Want to Start a Business? Try an Alternate Path

Entrepreneurship is such a trending word it seems anyone can start his own business. But not everyone is lucky enough to obtain an entrepreneurial opportunity. The owner of Home Brite Cleaning Services, Siraj Mirza, is part of an alternate trend which people buys an existing business and makes smart modifications to help the business prosper.

Home Brite Cleaning Services is a professional cleaning services company started in 2009 that provides private home cleaning, pre move-in and pro move-out cleaning, office cleaning and post construction cleanup services. The owner of Home Brite, Siraj Mirza, currently in his mid-40s, used to be a banker working with foreign banks; he was laid off during the recession in 2008, leaving his wife, Tess Zaidi, under heavy financial pressure. After changing jobs for a few times, Mirza decided that he didn’t want the stress of managing credit portfolios anymore, so he purchased the national franchise and canceled original contract deals restricted to cleaning services in Beverly Hills and Studio City areas. Instead, Mirza and his wife created their own brand, Home Brite, and started serving personalized home cleaning services to multiple areas within LA County.

Mirza recalled that when the business first started out in 2009, sales kept going down for a year because of the downturn that entire U.S. economy was undergoing back then. “Life was very stressful in 2009, we had lost one of the properties we owned to foreclosure”, said Tess. Thanks to the recovery of overall U.S. economic conditions and Mirza’s hard work, Home Brite has been able to double its business sales every year since 2011. In addition, Home Brite improved its service quality, and it started its marketing campaign, as well. As a result, Home Brite is able to reach steadily growing annual sales of 200,000 dollars in 2014.

The most dominant change that Home Brite made to its business is personalizing its services. Mirza knows his customers very well in person and remains accessible to his customers through text messages and phone calls daily. For private home cleaning service requests, Home Brite is able to respond very quickly and arrange timely services for its customers. By maintaining its high quality of service, Home Brite is able to maintain its loyal customers while increasing the number of new customers. Another factor that helps Mirza with increasing sales is diversifying the projects his team works on. For example, he himself would work on smaller apartment cleaning, and his other team of 6 people would work on larger projects such as post construction cleaning for an entire house.

According to Home Brite owner Mirza, he refers the housing market and national unemployment rate as two broader economic data that impact his business. Since the service Home Brite provides is essentially a discretionary service, the demand for home cleaning services depend largely on people’s economic conditions. When unemployment rate is low, people can afford discretionary services; however, when unemployment rate rises, people are losing jobs and thus are less likely to afford discretionary expenses. Another factor Mirza concludes that affects his business is the housing market. A robust housing market creates more demand for house cleaning services, yet a weak economy reflects a low level of investment that results in less demand for services.

The biggest challenge Home Brite faces with currently is to find reliable employees due to the nature of service it provides. “It makes me nervous”, said Tess, “we have not experienced anything bad, but I always want them [the cleaning team] to be extremely careful with expensive items”. Indeed, many people who use cleaning services worry about the same trust issue. In order to maintain the loyalty of both its employees and customers, Home Brite owner Mirza says he would choose to grow the business at a controlled manner. He notes that he does not want employees who are “constantly not available or constantly changing jobs”; it is not the size of a cleaning team that matters but really the quality of its service that matters.

In general, the lowering of interest rates has allowed investments pour into construction, which creates more jobs in post construction cleaning for cleaning services such as Home Brite. “When more buildings are being built, it increases our sales”, said Mirza. One may think that access to capital is a requirement for starting a business, but for a smaller business like Home Brite, Mirza used his savings to finance the initial stages of the business. Once the business is up and running, there is little capital they had to acquire from banks.

The major competition for Home Brite comes from independent workers who are not registered with residential apartment buildings. Another competition comes from national cleaning franchises such as Merry Maids and Molly Maids, because these companies are capable of much stronger marketing campaigns, especially their powerful online presence. On the other hand, Home Brite holds its own advantages. Mirza and his team are flexible in time scheduling and they always respond quickly to customers. Besides, their services have no territory restrictions. “When I talk to people who used to use other larger maid service companies, customers have complained that they never answer the phone or response to text messages, and they keep changing the times”, says Tess. Although Home Brite has not been able to raise prices for the past 5 years, it has not yet had to offer discounts to attract customers either.

“We are currently bidding for a few larger projects over 100,000 dollars per job”, Mirza says. “We now show up as the No. 1 post construction cleaning team in LA County.”

Diversification of jobs has increased Home Brite’s competitiveness in the market. In the mean time, by maintaining good relationships with its current customers, Home Brite is taking the purchased franchise onto a fruitful path.

