When a Hispanic supermarket in Chicago Heights added a take-out counter with ready-to-eat food and expanded its advertising to English-language suburban newspapers, sales rose 40 percent.
Sureia Martinez, the owner of La Loma, admits it was a lot more than she expected, but it was not the only surprise.
“I wasn’t expecting that I’d be working so much physically that the store would begin to suffer,” said the the 53-year-old former assistant manager at a meat processing plant.
“I was the chief butcher, cashier and cook. Something needed to change.”
So Martinez hired an experienced office manager to do back-office work such as ordering groceries and training new employees. The office manager’s salary: 15 percent of the first year’s profits.
“No matter what it cost, this was cheaper than not being able to concentrate my time on improving the business with new products and services,” she said.
Like Martinez, many Chicago area small-business owners are finding that trying to boost revenues can be tricky.
On one hand, increased sales may bring economies of scale, bulk prices for commodities used and welcome new customers. But it also may entail unanticipated headaches: finding additional money to pay for the extra goods or services; hiring, training and managing more employees; and finding some spare time to strategize.
Linda Learn, the president of Corporate Identity Inc., a Barrington-based company that sells products with corporate logos, is also familiar with some of the headaches of increasing sales.
“If you have a big job and the suppliers don’t know you, you have to give them cash upfront for materials,” said Learn, adding that Corporate Identity, whose annual revenues are about $3 million, invoices daily.
When she decided to expand her business, some of the jobs were so big she took a commission on them instead of doing all of the work herself, she said
“I’d let the manufacturer sell for me. As soon as I could afford it, I’d pay for the product and then resell it. It was a way of getting work from the client, getting to know the client and building up my cash flow,” Learn said.
Consistently meeting an increased payroll plus additional workers’ compensation and professional liability expenses are the greatest obstacles to small-business expansion, said Gwen Duncan-James, who owns Gareda Diversified Services Inc., a Calumet City-based home care and nurse registry.
Twenty-two years ago, it started with four workers. Now there are about 1,800 employees.
“In the beginning, I could borrow $5,000 from friends to meet payroll and repay it when the checks came in,” said Duncan-James. “As we grew, we couldn’t go back to friends to ask for the thousands of dollars needed to keep going.
“We couldn’t grow without procuring more substantial contracts, yet contract procurement meant having the ability to finance our expansion.”
She approached several banks before being granted a line of credit by South Shore Bank. In the meantime, to help finance growth, Duncan-James took on outside employment and deferred her Gareda salary.
Martinez used Governors State University’s Small Business Development Center, which provides free help for small-business owners. This includes assistance in applying for Small Business Administration loans, as well as student business consultants to review business plans.
Found help quickly
Like Martinez, both Learn and Duncan-James hired experienced managers as soon as they could.
Many small-business owners usually balk at this suggestion because of the extra cost, said Tucker Kennedy, director of marketing communications at Peoria-based Illinois Manufacturing Extension Center, a not-for-profit small-business consultancy.
“There’s a tendency for employers to say, `I’ll manage 100 employees just like I managed 10,'” he said. “It can’t be done. The bigger you get, the less time you have for innovating and planning.”
Learn didn’t need any convincing. She restructured her business around a manager and bookkeeper “the minute I could afford it,” she said. “That got me out on the street making calls, seeing my customers, how they reacted to new products and explaining things in person. That was a much better use of my time.”
Other problems relating to new customers and increased sales are not as easy to solve, the small-business owners say.
“When I started my business, I anticipated most problems, but I didn’t expect business to be very busy one day and dead the next,” said Learn. “That makes hiring new employees for extra business a real juggling act.”
She hires part-time workers, who can work a few hours weekly, when needed.
A detailed office procedures manual, written by Learn, allows her to be out of the office selling without worrying about whether these part-time employees are following procedures back at the office.
At La Loma, more customers means more pressure to estimate precisely how much prepared food will be purchased on a given day, so that there is no perishable food left at closing.
“Once you offer a new item to customers, you can’t run out,” said Martinez, who is considering investing in a double stockpot.
She has been running out of tamales menudos [tripe soup] recently using only one 50-gallon container.
“We’ve asked customers to call so they won’t be disappointed,” she said.
For Duncan-James, increased business meant the need for more office and warehousing space.
“Having adequate workspace for everyone became like a game of musical chairs,” she says.
Although these needs were foregone conclusions, having the space built to custom specifications wasn’t, she said.
“I thought to build you needed more cash than we had on hand,” she said. “My contractor showed me that I could build and have what I wanted for less than half of what it would cost to rent and renovate.”
She financed a construction loan, underwritten by the SBA and the now-defunct Beverly Bank, for a 10,000-square-foot corporate headquarters and warehouse complex in Calumet City in 1997.
“It was one of the most prudent decisions I’ve made,” said Duncan-James. “It gave us more room to thrive and grow.”
Growth not for everyone
Increasing sales is not the right strategy for every company, said Russ W. Rosenzweig, director of the University of Chicago’s New Entrepreneurs Program at Graham School.
“Many companies take it as gospel that they must grow,” he said. “Why? If you’ve created a successful small business that employs a few people, generates a nice income and makes you happy, perhaps it would be better to focus on “getting rich slowly” by growing in a slow, manageable, stress-free manner.”
Martinez, who recently decided not to add a second La Loma location, agreed.
“You don’t want to grow so much that you lose what makes you distinctive,” she said. “I put the brakes on some growth to preserve what we have.”
