Owners of Traz pulling out all stops to survive
Tom LeValley is going all in. Besides pushing his pile of chips into the center of the table, he’s tossing in the gold watch, the keys to the car and the deed to the house, so to speak.
The co-owner of Traz Snow & Skate believes in the cards he’s holding, but he’s well aware of another quite real and unwanted possibility: His hand isn’t unbeatable. No one’s is, especially in an economic recession.
If running a small business feels an awful lot like playing Texas Hold ‘em, well, it is.
Mesa State College business professor Tim Hatten made the poker-playing comparison when discussing the risks business owners take to survive a recession.
And Grand Junction Area Chamber of Commerce President and Chief Executive Officer Diane Schwenke said never mind the recession, “Anytime somebody goes into business, it’s a gamble.”
LeValley knows. Boy, does he ever.
2010 has been a whirlwind of change and taking risks as he and fellow Traz co-owner Harold Martinez have tried to improve the store’s lot after an awful 2009. Sales, LeValley said, were down 25 percent last year when compared with 2008.
“When the profit margin’s only 7 (percent), that’s not too good is it?” he said.
Among the changes for Traz:
LeValley and Martinez have moved the store to a more visible spot in the Grand Mesa Shopping Center building at 2466 U.S. Highway 6&50 where Traz has been for the past five years. They spent $15,000 to make the move.
The new location is about one-third larger than the previous store.
They added Beach Street as a tagline to the store’s name, emphasizing the summer apparel they carry in addition to all things snowboard and skateboard.
They increased inventory, adding items for girls and women, whom they did not target previously.
They started a rewards program to help generate repeat customers.
LeValley went one step further in trying to ensure Traz would have the capital to reverse its fortunes. He sold the former home of Traz in the Eastgate Shopping Center, 2830 North Ave.
LeValley said he was the sole owner and saw that property as a source of retirement income, but a buyer closed on the property for $265,000 Tuesday. An agent himself for Century 21 Cole and Co. Realty, LeValley said the property was listed at a legitimate $349,000 two years earlier.
LeValley said he still owed about half of his loan on the North Avenue property, but he had a good lease with a good tenant, and he figured the setup would provide steady retirement income. Instead, the equity he had there will now go into keeping Traz viable.
“It is being sold ... to basically recapitalize this business, and hope that the future brings a better return and keeps us in business,” LeValley said. “We’re banking that business is going to improve, I guess. It is a risk (to do this). But if I don’t do it, the other end’s going to fall apart. I hope it wasn’t an error, and business is going to grow.”
Schwenke said Traz is far from alone.
“You see a lot of that, actually,” she said, adding the tight credit market has made it extremely difficult for small businesses to get loans, and “the majority of businesses in the valley tend to be small, with one owner and less than 10 employees.”
When loans aren’t available, business owners resort to measures such as taking out second mortgages or selling personal property, raiding their retirement funds and maxing out the limits on personal credit cards, she said.
“With credit tight, they turn to personal resources,” Schwenke said.
Taking such large risks, she said, reflects the mentality of “if we can get through this ... there will be reward on the other side,” and the business will be positioned stronger when the economy does improve.
Hatten echoed the sentiment, saying, “I think the reason entrepreneurs do that is it’s not really an escalation of risk to them, it’s a belief it’s going to pay off in the end.”
“During a down market is a prime time to invest if you have the capital,” he added.
That’s what Traz is doing, and Hatten said the measures being taken amount to a gut check.
Returning to the Texas Hold ‘em analogy, Hatten said sometimes folding makes sense and is the right thing to do.
On the other hand, he added, “How many people win big by folding?”