There was a sad announcement early this week that Grand Rapids mainstay Van Hoecks Shoes would be closing its doors for good. Van Hoecks was a retailer that had been located in downtown Grand Rapids for 70 years and attracted customers from all across West Michigan. With such a loyal following and such a known presence, what could have caused this retailer to close down? There are many entrepreneurial lessons that can be taken away from this situation.
Van Hoecks was the cause of its own demise. While the economy might have played a role, Van Hoecks unwillingness to vary from its business model caused the store to work itself out of a relevancy.
Lesson #1: Location, Location, Location
Van Hoecks refused to abandon its long time location on Monroe Center. This 8,500 square foot, behemoth of a location was an albatross from a number of reasons. The first is the overhead it created. That much space in a downtown location is going to come with a hefty rental payment. Van Hoecks also did not have its own parking area causing customers to pay for parking in order to visit the store. The final and biggest reason why their location was part of their downfall was the lack of customers. With few retail shoppers roaming the streets of Grand Rapids, Van Hoecks had to rely on shoppers making the specific trip to their store to buy shoes. This creates a fiercely loyal customer base but not a large customer base.
With the development of the times, entrepreneurs have more and more access to information. With sample forms and online document preparation services readily available to business owners there are a lot of people that are “doing it themselves.” To begin with it should be noted that Michigan contract law follows two sets of rules when it comes to contacts based on whether the contract is for goods or services. How can an online document service that preaches they it does not practice law properly guide a Grand Rapids small business owner which set of rules they must follow? Beyond this the “do it yourself” entrepreneurs are creating two problems for themselves.
The first problem that arises is these forms were not tailored for your small business. Obviously a contact that was drafted between a pizzeria owner and peperoni supplier is going to be completely different then a contract between a construction company and someone looking to build a new home. It is impossible for there to be one form that can fit both situations. Even if a contract is stripped down to its most basic elements often times there is subtle differences between what you need and what a form can provide.
For a great number of new entrepreneurs’ their first priority in starting a business is funding. They want to know where they can get money, how much they can get and what the best deal is. A majority of the time funding should not be the first priority. There are much more important steps to take, including finding if you have a market and developing a team. At some point though, a situation might arise where your small business or startup needs funding. Michigan businesses will soon be seeing a new option.
There have been a number of recent developments in finding funding options. West Michigan has seen the birth of Start Garden, a $15,000,000 investment fund. The federal government recently passed the Jumpstart Our Business Startups Act (or JOBS Act) which will allow for crowd funding without previous restrictions by the SEC. Now the Michigan Office of Financial and Insurance Regulation could generate another potential source of capital for small businesses at a time when the state wants to build support networks for entrepreneurs and second-stage companies.
Being a Grand Rapids small business can be scary. It’s a big world and you are looking to carve your own niche in it. There are any number of obstacles that you can run into and trademark issues are just some of them. With around 30 million small businesses in the United States there is bound to be some businesses that cross paths with their branding. But what about larger companies that are looking to eliminate anyone that carries any similarities to their branding?
Grand Rapids bar owner, Brett Alward, has gotten a crash course in these types of matters. Alward is the owner of the soon to be former Sazerac Lounge located on Grand Rapids’ Northeast Side. The Sazerac is a rye whiskey mixed-drink that is known as the oldest known American cocktail and is the official cocktail of New Orleans. As a fan of New Orleans, Alward decided to name his bar, which was opened in 2005, after this iconic cocktail. About a year ago he was contacted by a Los Angeles law firm that represented the New Orleans based Sazerac Company regarding their claim that Alward’s bar was infringing on the Sazerac Company’s trademark.
Startups are complicated. There are so many factors that can easily be overlooked. It would seem only logical that if you develop a product, it starts to generate a buzz, larger companies are partnering with you, retailers want to sell your product, and you are already making sales that if you make more of your product then your business will take off. But that is not always the case. That is when terms like “scalability” start to pop up in your weekly meetings with your partners.
