Three out of four still in the game

An old adage has it that most new businesses fail within a year.

The truth is less grim. According to census data gathered by the U.S. Small Business Administration, seven of 10 new businesses remain alive after two years. Fifty-one percent are still in business five years after their birth.

A year ago, The Virginian-Pilot profiled four businesses - a jewelry and accessories boutique, a clothing store, a restaurant and a tanning salon - that opened with a burst of optimism during the recession.

One closed last month; the others remain open. The owners of those three aren't yet making a living off their businesses, relying on other jobs or their spouses' incomes. But the businesses remain afloat.

"I'm not losing any money of my own," said Lisa Sheldon, owner of Sure Tan in Portsmouth, "but whatever I make gets put back into the business."

Every small business has different dynamics, said Jim Carroll, executive director of the Small Business Development Center of Hampton Roads. "It's incumbent upon the owner to understand the dynamics - When are people going to come in and buy? When are people not going to come in and buy? - and then plan accordingly."

No matter what the scenario, "the decisive factor is going to be cash flow," Carroll said. "You have to have appropriate cash on hand so you can meet your bills in a down period."

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EKLECTIK FUNK BOUTIQUE

"I'm here and I'm not going to give up," Erin Kelley said last year. "I'm determined to ride it out."

She tried.

Kelley opened Eklectik Funk Boutique, a clothing and jewelry store featuring her own work, on High Street in Portsmouth in August 2008. After an upturn in sales last summer, business slowed in the fall.

She moved two doors down to cut her rent by $275 a month. To supplement her income, she got a part-time job at a Portsmouth restaurant, but it closed in November.

The boutique was taking in no more than $800 a month, and Kelley was dipping into the family budget - her husband works in technical support for cell phones - to pay the $1,100 monthly rent.

"I started thinking: What am I going to do?" she said. "If I have to work another job to keep the store open, maybe it's time to go ahead and do something different."

Kelley closed Eklectik Funk at the beginning of the year.

Looking back, she blames the economy - "I hate to say that, because that's what everyone talks about" - and her decision to locate in downtown Portsmouth.

"There's a lack of retail in Olde Towne," said Kelley, 34. "People will come down to go to the movies or eat out or go to the Children's Museum. But they weren't coming down there with the intent to shop. People always got excited browsing and supporting local artists, but that excitement didn't translate into sales."

She also wondered if her lack of advertising - which she said she couldn't afford - hurt her.

At an interview at a Norfolk coffee shop, Kelley wore some of her handiwork - a woven purple and green scarf and a drooping necklace dotted with pink and aqua beads and shells.

She's looking for a full-time job and continues to create her own designs at home, which she markets at www.eklectikfunk.com and at parties. She's branched out from jewelry and scarves into tutus, which generally go for $15 to $40.

"People wear them to '80s parties," Kelley said. "I even made one for a girl who was going to her prom."

She has no regrets about opening Eklectik Funk.

"Personally," she said, "I am disappointed. I put a lot of time and effort into building up the store. But I'm determined to be optimistic. I'm entering the next chapter of my life. It's sad, but it's not sad."

- Philip Walzer

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PROVISIONS

 This month, Chris Dial gave himself a paycheck for the first time since he opened his Norfolk clothing store in October 2008.

"A very small salary," the owner of Provisions clarified last week.

Still, Provisions turned a profit last year selling men's and women's fashions - no small feat amid a recession that caused consumers to rein in spending, particularly for luxuries such as a new outfit or pricey pair of jeans.

Dial attributes his perseverance to his merchandise mix. Provisions' niche is in lesser-known, independent designers that few other local merchants carry.

He also has kept a careful eye on affordability, mixing $30 shirts or $70 dresses among $300 jackets. Even in the recession, his customers have seemed undaunted by higher prices, he said.

"The jacket for $300 will sell before the other one" for $75, he said. "Our most expensive jean line sells the best."

The most expensive among the premium denim he carries is $225.

"It's a destination place," Dial said of Provisions, in the Palace Shops in Ghent. "We don't really advertise a whole lot. It's word-of-mouth."

Facebook, the online social network, has proved one of his most successful marketing tools. Dial has offered special discounts to Facebook "fans" of the store.

He has explored opening a second location but decided first to focus on e-commerce. A new Web site he hopes to have up in April will allow Provisions to take orders from out-of-town customers - those who heard about the store or shopped there while visiting the area, or even Virginia Beach consumers who dislike driving to Norfolk to buy clothes, he said.

"It takes us to the next level," he said.

