Sunday, October 5, 2014

Guest of the Stable: Entreprenurial risk and Washington St.

The following is a guest of the stable article submitted under the pseudonym John Witherspoon. 

Why do I think that most of the commenters that post here are not really plugged in to the local business community and have never had the responsibility of running a business and have no experience with entrepreneurial risk.  It is funny how over educated desk jockeys or risk adverse employees love to blather on about how nasty and avaricious business owners ”should” spend their money and run their business. As an aside, even the hated real estate folks are business owners; I know a few that failed miserably in that industry.   And yes, it is a responsibility to run a  business.  In any successful business, the owner gets paid last.  All expenses come first. Rent, utilities, costs, technology hardware and software and business insurance (make sure you have employee theft and business interruption riders in your CGL policy or suffer the consequences) have to be paid, along with license fees, entity filing fees, accountant, bookkeeping and payroll services.  On top of that is the initial startup equity plowed into the business.  

Now consider health insurance options and possible profit sharing or 401k plans to retain key and valued personnel.  Employers actually worry about hiring and keeping good and honest employees.  I am well aware of the theft rate in the hospitality business, especially in the smaller cash driven restaurants and bars. Let’s not forget the building code and fire inspections that can kill a business.  At least Hoboken has finally put the past blackmailing, City Hall code enforcement employee-built inspection dynasty in its rear view mirror.  

Then there is a line of credit to even out the sales season.  Perhaps a small business loan to factor inventory, as you have to buy it first and then figure out how to sell it at a profit (even liquor). Both are tied to your personal credit and almost always require a second mortgage on your home.  If a business fails, almost every business owner not only loses their business (and their income) but their financial security and their home.  Now add in the salaries of employees.  The unemployment insurance, sales taxes (which are personal, non-dischargeable liabilities of the owner if not promptly paid), state and federal income taxes and don’t forget the tax that each employer pays for the privilege of having an employee.  If you are in the hospitality arena, the cost of a liquor license is not cheap. And that license can be taken away (and your business shut down for a period of time) if you don’t run it correctly and your bouncers don’t do their jobs.  Every night-time establishment has essentially placed the success/failure of their business in their security employees.  Try that one on for size and see how easily you sleep on any Thursday, Friday and Saturday night.

Spare me all of the moaning and groaning about how business owners should spend their money.  Spare me the moaning and groaning about what businesses on Washington Street are or will or should be successful. If you don’t like the mix of businesses, put your big boy/girl pants on and start a business that you want to see exist.  Take the risk, and according to the old adage, “Put your money where your mouth is.” Most businesses in Hoboken are on 20 year leases, generally a five  year initial term and two five year extensions ( which have rent escalation clauses).  Most leases have real estate tax pass-throughs or percentage rent clauses.  That is typical in any commercial lease.  If you think that landlords on Washington Street should be more benevolent, then buy up a building or two and then rent it out on a charitable basis. 

Grow up, we live in a free market economy.  Consumer preferences drive businesses. Product driven business are reeling from the onslaught of internet sales, even hardware stores.  Check out Amazon.  Anyone notice the fleet of UPS and FedEx truck in town – all day, every day? Ever check out the lobbies of most condo buildings and the sea of packages that appear every day, disappearing during the evening rush hours into the ever increasing in value condos of the recipients?   It is 2014. Commerce is undergoing a technology revolution.  A business is guaranteed to fail if it does not adapt to that reality and find a way to provide goods and services that consumers want and will pay for and still make a “profit” at the end of the year.  Even putting up a website to generate sales and revenue, even in food delivery, eats into every business’ bottom line, but the internet has become ubiquitous in commerce because of the ease of on line ordering in the comfort of your home and tracking “points” with credit card usage. 

As to zoning issues, Washington Street is part of a designated Historical District and any alterations, modifications, rebuilding must first have applications presented to the Historical Commission Baird approval.  However, that approval, thankfully,  is discretionary and not binding on the Zoning Board.  The past two to three years has witnessed, IMO, a serious overstepping of boundaries by the Commission, which has added unnecessary and expensive delays and costs to applications pending before it.  300 Washington is just one example. I am familiar with the facts regarding that application and am aware that a lot of stuff happens between professionals that does not see the light of day in the public hearings.  There are many more examples other than 300, and most businesses dread having to appear before the Historical Commission. There is more than one architectural firm that will no longer appear before the Historical Board simply because the approval process has become too bizarre.  Since the log-jam of Zoning Board appointments finally was broken with the election of Jim Doyle, the Zoning Board has been effective in plowing through the significant back log of applications. Not everyone is going to agree on all applications, but having any application take 2 years to get through the Historical Board  is unacceptable.

Every small business is a love/hate affair.  It is 24 hours a day.  It can become a demanding mistress. Worry about the phone not ringing or not enough orders coming in online, not enough seats in the seats or competition down the block (or even next door) or that midnight call of a fire or natural catastrophe wrecking your inventory is part of the deal.  But then there is the reward (financial and personal) from successfully running and owning your own business, having some greater sense of control over your own destiny. Dealing with the changing technology driven economy affects every part of the business community, large or small. Car rentals, taxi cab owners, taxi cab drivers, restaurants, retail stores, nail salons, hair salons, laundry and dry cleaners, liquor stores, convenience stores, pharmacies, real estate brokers, newspapers, magazines, professional services; each have their own issues with adapting to 2014 and surviving. 

Most of the simplistic and overwrought comments are amusing in their naivete and lack of practical real world experience in owning and operating a successful business.

Just my opinion. Let the bashing begin!