An Economy-Agnostic Startup?

In the mid-to-late 2000’s, a number of college students might have lamented graduating into the worst economy since the Great Depression.

Not Brenton Sullivan and Kai Sato—they launched a business in the face of a crashing financial market in 2008.

The 2007 USC graduates’ concept for what would become FieldLevel had been named “Best Business Plan” by the Marshall School of Business’s Lloyd Greif Center for Entrepreneurial Studies, and the pair had even received an offer of $1 million for an 80 percent stake in the company but we unmoved. Instead, they took the more difficult path, opting to bootstrap through the early part of their existence.

Numerous sleepless nights and pivots later, FieldLevel was accepted into the Los Angeles Dodgers’ Sports and Entertainment Accelerator—a distinction that came with $20,000 in funding—last month.

Sullivan and Sato maintained a cash flow positive business well ahead of being accepted into the accelerator. While cash flow positive and profitable are two very different distinctions, and the company still has a ton of work to do, the fact that FieldLevel has taken off in the face of a horrific economy is impressive.

Both entrepreneurs attribute their success against the adverse economy not only to their passion and flexible business model, but also to the generosity of friends and family, who provided them the initial funding that enabled them to avoid the typical path of venture capital (and reject the early offer to cede 80 percent of the control in their business).

Sullivan and Sato have always been leery of traveling down the VC path and seemed almost thankful that it’s nowhere near as established in this half of the state as it is up north in Silicon Valley. The tech industry, as a whole, has numerous stories of VC’s either making small investments as a means of basically stealing entrepreneurs’ ideas and putting them out as their own or as a takeover (the initial overture FieldLevel received).

Perhaps what makes this story most interesting, though, is the fact that at no point were economics a driver for this business. Ultimately, the business needs to transition from cash flow positive to profitable, but the duo is in no real hurry to make that happen.

To these two former high school athletes who were largely invisible to recruiters, it’s more important to get it right.

“Finding the right fit is the key,” Sullivan said. “I was probably a guy who should have been at a DIII school somewhere, but they had no way to find me. I would have had to go to them.”

FieldLevel is a free service that aims to bridge this disconnect, enabling coaches at all levels to have the same access to prospective players.

One major differentiator, though, is that college coaches would be connected to high school and travel team coaches—not to the players themselves. This (theoretically) shields college coaches from being spammed.

The other? It’s free.

“This is where the economy, I believe, worked in our favor,” Sullivan said. “Recruiting services are outrageously expensive and, generally, get minimal returns. College coaches we talked to hated them.”

The combination of frugality, recruiting service fatigue and use of prep coaches as a buffer enabled FieldLevel to amass the largest network of coaches in the industry quickly. But instead of rushing to “monetize” or “maximize valuation” like venture-backed Silicon Valley companies, Sullivan and Sato are looking to continue refining their business—a process aided by the Dodgers Accelerator.

“Developing this business has been an evolutionary process, and we’ve had a number of pivots along the way,” Sato said. “We needed a partner that understood that, which is why we chose to do the Dodgers Accelerator. We didn’t need the funding, but the collocation space with other entrepreneurs and the corresponding added brainpower are invaluable.”

The heavy focus on product and willingness to proceed in the face of a negative economy have been key to FieldLevel’s growth, but that doesn’t mean the entrepreneurial team behind the company hasn’t paid any attention.

“We grew our business in the face of an economic downturn, and sure our [friends, family and business model] made it possible, but there was also a lot of chatter on Capitol Hill about helping small business as the economy was at its worst point,” Sato said. “But even as we hired, we never saw any of it.”

True to startup culture, though, they refuse to spend any brainpower on it.

“It sucks, but we’re too busy building our business to worry about it,” Sato said. “We’re not taking the company public or anything like that, but we firmly believe that the best is yet to come for us.”

The economy and a couple high-profile flops have made the IPO market essentially stagnant over the last few years, but hopefully his optimism is not in vain. While he company will still face the dilemma of how to monetize a network of users, it can look to the successes (and failures) of predecessors like Facebook and Twitter (albeit on a much smaller and more targeted scale).

The economy might not have factored heavily into its growth to this point, but now that FieldLevel has taken on capital and is looking at adjacent business opportunities, it is unlikely that the company can continue to ignore it.

The Number Matters

“September and October of 2008 was the worst financial crisis in global history, including the Great Depression.”, the former head of federal reserve, Ben Bernanke, said. Although seven years have passed since the country has broken out of the crisis, many companies are constantly affected by the fickle health of the economy.