Dial and his wife, whose job with a local real estate developer has supported them, planned for him to start making money from the store this spring. He's a bit ahead of that schedule - and the timing couldn't be better: The Norfolk couple had their first child last week, so they can use the cash.

Dial doesn't expect to get rich on Provisions. It's about doing something he enjoys, he said.

That's why he'd never compromise by picking up products that other stores carry just because they are popular or might attract more shoppers, he said. "I would rather go out of business than sell things that I wasn't passionate about."

- Carolyn Shapiro

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SALTYDOG

The owners of SaltyDog restaurant in Virginia Beach learned a few lessons in their first year in business:

Summer is the season on Shore Drive. Don't overstaff. Scrutinize spending. Listen to customers. Nonsmokers want to belly up to the bar, too. And don't give up your day job yet.

Amid the local beach and boating community, SaltyDog's good-food-at-good-prices formula brought steady sales through the summer. But traffic fell off in October, particularly on weekdays, as customers dined out less to save money.

The owners - sisters Jennifer Edwards and Karen Abraham and Karen's husband, John - cut out lunch Monday to Thursday. They also pared the staff back to nine from 27 when they opened.

They grew smarter and more efficient with their food orders, helping them cut costs and avoid raising prices. Suppliers sometimes charged more than the agreed-upon price for an item, they said, so they learned to check invoices closely.

"We've gotten a lot better at running the place," John Abraham said. "We didn't know. Trial and error."

Today, the restaurant is breaking even, they said. They earned a small profit in the summer, lost some money in the winter.

After the state banned smoking in restaurants on Dec. 1, SaltyDog still welcomed smokers in its bar because it has a separate ventilation system. But nonsmokers started asking for their own place to drink.

The owners took some of the money the restaurant made during the summer and built a bar in the dining room. They also added a walk-in freezer in the kitchen.

John Abraham and Edwards have kept their day jobs. He works for Adams Outdoor Advertising and she for Overhead Door Co. of Norfolk. That takes the pressure off the restaurant to support them, Edwards said.

"If we did work here, we probably wouldn't be taking a paycheck," Edwards said, "because it would be going back into the company."

- CS

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SURE TAN

A little more than a year after Sure Tan opened in Portsmouth, "it's paying for itself," owner Lisa Sheldon said. "But we're not making anything off of it. I figured the first couple of years would be like that."

Any profits, she said, go for upgrades and maintenance at the store. And they can be costly. Replacing the lamps in one tanning booth cost $1,200. If she pocketed the money instead of making improvements, "people would say, 'I'm not getting anything. I'm going somewhere else.' "

The salon, in Olde Towne, has seven tanning booths. A session can run 10 to 20 minutes and cost $7 to $15. Her customers range in age from 16 to 85.

Sure Tan, she said, averaged 765 tanning sessions per month in 2009, but business varied sharply depending on the season. April was her busiest month, with 1,667 sessions; September among her slowest, at 411. The second half of the year, she's learned, is typically quiet for tanning salons, but that didn't stop Sheldon from sometimes wondering if she did the right thing.

The new year has brought more encouraging numbers. Sheldon recorded 510 sessions last month, up from 350 in January 2009. This month, she had 22 customers the Monday after the first snowstorm.

"Everybody was stir-crazy," said Sheldon, 45. "They were ready to get out of the house."

She's constantly trying to conjure strategies to boost business, changing her mix of lotions and adding Foxers, a locally made line of women's lingerie, to her sales list. She spent $4,200 on advertising, including an ad in the Portsmouth Visitor's Guide.

Sheldon figures she works 68 hours a week, even after deciding to close on Sundays - few people were coming that day - and reducing Friday night hours.

It's also meant more work for her husband, Lee, who's a glazier.

He's the one who installed the lamps, and he helps at the store some nights. He's also shopping, cooking and cleaning more these days. And he's working overtime and umpiring more baseball games to help make up for Lisa's lost income; she left an accounts-payable job at a Virginia Beach company.

"We're sacrificing to hopefully have her fulfill her dream to make this successful one day," said Lee, 45.

Aside from a few military customers who have shipped out, Lisa Sheldon said she hasn't lost any patrons as a result of the struggling economy.

"It's a feel-good thing," she said. "It's still not as expensive as plastic surgery or any kind of Botox. They can't wait to get their 20 minutes of R&R."

Dawn Marie Hepner, an administrative assistant at Norfolk Naval Shipyard, visits two to three times a week.

"You get that 15 minutes of peace and quiet - it's completely a relaxation factor," Hepner said. "She really gives you that individualized attention. I don't even feel like a customer anymore."

- PW

Philip Walzer, (757) 222-3864, phil.walzer@pilotonline.com

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com