By ANGUS LOTEN
Introducing "Second Chances." Over the past five years more new businesses were launched by Americans over 50 than under 34, according to the Ewing Marion Kauffman Foundation. Today SmartMoney.com presents the first in an ongoing series of profiles of over-50 first-time business owners by Angus Loten, a small business reporter for the Wall Street Journal.
For 26 years, Jerry Elman was a company man. Eastman Kodak Co., to be exact, one of the two most-desirable steady employers in his hometown of Rochester, N.Y. "I really felt lucky," says Elman, 56. But after living through one restructuring after another, Elman decided he was ready to be a different kind of company man his own. In 2006, he took a voluntary layoff and went searching for the right spot to open an auto repair shop.
A life-long car lover and DIY mechanic, Elman found a mom-and-pop auto repair and used-car lot whose owner of 30 years was eager to retire and willing to accept a modest down payment and a note. The sale closed just as the economy went into a tailspin in mid 2007: "I bought place this at the worst possible time," Elman says.
As the auto market bottomed out, the shop, which he named Schoen Place Auto, suffered. Elman was forced to close the sales side, rather than ramp it up as originally planned, and sold the entire inventory of used cars to stay afloat. Then, just as repairs were picking up, the financial markets collapsed and nearly drove him out of business again. Instead, Elman used the remaining proceeds from his inventory liquidation to buy a more upscale location "It had a waiting room," Elman says on a busier street.
Who: Jerry Elman, 56
Old Job: Supervisor, Eastman Kodak Company (Rochester, N.Y.)
Annual Salary: $110,000 (2006)
New Job: Owner, Schoen Place Auto (Rochester, N.Y.)
Annual Salary: $25,000 (2010)
He also found a niche: Women drivers. According to the Car Care Council, an auto repair trade group, about 85% of household vehicle maintenance decisions are made by women, yet many feel they're treated differently than men by mechanics. Elman decided to create a "female-friendly" garage and got himself certified as such by AskPatty.com, a national auto market advocacy group for women.
To make the shop more welcoming to women, he painted the waiting room with pink-ribbon highlights to promote breast cancer awareness. He remodeled the restrooms with new fixtures and a vanity table. He put women's magazines in the waiting room and offered refreshments. And he invited AskPatty instructors to train his staff to make sure they were communicating well with women, listening to their concerns and not talking down.
Today, nearly two-thirds of Elman's repeat customers are women, and he's one of only a few men in the National Association of Women's Business Owners. Last year, Schoen Place Auto won the 2010 Rochester Business Ethics Awards. Last year the shop's annual revenue rose 14% to $570,000, still less than half its pre-recession levels but growing every day. "It's no longer survival mode," Elman says, adding that his worst days at the garage beat his best days at Kodak.
Elman's Lessons Learned
General business skills aren't enough. Elman quickly learned he needed specifics: "What are reasonable margins? How do you buy and sell? I knew about business basics, but didn't know anything about the car business." The key number in any business is gross margin the difference between the revenues collected for goods or services and what it costs to produce or provide them. But averages vary by industry, says John Seiffer, an entrepreneur and business coach based in Milford, Conn. Elman could have benefitted from studying the local auto industry, instead of relying on his years of corporate experience, Seiffer suggests.
Understand the numbers. "I wish I had gone over the numbers more myself and tried to understand them, rather than leave it to my lawyer and accountant," Elman says. As a new business owner, make sure you get a firm grasp on key numbers, such as gross margin (see above), the lifetime value of a customer, the cost to acquire a new customer and monthly break-even sales amount, says Seiffer. Take a business class or ask for training sessions with an accountant if numbers aren't your strong suit.
Be a leader, not just the boss: Being a corporate manager didn't prepare Elman for having his own employees, he says: "As a business owner, every problem my employees have is my problem. You can't send it up the corporate chain," he says. People bring their whole lives to work, good and bad, says Seiffer. Among other things, a CEO is responsible for the company culture and this directly affects how you deal with people and their productivity, he says.