Going With The Flow

By Jaquetta White
Business writer

Lisa McKenzie didn't know what to expect when she returned to New Orleans about a month after Hurricane Katrina to try to salvage the business she has operated in the Ernest N. Morial Convention Center since 1997. She had seen news stories about the Convention Center's turn as a makeshift assembly ground and shelter for the rescued but had been unable to gain a clear picture of what had become of her company, Rhino Business Services.

What she found was nothing, really. At least nothing salvageable. Laser printers, copiers and even staples met their end in the Convention Center office in the days following Katrina. Within a few days the company that had worked to help conventioneers meet last-minute deadlines by vowing: "If we don't have it, we can get it," was incapacitated. What's more, not only was the firm's physical location destroyed, its customer base was obliterated.

"After the storm, we discovered that we were going to be out of business for a long time," McKenzie said.

So instead of waiting for the Convention Center to reopen and hoping for convention business to return to town, McKenzie did something many small-business owners consider laughable. She packed her business in mothballs and moved on to a new project.

While shutting the doors on a business, even temporarily, is hard, at least one expert says it is a necessary step toward small-business recovery in New Orleans.

"The hard thing for small-business owners to do is leap out of the mindset that it's going to come back," said Dan Alesch, a retired professor at the University of Wisconsin Green-Bay who has studied the effects on small businesses after a disaster and written a paper about his findings.

"Small businesses just aren't as robust as big businesses. The people that do well are the people who step back and say 'I can't keep doing that anymore. There must be a new opportunity.' "

That's exactly what several local entrepreneurs including McKenzie have done. Realizing that business as usual wouldn't work post-K, they've abandoned the usual way of doing business.

After learning that all of the major trade shows that visit the city each year were canceled, McKenzie knew there would be no way to keep her staff of about 15 employed until that business returned. Almost immediately she began to brainstorm ways to keep them together and employed and herself busy.

"With just major destruction all around, I looked at my husband and I said there's going to be this tremendous need for these portable storage devices," McKenzie said. "One night I couldn't sleep and I got on the Internet and researched portable storage."

Within a month, she bought warehouse space and opened a SmartBox franchise, a company completely different than Rhino.

Experience has taught Alesch, however, that McKenzie, as a business owner operating in a post-disaster city is the exception, not the rule. Most businesses do not adjust properly to life after disaster, he said.

"People like to retreat to what used to be," Alesch said. "Recovery is not trying to rebuild what once was. What you try to do is rebuild the new reality; something that becomes viable."

Part of the problem, said Tim Williamson, is that small-business owners often are trained in one area and aren't flexible.

"That's the delineation between an entrepreneur and a small-business owner," said Williamson, president of The Idea Village. "The ones that are refocusing are the ones that are going to prosper in a new situation."

Added Alesch: "A lot of small-business owners aren't business people, they're cabinetmakers. They're hairdressers."

In essence, he said, they are sometimes so wedded to the service they provide that they are unable to see what the market actually demands.

McKenzie said her firm is no longer dependent on the city's convention business.

"It's nice not to have our eggs all in one basket," she said. "When we evacuated, we thought how crazy we are to rely on that industry given how volatile it can be."

Businesses that rely on tourists aren't the only ones affected. Those that generate revenue from the disposable income of residents have found themselves in a pinch as well.

"After a disaster, you don't go to fancy restaurants, you don't buy furs," Alesch said.

"People fix their houses."

That's the conclusion Aaron Wolfson drew as he prepared to reopen Savvy Gourmet, the cooking school he owns on Magazine Street. The company, which also includes a retail store, had its soft opening Uptown just before the storm in August.

"We were barely open a couple of weeks. We hadn't advertised we were open and hadn't yet had classes open to the public," Wolfson said.

In late September when Wolfson returned to New Orleans, he found that the building had sustained little damage and received no water. But he knew a cooking school wouldn't survive in a city populated by the military and Federal Emergency Management Agency workers.

"At that time there was not a big demand for cooking classes," Wolfson said.

There was a demand for places to eat, however. Wolfson had never planned to add a restaurant to his business after having been involved in other restaurant ventures. Despite his misgivings, that's exactly what he did.

"There was a community need and there was a business need. We had to find the quickest way to cash flow and that was to serve food for sale," Wolfson said. "We really didn't want to do that at all. And now that we have it, we really can't stop."

The restaurant has grown from 35 visitors on its opening day to more than 100 a day. More than 120 eat there for Sunday brunch, Wolfson said.

 Enrollment in cooking classes has picked up since September, Wolfson said. Classes now are booked through April. But the restaurant will remain a part of the Savvy Gourmet business plan, because it has generated an unexpected bonus.

 "Our original business model was to use the classes to sell cookware," Wolfson said.

 "One of the fortuitous byproducts of the whole thing was we increased our foot traffic through the door by 10 times by having lunch. We're increasing our opportunity. It's really helped our sales."

 Andrew Herrington, owner of New Line Environmental Systems LLC, an erosion-control business, also found that going into a new business after the storm has helped his company. With the erosion-control business in low demand after Katrina, Herrington decided to take advantage of the demand for demolition work. He saw it as a way to keep employees working and cash flow circulating during an otherwise uncertain time.

 "We didn't exactly abandon our business model with erosion control. We just shifted employees," Herrington said.

 Herrington said he doesn't think the fairly new company could have remained profitable otherwise.

 "I would tell small-business owners to stay flexible and if they see an opportunity work on it and see if you can make a run for it," Herrington said.

 The risk in not doing so, Alesch said, is business failure. He estimates that small businesses in the metro area will continue to close for the next 10 years or so.

"Sometimes businesses can go on for four or five years. It depends on how much money the owner has to continue pouring down a rat hole," Alesch said.

 In that time business owners are likely to exhaust their savings and get loans that they eventually are unable to pay back. It could take years for the effects to become fully realized.

 "It depends on the individual. How much money they've got. How much they're willing to go into debt. And how blind they are to reality," Alesch said. "But I bet it wouldn't stabilize for about a decade."

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