Richard Martin, who is a publicly certified accountant, founded Martin & Associates in 2003. The company provides accounting and financial accounting services such as business consulting, investment review, and tax planning to individual and business clients. For example, it calculates the gross profit percentage for its customer and gives advices on whether its customer needs to adjust production quantity or the pricing. Moreover, Martin & Associates analyzes businesses from a financial perspective, often resulting in financial advisements. When their customers are in debt, Martin & Associates evaluate the financial health of the company and make adjustments necessary to return to a healthy cash flow. What differentiates Martin & Associates from other accounting firms is its commitment to establish valuable relationships with its client base customers. The company truly believes that the success of their clients impacts the success of Martin & Associates significantly.

Further, Martin correlated the state of the economy to his firm by insisting it is all a “chain effect.” The prosperity of Martin & Associates depends on the financial health of its clients. When its clients are financially healthy, there is a more rapid rate of payment and a steadier flow of consulting appointments as they seek advice with investing their surplus cash; however, during times of economic hardship, more effort is required on part of Martin & Associates to ensure that payments are made within a feasible period. If one of its customers is not performing well, it affects Martin & Associates directly because the customers do not have the means to pay the company for its financial services. When their clients file for bankruptcy and go out of business, Martin & Associates feel immense pressure d to actively seek out more clients by going through additional service providers and networking. Interestingly, a large amount of their new client base comes as a result of referrals.

Besides the broad economic environment, the movement of the federal interest rate impacts the client of Martin & Associate the most, inversely impacting them. “The lower the interest rate, the less interest expenses for my clients, resulting in more liquidity. In times of notably high liquidity, my clients seek additional financial consulting”, stated Mr. Martin. When Martin & Associate’s client owns greater amount of capital, they tend to invest in capital goods therefore demand more financial advices. For example, a client with additional cash flow for any given time period, may want to invest in additional land or equipment, and seeks advice from Martin & Associates as to what the financial return of those investments may be.

Additionally, government regulations are one of biggest challenges Martin & Associates is currently facing. Every time a new law or act is put in place, its clients must reallocate their budget breakdown to meet the needs of the change. An example of this may be additional health insurance costs as a result of the Affordable Care Act, or a change in minimum wage. In addition to these widespread regulations, there are also additional changes that vary from industry to industry (being that their client base varies from insurance brokers, to tech companies to restaurant chains). For this reason, it is important that all the employees at Martin & Associates stay up-to-date on changes within various industries and have the knowledge to respond to those changes.

Furthermore, Martin & Associates is an outstanding company because of their personal ethical decisions within their own firm. Since the 2008 global financial crisis, many businesses have made changes within the company in order to survive and remain its status within the market. Some companies offer discounts to its customer in order to maintain its competitiveness. However, instead of lowering the price, Martin & Associates decided to maintain its original price but provide added service. “Once you lower your price, you are competing with other companies on the price level instead of competing on service. Lower price may imply lower quality, and competing on price alone does not build loyalty with customers”, Martin said.

Another significant obstacle that Martin & Associates have strategically conquered is the growing popularity of the Internet. The Internet era not only affects the way people communicate with each other, but also affects the competitive landscape in the accounting field. With the convenience Internet provides, instead of seeking financial advices and services from traditional accounting firm, people turn to online software. In order to raise its company’s competitiveness, Martin suggested that his company understand the trend and further provide extra services to its clients. He mentioned, “Online software servers are able to reach a huge amount of audiences. Technology brings competition, therefore companies have to keep up with the technological innovation to provide added value services.”

Starting a business of your own might not be easy task but keeping the company running through economic hardship is certainly harder. By maintaining relationship close relationship with its clients, creating added value services, and constantly monitoring the economical trend of the market, Martin & Associates is able to withstand through the ups and downs of the economy.

More than just Marihuana, It’s a Business

The Medical Marijuana industry has been a controversy in the United States for years.  It is a touchy subject that maybe an old man and his son would get in an argument about because of the interesting changes that have taken place through the generations. However, many are making an entrepreneurial leap of faith and creating Medical Marijuana as a business that thrives. This is the case for Nate Taylor who is a Seattle native and has spent the last five years in the industry with his Medical Marijuana Company called Fweedom Collective. Nate has done more than create Fweedom Collective as a well-known million dollar business in Seattle. Fweedom Collective has benefited consumers, the city of Seattle, and influenced the legal changes that are being processed today.

Three years ago recreational Marihuana was legalized in Washington State. Since then, the government has started to regulate the Medical Marijuana by joining it with Recreational Marijuana and push it all into one system. Before the law was passed, Medical Marihuana was only loosely regulated. Though this may seem beneficial for Nate’s business, it has definitely takin a toll on the company.

