The sweet side of startups

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August 17, 2009 // UPDATED 8:18 am - August 17, 2009
By: Jake Weyer
Jake Weyer
// A look at entrepreneurs charting their own path in turbulent economic times //

For Krista Steinbach, life is sweet.

In April, she launched her own bakery business, Sweets Bakeshop, online and started selling her cupcakes, macaroons, brownies and other treats at Downtown general store Local D’Lish. Never mind that it was her first business ever, starting at a time when closings and bankruptcy filings obscured any news of successful startups.

“I had some concerns,” Steinbach said. “It is kind of risky, but I really wanted to do this, so I just went for it.”

So far, it’s been worth the risk. Sales are climbing and Steinbach is on the hunt for her own retail space.

Her business is one of several new ventures taking off Downtown despite the stormy economic climate, a phenomenon that’s not limited to this area.



Any time is the right time

Right now in the Twin Cities, within 25 miles of Downtown, there are roughly 2,000 new businesses being formed every month, said Patrick Boulay, president and CEO of startup resource New Business Minnesota.

“It’s a huge number,” he said. “It’s why we exist.”

That count includes everything from the weekend handyman service to the company looking to build a better heart valve, Boulay said, and the down economy isn’t slowing the boom.   

Though some banks have tightened lending, interest rates are down, startup costs and overhead are low and the social-networking age has made marketing cheap and easy, Boulay said. Entrepreneurs these days are technologically armed, unlike their counterparts during previous recessions, when Internet, cell phones, fax machines and other modern business tools weren’t on the scene.  

“The speed at which you can do things is remarkable,” Boulay said.

There’s also more “involuntary entrepreneurs,” people who have decided to start their own career after being laid off. Others are simply breaking old habits and looking for new opportunities.  

“When the economy starts changing, people start rethinking things,” Boulay said. “They take a look at old relationships and doors start opening.”

Jeffrey O’Brien, an attorney who oversees a business incubation program within his Downtown firm, Mansfield, Tanick and Cohen, said he’s seen an increase this year in startups looking for legal guidance.

“I think [the economy] has enhanced that, contrary to my expectations,” O’Brien said.

He said many of the people he advises have started their own consulting practices to become their own bosses or to fill a void during slow times at their fulltime jobs.

Ed Daum, director of the U.S. Small Business Administration’s (SBA) Minnesota district, said there’s been no shortage of loans for new businesses this year. Between April and May, the SBA awarded 519 loans totaling nearly $99 million. Of those recipients, 164 were new businesses. That’s a slight increase from the 158 startups that received loans during the same period last year, when 484 loans totaling just over $88 million were awarded.

“I’ve been with the SBA for a long time and I just think anytime is a good time to start a business,” Daum said.

As for today’s market, Daum echoed the advantages Boulay noted and added that rent is cheap and employees are plentiful.

Of course, getting started in a slow economy has its drawbacks, Daum said. Persuading thrifty consumers to spend on a new product can be tough. He said developing a solid business plan before a trip to the lender is essential.

Brad Ruiter, spokesman for the Minnesota Bankers Association, which represents 95 percent of the banks in the state, said a clean financial history is also important.

“If you’ve had financial trouble in the past, it’s going to be harder to get a loan, “ Ruiter said.

But, he said, lending statewide was up four percent in 2008 and one percent in the first quarter of this year.  



Using the economy

“We used the economy to negotiate,” said Brett Pederson, co-owner of new bar and nightclub Elixir Lounge at 332 S. 1st St. “I think that it was because of the economy that we were able to get this particular location.”

As Downtown businesses have closed or moved, property owners have been more willing to swing deals to fill vacancies, Pederson said. He said now is the time to find an affordable space in a great location.

The Elixir Lounge is Pederson’s sixth bar, so he had some experience before writing up the business plan, which he wrote around the location and demographics. He also had financial backing from a couple investors — the same guys who opened upscale nightclub Aqua a couple years ago.

“They’re the guys with the money and I’m the man with the plan,” Pederson said.  

The plan involved minimal build-out — basically a facelift that incorporated a new door, paint and tile work. The theme was 90 percent upscale cocktail lounge, 10 percent nightclub.

Marketing so far has been limited to social networking sites, fliers and word-of-mouth, but a broader strategy is in the works as the cash flows in, which it is. Pederson attributes that to three factors: good products, prices and service.

“I feel like people are still going out, they’re still spending money,” he said. “But they’re going to be a lot more conscientious about how they’re spending it and where they’re spending it.”

Pederson, who worked his way up from dishwasher in the restaurant industry, said he works a minimum of 60 hours a week doing everything from bussing dishes to bartending at Elixir to save on employee costs.

“You’ve definitely got to wear a couple hats,” he said.

Pederson said the new Twins stadium should be a boon for Downtown businesses, as long as they can figure out how to manage the additional traffic.



Doing what you love

Steinbach and her husband came up with the idea to start a bakeshop a couple years ago while serving in Iraq with the National Guard.

“We started with a list of 100 possible things we could do and we just started narrowing it down,” she said. “We ended up wanting to do something that one of us loved, so we could really put everything into it, so we ended up narrowing it down to baking.”

Steinbach started baking as a young girl in her grandmother’s kitchen and it has been a passion since. She even baked bread in Iraq.  

So after earning a marketing degree from the University of Minnesota, Twin Cities, in 2007, she immediately enrolled in a California culinary school. There, she spent about a year writing her business plan.  

“It’s kind of hard starting out,” “You don’t really know where to start, or what template to use, or what to put in there. For me the hardest part was forecasting sales.”

She initially wanted to open her own shop right away, but instead started selling once a month at the Mill City Farmers Market and on Wednesdays and Saturdays at Local D’Lish in the North Loop. She also takes orders at sweetsbakeshop.com. She rents a kitchen in Columbia Heights for all the baking.

The next hurdle is finding the right space for Sweets Bakeshop and the financing to buy and remodel it. She plans to do that this year, as long as customers keep lining up.

“My research has led me to believe that people are kind of trading down,” Steinbach said. “People that were going to a fancy restaurant and getting dessert there want something more inexpensive and accessible.”

She hopes her sweets will hit the spot. 

Reach Jake Weyer at 436-4367 or jweyer@mnpubs.com.