The keys to PB&J's rapid growth? One is loyal customers; in Kansas City, says Crooks, people stay with a restaurant they like rather than scurry to the latest trendy bistro. A second is money. Like most start-up entrepreneurs, Crooks and Khoury had to pony up virtually all their cash for the first restaurant, though they also managed to land a Small Business Administration guaranteed loan. Ever since, however, the two have found local financiers receptive to their expansion plans, mostly because they made themselves known in what is still a relatively small downtown business community. "People see you at business lunches," says Crooks, "and you move through the system a little quicker because you get to know people. That's a tremendous advantage, having a personal relationship -- not just with a loan officer, but with the owner of the bank." Picture that happening in New York or Chicago.
The critical factors naturally differ from start-up to start-up and hence from city to city. Doc Hamm moved from Washington, D.C., to the Raleigh-Durham area to make sure his new company, SilentPower Technologies Inc., would have a steady supply of mechanical engineers. Paul Shand started the Classic Marble Co. in Cleveland because the city was about to embark on $2 billion worth of downtown construction -- and because it housed a sizable supply of skilled stoneworkers. Freese of Alphatronix wanted to make sure his new home offered good public education and an appealing quality of life, and thus would be attractive to recruits. But he wasn't thinking Boise or Boulder; he also needed quick access to customers and to a well-developed high-tech infrastructure, complete with technically oriented universities. Finding the right place, he felt, was central to "maximizing our probability of success."
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Help for Start-Ups
Back in 1989 Vince Campanelli and Frank McConnell had a plan to open a graphic-arts-production-support service, a specialized company to work with ad agencies and corporate-communications departments. They figured they'd do it in San Francisco, where they had lived for 15 years and where they had all their business contacts. Looking for assistance in getting started, they visited the San Francisco Chamber of Commerce and the local SBA office. Not much help was available, they discovered; they were on their own. Then, on a vacation, they visited Cleveland, where both had grown up. On a lark they stopped in at the Cleveland Growth Association's Council of Smaller Enterprises, known as COSE, which serves Greater Cleveland.
"I was astounded," remembers Campanelli. That first visit quickly led to a three-hour meeting with "10 or 15 specialists in all different areas of starting a business"; later, COSE provided the partners with quantities of demographic information and with introductions to veteran Cleveland entrepreneurs willing to share their experiences. When Campanelli and McConnell decided to launch Technigraph Media Services Inc. in the city, COSE offered training in how to write a business plan, introductions to the local SBA and Service Corps of Retired Executives (SCORE) offices, and hands-on assistance in locating financing. "They literally put all the pieces of the puzzle together for me," says Campanelli. Even now, he adds, he continues to review his company's progress with volunteer COSE business counselors.
Cleveland, which a decade ago witnessed the virtual collapse of its old-line industrial economy, "gets" two fundamental facts about the future, namely, that prosperity depends mightily on entrepreneurship and that entrepreneurship can be nurtured. "After the pain we went through, we began to work like crazy to stimulate new ventures of all kinds," explains COSE executive director John Polk. "We recognized we could create a pretty interesting economy, where small companies play a very significant role."
For start-ups, the benefits of this attitude are considerable. COSE runs what is probably the nation's best-developed entrepreneurial-support program: it includes not only extensive start-up assistance but three separate tracks of ongoing management education. The organization also administers a widely admired health-insurance program for small companies. (See "Safety in Numbers," Hotline, May 1991.) Like Campanelli, plenty of Cleveland company owners feel COSE has been a critical element in their success. Moses Saleh, a franchisee of the Coffee Beanery Ltd., wrote a business plan with the organization's help, then submitted it for criticism to three bankers on COSE's list of volunteer consultants. He got back comments, changed the plan, and submitted it to real bankers -- one of whom had already reviewed it as a volunteer. "It was like getting the answer to a test before you take it," exults Saleh, who landed a $150,000 loan.
Incredibly enough, COSE is only one of several entrepreneurial-assistance programs in Cleveland. Economic Development Inc. (associated with Case Western Reserve University) runs incubators, provides counseling for start-up entrepreneurs, and sponsors venture-capital conferences. The Cleveland Senior Council, a private-sector version of SCORE, matches start-ups with teams of experienced businesspeople. A recently published list of area resources includes literally dozens of other agencies and organizations committed to helping new and small companies.
The Cleveland model, if it can be called that, is slowly being emulated in other cities, including some that were high on Bob Freese's list. Kansas City's chamber of commerce, for example, runs an entrepreneurial-training program; an organization called the Silicon Prairie Technology Association has set up health-insurance and cooperative buying arrangements for small companies.