On Sunday, September 13th, I gave Nate a call. It was 12 P.M. and Nate answered to the sound of a football game, Seattle Seahawks vs. St. Lewis Rams, which was playing in the background. Nate is an avid Seahawk fan who attends the games frequently.  The Seahawks were down by nine points, It was the third quarter, and when asked if the Seahawks would come back he said, “Oh, for sure!” While the game was still playing he was more than willing to answer the questions I had for him, with an occasional burst of excitement or dismay from the game.

Many economists are probably wondering: has the Medical Marihuana industry been impacted by cyclical or secular shifts? When Nate was asked this question he said that the answer was most likely secular. If the economy goes down, people don’t stop spending money on the product, it is a necessity to them. However, they may buy less of it at a time.

With the economy changing and new technology constantly being developed, businesses have to adapt. Nate said that over the last few years Fweedom Collective has had to make some beneficial changes. It increased its Search Engine Optimization, worked on improving and creating more online orders, and developed different apps that profit the company. The business also increased its hours of operation due to demand. Nate noticed early on that people get off work later and by creating longer hours improved sales. These changes helped Fweedom Collective stay on track with today’s basic needs for consumers.

Seattle is a booming city, and many businesses have either expanded or moved there for better opportunities. Some of these big local businesses are Amazon, Expedia, T-Mobile, and Microsoft. Nate mentioned as long as these companies are prosperous, steadily growing and no economic down turn, the city benefits, including his company. “As crazy as it sounds”, Nate said. “When professional teams in Seattle perform well, spending has increased at Fweedom Collective.” After the Seahawks won the Super bowl in 2014, sales dramatically went up at Fweedom Collective.

Of course being in the Medical Marihuana business is not easy, especially since it is loosely regulated. Mentioned earlier, Recreational Marihuana was legalized in 2012, though this might seem like it would benefit Fweedom Collective right away, it actually has presented many challenges. “My industry is at the end of an area, the probation of Marihuana, therefore making it a grey area,” Nate continued, “a lot of changes are being made.” Even though the law was passed over three years ago, the government is still in the process of making regulations for recreational Marihuana and should be resolved by 2016. With no heavy guidelines, many smaller recreational businesses have entered the market and have changed the prices of products. He elaborated on how he has seen products that were priced at $13 drop to $10. “We constantly have to change prices and adapt to the environment around as more businesses are evolved,” Nate said. He also believes many of these stores are in it for the money and only want to be open for a short period of time. In July of 2016 Recreational Marihuana should be fully regulated.

In some cases today, the economy does not look at Medical Marihuana as a legitimate business. Therefore interest rates or access to capital do not play a major role in Fweedom Collective, for consumers anyway. The company only takes cash or credit cards. Nate mentioned that he could get a loan through his business if necessary. However, what affects the company the most is business loans because banks and financial institutions will not grant them to a business like Fweedom Collective. Nate said its loans come from private investors. Most likely when regulations are officially submitted for Recreational Marihuana, banks will be more willing to loan money.

The most surprising news that can be learned from this interview is the impact Fweedom Collective has had on the community it operates in. Nate elaborated on the positive impact the company has on its small location north of Seattle. “With our business being there it has helped the neighborhood out a lot, cleaning it up, put illegal deals off the streets and into a legal business, and crime rates have dropped.” Nate also mentioned his business has brought money to an area that was demolished and made it more commercialized.

After eight years, Nate Taylor and two of his coworkers, Sky Nielsen and Tyler Godfrey, took an idea and brought it to life. Now at 28, Nate is a successful business owner who is looking to expand in other areas. Though his business is succeeding, the Seahawks are not. They lost 31-34 to the Rams.

 

nate

 

A few dollars, a big difference

Los Angeles roots for the underdog while riling businesses with proposals to hike the minimum wage.

Garcetti announces his plan for a new minimum wage this Labor Day weekend. | LA Times

Garcetti announced his plan for a new minimum wage on Labor Day at a South L.A. park. | LA Times

Mayor Eric Garcetti says his proposal to raise the minimum wage in Los Angeles by nearly 50 percent over three years will boost struggling families above the poverty line, making the city affordable even for busboys, cashiers, janitors and others living off $9 an hour. In turn, he says, these workers will pump dollars back into the economy.

But business owners say the pay boost – which would reach $13.25 by 2017 – could trigger side effects that would endanger businesses and cut jobs. Some companies have said they would consider skipping town altogether. Restaurants and stores that depend on their locations may need to slash labor hours or take a gamble on hiking prices. Entrepreneurs might jump ship into the underground economy. Even businesses outside of the city could wither if compelled to hire L.A.-based companies at steep rates.

