Chicago Small Business Survives Despite Struggles

Chicago Small Business Survives Despite Struggles
Shawn Smith is owner and creator of owner and creator of Shawnimals, a small business in Chicago. (WBEZ/Kristin Moo)
Chicago Small Business Survives Despite Struggles
Shawn Smith is owner and creator of owner and creator of Shawnimals, a small business in Chicago. (WBEZ/Kristin Moo)

Chicago Small Business Survives Despite Struggles

There’s a lot that’s wrong with the economy these days. Unemployment’s at a 25-year high. And the credit that could help boost payrolls remains tight. Not everybody agrees on how to reverse the downturn, but there’s no doubt that small businesses—the self-employed entrepreneur to a company with fewer than 500 employees—must play a role.

As part of our ongoing series Chicago Matters: Beyond Burnham, WBEZ’s Kristin Moo explores the City of Chicago’s ability to nurture small business.

The message comes straight from the top.

OBAMA: Small businesses are the heart of the American economy. They’re responsible for half of all private sector jobs. And they create roughly 70 percent of all new jobs in the past decade.

That pep talk certainly rings true in the Midwest. Over the past decade, it’s added small business at a decent clip, with Illinois ahead of its neighbors.

Still, the recession is putting pressure on local budgets. In Chicago, some business owners say the city’s passing along its pain to them. They say fees, regulations, and fines are clogging the system…making it harder to do business here.

Robert Gomez owns the Subterranean, a bar and music venue in Chicago’s Wicker Park neighborhood.

MOO: How would you characterize Chicago as a place to do business?

GOMEZ: (laughs, sighs) Um, yeah, I guess that warrants a sigh. It feels like as soon as the city got this giant deficit, we were responsible for it.

Take the Subterranean, which occupies a 3-story building.

GOMEZ: They have us get a liquor license for each floor, and we had to get an entertainment license for each floor. And now, the new thing is that you have to pay 2 years worth of licenses. All together, that’s $19,000 that I have to pay at one time. At what point is the bleeding just ridiculous?!

On top of that, Gomez says business owners feel like they’re being nickel-and-dimed as city inspectors get more aggressive.

GOMEZ: One gentleman had a doorway, and that door is required to be a fire-grade door. And it wasn’t. He’s been in business 10 years, and in 10 years, every inspection, no one’s even mentioned it. And in his last inspection suddenly that’s a ticket, that’s a fine.

STEIN: I don’t think anybody likes to pay additional fines that they hadn’t expected to pay from the beginning, and we try to capture that from the beginning, when they apply for their license.

Efrat Stein is a spokeswoman with the Chicago Department of Business Affairs and Consumer Protection. She says there’s no connection between the city budget and business citations.

And experts say there’s no proof that business fees or tax burdens are a deal-breaker for entrepreneurs looking to set up shop in this city or elsewhere.

Meanwhile, there are signs that Chicago is holding its own.

In various measurements of small business health, the city and the state of Illinois generally rank around the middle.

The sheer number of businesses is one reason the city issues licenses in 2-year intervals—Stein says the idea is to stagger renewals and reduce hassle for business owners.

WORKSHOP: Things that we check for. Primarily, are you displaying the proper business license to operate…

The department also tries to head off fines by holding free workshops to educate current and prospective business owners on the steps to take… and boxes to check… from traversing the worlds of small business loans and marketing down to the nitty-gritty of how to prepare for inspections.

The workshops have seen a 150-percent jump in attendance in just this past year. After all, Stein says, they’re a great deal.

STEIN: because many of these workshops, if you were to go outside, and seek legal counseling or seek consultant to a website, you can find many resources that the instructors will tell you how to go be creative and crafty and save money.

And the crafty and creative might also learn to turn a profit.

SMITH: I’m Shawn Smith, I’m the owner and creator of Shawnimals. We’re a character design studio that makes a variety of goods, plush toys, character branded merchandise, and we also license that stuff out for a variety of different products.

Products like the video game Ninja Town… where Business Ninja carries a cell phone, and Consultant Ninja waves a pie chart.

These guys have nothing on the real-life folks who helped Smith and his wife Jen expand Shawnimals from a do it yourself side project to a full-fledged business. Like the Chicago City Treasurer’s Office. In 2006, Smith’s plan won second place in the department’s business plan competition.

SMITH: We had this business plan, that we had written, that I thought was fantastic. And it did talk about what we did, and did fairly accurately explain what we made. But it certainly could have used more polish in certain areas, and there was no mention of financials to be seen. after we re-worked it for the purpose of the business plan competition, we realized we should have done it a long time ago.

And it wasn’t just the city that that gave Smith’s business a boost. He tapped into a legal clinic at the University of Chicago that provides free assistance to entrepreneurs.

And just down the hall from Shawnimals’ headquarters in an industrial building on the city’s near west side is a state-sponsored small business development center.

It’s cheaper rent and organizations like these that have kept Smith from setting up shop in New York or San Francisco, where even he says his offbeat characters might be more at home.

SMITH: Creatively it might make more sense, but what are we giving up to move to one of the coasts when we have access to all that great stuff right here in Chicago?

Smith says all the help he’s gotten pays off for the city, too.

SMITH: You know, we’re here. We live in Logan Square, we have our office here. So if we can bring people into Chicago for that purpose, and know that, ah, Chicago’s a cool, creative city, that’s awesome, there must be something going on there. We’re part of a growing community of people not just doing designer toys, but doing things that are artistically interesting, and putting Chicago on the map.

HEWINGS: I think the city has been far more proactive in terms of economic development than the state.

Geoffrey Hewings heads the Regional Economics Applications Laboratory at the University of Illinois at Urbana-Champaign. Hewings says when it comes to economic recovery, Chicago can’t go it alone.

HEWINGS: People are crossing county boundaries, they’re crossing community, city boundaries. This is not a city problem. This is a region-wide problem. And I think part of the problem, when you have over 300 communities within the seven-county metro area, it’s really hard to enact a degree of coordination.

One goal could be to loosen up capital for entrepreneurs looking to start a business or expand. Hewings says that may be tougher in the Midwest, where investors seem to hold their cash more closely than in other parts of the country.

And at this critical moment as the Chicago metro area struggles with unemployment higher than the national average—there should be no question who should lead in the push for more investment, and more jobs.

HEWINGS: Should it come from the state, should it come from the city, or should it be something the business community and the financial community take the lead? My attitude is all of the above.

How well they all work together may be a measure of the Chicago region’s ability to revive and thrive in the years ahead.

Resources for Small Business:
Chicago Department of Business Affairs and Consumer Protection
Chicago Small Business Expo
Illinois Department of Commerce and Economic Opportunity
U.S. Small Business Administration
Institute for Justice Clinic on Entrepreneurship
Chicago Community Ventures