Grand Rapids startup, Teamwork Design, received a $5,000.00 infusion of cash to study the scalability of their handcrafted handbag business. Nick Stockton and Nick Stygstra, two Kendall College of Art and Design graduates, founded Teamwork to make T-shirts in a Grand Rapids studio but found real traction when they branched out into the handbag market. After having some small scale success of making their own sales, Teamwork found that in order to make a real impact they needed to contract out the manufacturing portion of the business while they remain the designer and developer of the products. This allows them to focus more on other aspects of the business while meeting the production demands at a reasonable price.
Entrepreneurs can plan for a rise in cost of materials. They can plan for marketing. They can plan for expanding. They can even put together a succession plan. One situation that no business can prepare for is a lawsuit. No matter what market your business is in, you are connected to any number of individuals or entities.
Even if you only supply a product to one distributing entity, you still have more connections than you probably realize. There are connections to those entities that supply your small business with the materials to manufacture your product, then after you sell your product to that one entity, they sell it to third parties or put it in another product which then goes on to third parties. Those are all entities and individuals that can bring a lawsuit against your business.
The Kalamazoo, Michigan-based medical device maker, Stryker, is now facing a number of lawsuits over faulty hip replacement devises. Stryker recently voluntarily recalled the model of the device that was causing the problems. These lawsuits are appearing in numerous states because of how widely Stryker products are distributed. And while the total amount of damages being claimed by each individual is unknown to the public there is one suit that has been filed in federal court claiming damages in excess of $75,000.00.
Experienced, successful entrepreneurs will tell you that not every idea they have is a success. It is often commonly said that failure is part of being an entrepreneur. Failure is probably not the right term simply because of the negative connotation it carries among the general public. “Further development” is probably a more accurate description of those situations.
Mark Sellers is a successful restaurateur. He is the owner of Grand Rapids, Michigan popular spots like Hop Cat, Stella’s Lounge, and Grand Rapids Brewing Co. But his, other night spot, The Viceroy is going through “further development.” Sellers tried a number of solutions to keep The Viceroy operational including reducing the size of the space it occupied. In the end Sellers has decided to transform The Viceroy into the back room of his neighboring business, Stella’s Lounge. This has included closing he building’s entrance that was to The Viceroy, installing a DJ booth and transforming the décor to match that of Stella’s.
Car dealerships are experiencing an extreme version of what most small business owners should be doing in a tough economic time. Dealerships are being forced to make drastic changes. They are being upgraded, sold, rebuilt and retrained. One of the hardest hit industries is was the auto industry. As part of the recovery, many manufacturers are requiring their dealers to get a facelift to reflect the changes in the brand. These changes are causing a ripple effect.
Some dealers cannot afford to make the required changes and thus are forced to close or sell to other dealers. These changes are drastic enough that other non-required changes seem appropriate given the great turnover. The look of showrooms is changing. The technology of how information is presented to customers is changing. Even the promotions that we are used to are becoming a thing of the past. Basically in short car dealers that survive this economic storm will come out stronger then they went in.
You have built a great company. Cash flow is looking good. The business is expanding at a steady pace. So everything is great, right? Wrong. Similar to estate planning, a business needs to plan for the future. One of the reasons you are told to incorporate your business is so it becomes something tangible that can be passed on. How do you get value back out of the work you have put in?
Succession planning is important. Most bylaws or operating agreements have provisions that say that if one of the owners is to die the business or the other owners will buy the deceased owners share of the business. Where is the business going to get the money for such a purchase? What about retirement? Most people, even entrepreneurs, want to retire at some point. Planning who will take over, how you will phase yourself out, how you will be compensated, etc. are all things that need to be planned out and put in writing.
It’s the dream of every entrepreneur. It’s the goal of every startup. It’s what every small business strives for. The premise that at some point in the future, what started as an idea, that turned into a plan, that developed into a business will be worth millions of dollars. West Michigan entrepreneur, Daniel J. Bowen knows exactly what that is like.
Bowen founded the Byron Center based startup, Aspen Surgical, in 1999. At the time Aspen was a single operation that specialized in disposable medical products. In 2006 Aspen was sold to a larger entity and Bowen retained a minority share of the business. After relocating to Caledonia, Michigan and acquiring other medical supply entities, Aspen now employs 300 West Michigan employees and more than 700 worldwide. Recently Aspen was sold to Hill-Rom Holdings Inc. for $400 million in cash.