At the root of this debate are 3.3 million people nationwide earning the federal minimum rate of $7.25 an hour or less. According to the Bureau of Labor Statistics, half of these people range from 16 to 24 years old, and 77 percent are white.

[Read more…]

Swells in cell phone business

With a growing number of cell phone repair stores in Los Angeles, how do they grasp their competencies, how do they survive, when new technology updates and brings new phones to the market every year?

In a 1500-square-foot store on South Figueroa Street in Los Angeles, Nathan Kim sat in front of his work station all alone, covering his eye with a head loupe magnifier and installing the last tiny round widget on the back of an IPhone screen. As soon as he finished up, he put the screen aside, away from the pile of different brass and gray widgets sprawled all over the desk.

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Nathan Kim, owner of LA iPhone Repairs

Kim opened the iPhone repair store after he graduated from the University of Southern California with a bachelor’s degree in computer science. Seeing the fast updates and replacements in the cell phone market, many people like Kim were attracted by the potential profits and opened phone repair service stores.

In L.A., there are about 40 similar stores searchable on Google Maps. Some stores try to keep their locations concealed. Some of them run in apartment complexes; others provide door-to-door services by making appointments with repairers via phone or Craigslist (a classified advertisements website).

“They are doing home business without a proper license,” Kim said when he found an “iPhone screen repair” service on Craigslist. “This only costs $39 to fix a screen, while I charge $65.

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Kim’s working station. Electronic Registration certificate hanged in front of this desk.

“If there is any problem, they won’t be responsible for that, and their customers will become the victims.” The license he referred to was an Electronic Registration certificate issued by DCA (Department of Consumer Affairs), which hung in front of his work station.

Cutting the cost and keeping the business small but efficient are the core strategies for most store owners. Running the store in an apartment would be less nerve-wracking and probably cost less money than subletting a commercial property. Having only one or three people running the store would also allow each person to take home a larger share of the pie. Also, finding good retailers to supply continuously with cheap phone parts would help a lot.

Regardless the labor cost during repairs, phone parts suppliers have the greatest power of controlling the prices. “When the iPhone 5 was first released, the part (screen) cost about 180 bucks. Now it’s 80 bucks,” Kim said.

Every time a new phone came out, large demand would promptly cause the suppliers to lower the prices of the old phones’ parts. Particularly, the value adjusted a lot when iPhone 5 was released.

“There was a mass production of them (iPhone 5 parts) – the screens, the back plates, the batteries. Everybody needed them. Everything was super cheap,” said Herbert Reyes, the owner of All Wireless World located at East Hollywood. “Repair, that’s the best thing (to earn profits).”

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Screen replacement for phones of different brands @ Kim’s LA iPhone Repairs

China, the world’s factory floor, has become the biggest supplier behind these dispersed phone repair stores in L.A. “They (parts and accessories bought from Chinese retailers in L.A.) are pretty much the same quality you will get for $35 from somewhere else,” he said.

Purchasing large amounts of parts will give buyers cheaper prices than buying a single part. Thus, the cheaper prices the store owners could get from retailers, the cheaper prices they would sell to their customers. Kim offered the customers discounts depending how the prices vary. Reyes chose a new path by providing a customer discount once they did a check-in or a review on Yelp (an online service to provide consumers with information about local businesses). He would also evaluate the prices offered by the others on Yelp, and then lower his price $5 to $10 below than the average price.

The phone repair business is extremely competitive in L.A., which forces many business owners to compete with the lowest price that they can offer. Most business owners are confident and positive about their competencies.

Since cell phones have become an essential needs for most people, customers who come into the stores mostly need to get their phones fixed as quickly as possible. Having a background in Computer Science and engineering, Kim said he knew the basic structure of the phone, which made him an experienced, fast phone-fixer.

“My customers tried to fix their phone in other places but they didn’t know how to fix it; they didn’t know how to fix water damages,” he said. “I’m pretty sure they will have some problems whenever there is a new phone coming out.”

When the iPhone 5, 5C or 5S first came out, Apple did not only upgrade their iOS systems and cover them with better-looking cases, it also changed their interior design, which made the phones easier to fix.

“The first time I opened an iPhone (4), it took me 4 hours to open it and 2 hours to close it,” Reyes said. “Now I can do it within 20 minutes. (The screen of) iPhone 5 is actually much easier to fix, because you don’t have to take everything apart.”

As iPhone 6 and 6 Plus have been released on Sept. 9, most of the business owners are unsure about what will they do if someone bring a broken 6 or 6 Plus to their stores. Reyes said he would contact his suppliers to make sure they had the parts, so that he could get prepared for any upcoming damages to these new phones.

