIC, in addition to offering loans up to $250,000, WWBIC offers classes on how to write a business plan, repair credit and run a business.  Things like down payment, recent income and payment history are taken into consideration.  The non-profit organization has helped 60,000 people start businesses with about $60 million in loans since 1987.

Hetzel thinks there are more people interested in starting their own business lately.  “Based on the requests that we get, there are a lot of startups because people have lost their jobs or been misplaced and they want to try it on their own,” he said.  He also said that many millennials are especially interested in starting their own businesses.

Scott Lucey is a millennial who had to get creative to open his own business. In 2015 he opened Kickapoo Coffee Café with Viroqua-based Kickapoo Coffee Roasters T.J. Semanchin and Caleb Nicholes in Milwaukee’s Third Ward, another Milwaukee neighborhood in transition.  The Third Ward is an upscale area that has made a resurgence from a historic warehouse district to an upscale, mixed use area.

“The reason it took me so long to open,” Lucey said, “was because I had the feeling that new businesses in Milwaukee had a challenging time.”  He knows people who worked for another coffee shop when it first opened seven years ago who can attest that getting that business off the ground was challenging and slow.  “I waited as long as I did because I felt strongly that if I wanted my business to succeed, I was going to need to partner with a company that had a reputation already, some established credibility and a small customer base,” he said.

Lucey felt that working with the city to obtain the permits and the health inspection for the café wasn’t exactly easy, but doesn’t feel that regulations were excessive.

Finding financing was challenging, though.  Lucey initially took a startup business class through WWBIC and applied for financing through the agency, but was denied based on the competition in the neighborhood.  In the Third Ward neighborhood he’d be competing with Collectivo, Anodyne and Stone Creek coffee companies.  In the end financing was tied to the Viroqua-based roasting company and partnering with Semanchin and Nicholes allowed the café to start out with a bigger budget.

While average Americans have traditionally relied on personal savings, home equity and small loans to open businesses, the cost of opening and running a business may seem out of reach to some.  High rent, wages, cost of product, advertising, insurance premiums, taxes and cost of regulations combine to make it seem like an overwhelming burden to many aspiring entrepreneurs.  According to the Bureau of Labor Statistics, the consumer price index for all urban consumers in Midwest cities with populations between 50,000 and 1,500,000 rose from 121.6 in 2006 to 142.5 in 2015.  According to the U.S. Census Bureau website, Milwaukee had a population of 599,164 in 2013.

WWBIC is not the only place in Milwaukee that offers assistance to potential business owners.  According to Shirah Apple, Public Affairs Specialist with the U.S. Small Business Administration Office for Wisconsin, the SBA has helped coach and finance many startup businesses throughout Wisconsin.  In 2009, the SBA made 191 loans in Milwaukee county totaling $36 million, 186 loans totaling $66 million in 2010 and 230 loans totaling $98 million in 2011.  Last year SBA lenders made over 211 loans totaling over $100 million.  The loans ranged from $2,000 to over $5 million.  “The Jobs Act in 2010 made loans more attractive,” she said.  “It raised the SBA loan ceiling from $2 million to $5 million.”

Although Apple did not have access to earlier data, she thought that lending for small businesses was good before 2008. “Lending was pretty well before the recession,” she said.

According to the SBA website, the amount of capital needed to start a business varies.  The average startup capital is approximately $30,000, although many businesses have been able to start with less than $3,000.

In addition to the burden of higher costs to the aspiring entrepreneur, opening a business for many may have been seen as riskier because of decreased consumer spending.  According to a U.S. Bureau of Economic Analysis study, consumer retail sales fell sharply between 2008 and 2010, but have been rising over the past four years.

The drop in consumer sales coincided closely with a rise in unemployment rates in Milwaukee from 2008 to 2014, which could be another factor that may have hindered the rate at which potential entrepreneurs have been opening businesses.  According to a U.S. Bureau of Labor Statistics study, unemployment in Milwaukee started to rise from 5.3% in November 2008 to 10.1% in February 2010 and declined steadily until it finally dropped back down to 5.3% in September 2014.

Why fewer startups could be a problem

According to a study by J. Bradford Jensen, an international economics professor at Georgetown university, businesses either have the potential to import new money into a region or circulate money within a region. Fewer businesses that attract new money into an area result in diminishing money and jobs, until eventually, there is no growth and the economy becomes stagnant.  Businesses with highly skilled occupations such as in technology and engineering have the capability of attracting more money into a region, while businesses with lower skilled occupations such as in retail and service merely circulate existing money within the region.  The Wisconsin Policy Research Institute website reported that the Milwaukee region attracted and kept only 20% of University of Wisconsin system graduates who could help fill those highly skilled positions.

According to Hetzel of WWBIC, manufacturing and technology have been among the most numerous types of startups.  Even so, while Milwaukee has historically been home to manufacturing businesses, according to the U.S. Census Bureau website, Milwaukee had 1,340 manufacturing establishments in 2000 and only 991 in 2012.

While Milwaukee would certainly benefit from the type of businesses that attract more money into the area, an increase in all new businesses could enable more graduates to remain in the area.  While costs are still high, the decreased consumer spending and higher unemployment rates that contributed to the dwindling number of startup businesses seem to be improving.

Rodriguez relied on his own resources and Lucey had to get creative to get started.  Aspiring entrepreneurs can learn from their examples as well as take advantage of the variety of resources available to help them “try it on their own” while helping Milwaukee become more like the business market place it used to be.

Help for aspiring entrepreneurs

Financing for entrepreneurs is available through a variety of local, state and federal programs such as The Metropolitan Milwaukee Association of Commerce, The Wisconsin Small Business Development Center and the U.S. Small Business Association.

The Metropolitan Milwaukee Association of Commerce has a comprehensive new business planning guide. http://www.mmac.org/new-business-planning-guide.html.

Pros and cons about opening a business in today’s environment as well as tips and links to other websites, such as WWBIC. https://www.wwbic.com

The Wisconsin Small Business Development Center answers questions and gives start up advice related to business planning, permits and licenses and obtaining financing.

https://www.wisconsinsbdc.org/

The Small Business Administration has provided business financing, education and advocacy for small businesses since 1953. https://www.sba.gov/.

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