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Harbert Reyes’ All Wireless World and his employee.

“I will get myself an iPhone 6. And I will open it to see which part goes with which,” Kim said.

Regardless of dealing with technological difficulties, Reyes values customer services more than anything else. “As long as you do really good customer service, people will come to you,” he said. “There is a well-established strong connection between me and people.”

To make extra profits, many owners like Kim and Reyes expand their businesses by selling accessories, such as phone cases. “People will get a phone, and they will need accessories,” Reyes said. “There is always something to sell.”

A Minimum Wage Increase Triggers Tough Decisions

Karim Kurdi, a 31-year-old Los Angeles native, says he supports a minimum wage increase, but as an owner of a small convenient store in West L.A., he realizes it might push him out of business.

Kurdi

“I would love to pay my employees more but it’s tough,” Kurdi said. “Right now, I’m breaking even. I’m not really making any money.”     

Some of Kurdi’s employees travel to work from the downtown area or East L.A. and earn $9 per hour. But starting Jan. 1, 2016, their wage will be increased to $10 per hour in accordance with the state law.

Despite of his support of the increase, Kurdi says even a small change in his workers’s salaries will have a significant effect on his already tiny budget.

“It’s going to be tough time,” he said. “If the minimum wage will rise again, it might affect my workers because they’ll have their hours cut.”

Kurdi, a son of a Mexican and Lebanese immigrants, opened his business, a Mar Vista Ranch Market in 2002 after hiring four workers and renting a one-story building on a busy corner of Centinela Avenue and Venice Boulevard. 

For the first six years, he enjoyed stable income from his small store. He also managed to keep his prices low while filling the aisles with Iranian dairy, Mexican-produced Coke and local poultry and meat, which attracted residents, most of them live within a walking distance from the store. 

But in 2008, things started to change. Although the number of customers who shopped at the Mar Vista Ranch Market remained stable, the average spending has declined.  

“People used to buy products for several days and now they only buy for today, just one onion and one cilantro,” Kurdi said. “Now they’re very careful with their money.”

Kurdi-2

On a recent Sunday afternoon, Kurdi stood behind a register with a sticker that read “Credit or debit cards for $10 charge .50c.” A woman stopped by a register to pay for a watermelon and two mangos. 

The shelves in the store were filled with tea, yogurts, tamales, and produce with oversized tags attached to them advertising discounts. Kurdi said he has not need to promote his business. Most people in the neighborhood know he has the best deals. 

But three years ago, national retailers like Target, CVS and Walgreen started offering fresh yogurt, strawberries and frozen lunches expanding their business from selling apparel to offering groceries and produce.

And owners like Kurdi have to keep their prices low to survive the competition. 

“We can’t raise prices too much because people will start complaining more, and we’re going to lose customers,” Kurdi said. 

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The competition, severe drought and high prices on meat and produce began to drag the business down even further, Kurdi said.

“After everything is paid and after we threw a lot of fruit and vegetables away because of the weather,” Kurdi said. “I’m not really making any money.”

The minimum wage increase will add up to his already barely-surviving business.

Still, despite all the challenges, Kurdi remains optimistic. He says the increase of the minimum wage won’t happen overnight, and he still has some time to plan his budget. 

“I think the government needs to wait until the economy gets getter,” he said. “And then raise the minimum wage again.”
 

The Makeover of downtown Los Angeles Through Small Business

Gary Russell stood behind his counter in the Grand Central Market in downtown Los Angeles. Surrounded by those old-fashioned, bold-colored vendor signs, Russell in a casual red shirt and his clean-designed counter felt like an invader to the atmosphere of nostalgia.

RussellStanding

Photo credit: Peiwen Jing

Nevertheless, the crowd walking inside of the market in their sportswear  brought the sense of modern to this over-100-year-old marketplace, just like what Russell did with his kombucha tea bar in the past eight months.

CustomersIt was Saturday noon, one of the market’s busiest hours throughout the week. Two customers grabbed several traditional pork carnitas tacos, stopped by Russell’s counter, tasted different flavors of the kombucha teas they produced, and got two bottles of “midnight rose” as their drinks.

“The market has been there since 1917 and I don’t know some other place in LA quite like this,” said Russell. “The dynamic, the atmosphere, and also for the new organic and healthy choices coming in.”

Photo Credit: Peiwen Jing


Russell works for the Better Booch, a small business manufacturing kombucha tea in downtown Los Angeles. They get the organic tea leaf supply from the Art of Tea in Beverly Hills, brew the teas, and then add bacteria and yeast to let the mixture to ferment for a couple of weeks.

Products

Better Booch has been in the business for more than two years. The small crafted kombucha tea brewery now has five employees, including their husband and wife duo co-founders Trey and Ashleigh Lockerbie. All of the five people working with Better Booch began their career in the show biz as touring musicians, mainly backing up popular international artists. “After years of exhausting travel and inconsistent schedules, we decided to make a change,” said the founder Trey Lockerbie.

The tiredness of inconsistent traveling around the world was one of the personal stimulators for the Lockerbie couple to switch their gears into the small business of cottage product. Meanwhile, the policy makers also sent their encouragement, by passing the bill to support the movement.

California passed the Homemade Food Act, which went into effect in January of 2013. Since then, the cottage food industry has been booming, bringing more and more food artisans to farmer’s markets and craft shows. Food artisans crafting everything from bread, candy and cupcakes to dried pasta and nut butters were legally allowed to sell their wares to the public.

The policy benefited to the Lockerbie couple. They started to sell their products in the famers’ markets across LA, and had no idea that the Booch is selling through 40 different locations. The spot in the Grand Central Market is their only retail revenue so far.

“Through our experiences with Better Booch, we’ve seen our highest highs and our lowest lows,” Ashleigh Lockerbie described their experience of running this handcrafted small business in this way. “You don’t get very far if you don’t work as a team and whether it’s music, a tea business or navigating life’s domestic challenges.”


Photo Sep 13, 12 23 20The Booch promises only use organic loose-leaf teas from a local supplier, with no added sugar in the way of juices, purees, syrups or powders. According to Russell, The cost for Booch’s manufacturing is generally higher than the similar kind of product, even higher than a national standard.

“You earn a little bit less but you are making a better product,” Russell thought the higher cost was hard to afford, but worth it. “We want the quality of the product.”

The business keeps going up, in Russell’s word, “each week is getting busier and busier.” Nevertheless, in Russell’s opinion, the larger the sales didn’t mean the larger the profit from running the small business. Some things have made the small business running a major challenge: the cost to produce, the high rent in downtown’s commercial zone, and now the possibility of a minimum wage hike in the following years.

“I think these guys who are governing have studied economy are just making a rough guess that you are making enough to pay people,” said Russell. “If we get more small business going, they can hire more people; that is better than a lot of people don’t have work, I think that is what they need to know.”

Nevertheless, as a employee, Russell’s income has been effected by the minimum wage level. “It could be a good thing but nobody can afford to pay that. They make the small business owners pay more, but somebody will get fired,” he said.

John’s Violin Shop

“We used to have multi-million business back in 1998-2004.” John Han, the owner of John’s Violin Shop, talked about the most prosperous period of time of his business. “But when the real estate bubble hit America in 2007 we have several rough years, annual sales were as low as $200,000. It barely covered the store’s expenditure and I lost near one million dollars.” Han said.

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Located at the intersection of Olympic and Catalina, Han’s music instrument shop shares Olympic/Vermont’s liveliness as well as Catalina’s tranquility. With more than 20 guitars hanging on the sidewall of the lobby, a little show stage at the corner with drums, and keyboard, the space is divided by several electronic pianos in the middle, and some layered up sound mixers to the ceiling. All the saxophones, trumpets and violins are hanged behind the counter for sale. The doors of the two small cubicles at the back are closed, with harsh and unskilled violin sound flowing out. A small but cozy music store.

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His business kicked off in another store step away in 1994, and had to move to 6th street in 2008 after huge loss from the nationwide economic crisis. “I could not afford the rent of my old store at that time, people don’t come by but I still need to pay huge amount of electricity, rent and other daily expense. I couldn’t afford that.” Han said.

As a matter of fact, He said the business turned downward since 2004 as a result from the growing popularity of the Internet. People started to look for information online instead of coming by physical stores. Meanwhile, C2C and B2C mode entered the market and began to eat a large share, and websites such as eBay became a new platform for selling and buying products. Potential customers commonly try and test different brands of instruments in a physical store and then shop online for the best price. Accessories such as strings, drumsticks, sheet music, and tuning condenser are often discounted online. Some even call real music instrument shops as “showrooms” of online stores. Except music business, the Internet also affects other businesses, including record stores, bookstores, travel agencies and post office for the time being.

However, Han said the biggest strike was still the economy recession from 2007-2012. In terms of the competition with the internet, he believed brick-and-mortar stores won’t be stock out of the market because customers still need to come for instrument checkup, repair and music lessons. “Like this one, it’s not even a violin bridge.” Han pointed at the oversize bridge under a violin’s four strings left by a Chinese customer. “China produces some of the best violins in the world, but violin workers in China don’t have good knowledge of the instrument itself,” Han said. In his forties, Han has already earned over 20 years of business experience, and he knows what makes a good violin store. He knows violin, and in his opinion, violins are only mass-produced pieces of wood if workers don’t know much about the instruments. He has many customers buying guitars or violins from the Internet coming to him for help tuning and repair. In his defense, store owners also benefit from the Internet because they can post adds online and get more publicity.

Han moved back to Olympic when the economy started to warm up in 2012. Instead of leasing the original location he started in 1994, he chose a much smaller outlet in the same street in order to cut budget. Till today, Han’s store has not fully recovered from the nightmare in Great Recession.

So far Han is happy with the growing business, even though it is still not as good as in late 1990s and early 2000s. He has 25 students learning different instruments there, ranged from 6-year-old elementary school kid to 74-year-old grandparent. On average about 35 customers visit the store, and since it’s back to school season right now, visits are almost doubled. Except September, Christmas is another busy period as a holiday season. Light season such as February and November, Han likes to add more promotions to stimulate the business.

Currently Han earns around $300,000 to $400,000 a year. He plans to accomplish half-million revenue in 2014, and aims to fully recover before 2020.

 

 

 

 

 

Real Estate Industry-The Business That Will Never Die

Speaking of the great depression in 2008, Craven Ji was a little bit upset: “The sales of homes dropped by 50% that year, and house prices also decreased by 30% on average.” “However,” she then added, “As the economy is recovering recent years, the market is seeing a brighter future. Home prices have recovered by approximately 25%, which almost reach that of the peak time in 2006.”

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Craven Ji, a real estate agent in Real Estate eBroker Inc. in Los Angeles, has been in the business of real estate for almost 9 years. Different from her colleagues, most of Ji’s customers are Chinese. According to Ji: 67% of all her customers are Chinese immigrants while another 33% of them are overseas investors from China, either looking for investment opportunities or trying to find a new house in America. Ji does most of her business in Pasadena, Arcadia, San Marino, USC and UCLA neighborhoods where Chinese people aggregate.

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“The year 2008 was a hard time for me,” she said, “There were little overseas Chinese investors that time, and the local market was also frustrated by economic recession.” Ji only sold 7 properties in 2008, which was much less comparing to her average record of 20 houses sold per year. In fact, although the U.S. interest rate was pretty low during the economic downturn, most homebuyers were frightened by the poor economic performance and were thus resistant to borrow money from the bank. “When people earned money, they’d rather pay off their debt to the bank than spend them on other consumptions. They were simply not confident with the market,” said Ji. Because most of her customers rely on bank loan to buy house, the unwillingness to borrow money would definitely impact her business. Also, as bank owned foreclosures set home prices extremely low, home sellers had to cut down their price to the same level to be competitive in the market. The two sides kept going back and forth, which resulted in a huge decline in the market volume.

Now, several years after the real estate nightmare, the situation seems to get better. “Not only does the local market start to recover, but also does overseas capital continue to pour into the U.S. market,” said Ji. According to property consultant firm CoreLogic, home prices rose by 7.4% year over year in July 2014, and are expected to rise by 5.7% from July 2014 to July 2015. Moreover, according to LA Times, overseas homebuyers and new immigrants spent $92 billion on U.S. homes in the last year. The $92 billion amounts to 7% of all money spent on U.S. homes within a year, which is 35% higher than the year before. Among those purchases, 25% of them were made by Chinese buyers. Statistic shows that they are extremely interested in the Real Estate market in southland, including the city of Los Angeles, San Francisco and Irvine, which also helps drive up home prices in these areas.

Percentage Change in Home Price Index Year After Year

Chart 1When asking about the future of real estate market in the U.S., Ji expressed her concern over the median-price house market: “One challenge we are facing now is that there are less and less affordable houses in the market.” While the demand for median price house is going up, the supply is actually going down. In July, the median transaction price was $457,000, which is 7.6% higher than that of last year. Also, the market volume, which is 7012 this year, is 12.5% less than that of last year, according to CoreLogic’s recent report. Ji is worried that if the interest rate starts going up next year, there will be more competitions in the median-price house market.

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With home prices showing an upward trend and overseas cash flowing to U.S. market, some people may ask: will there be another cyclical real estate economic downturn in the future? Also, what about the housing bubble that once led U.S. economy to collapse? Well, the questions may be hard to answer now, but one thing we are pretty sure is that the housing market won’t crash, since buying house is an American dream that will never die.