As Whatcom economy recovers, business startups return

After enduring a roller-coaster ride the past few years, the number of small businesses has bounced back in Whatcom County.

Data from the Washington State Employment Security Department shows a significant jump in local employers between 2013 and 2014. Whatcom County had 6,347 employers in the first quarter of 2014, an increase of 198 compared to the same period in 2013. This comes after years of ups and downs as companies tried to survive the turmoil following the economic crash in the fall of 2008.

Last year’s growth was with businesses that had fewer than five employees — the county added 225 of them. During the economic downturn between 2009 and 2013, the net gain was only 100 for local companies with fewer than five employees.

It continues to be more difficult for other small-size Whatcom County companies. In 2014 firms with 5-9, 10-19 and 20-49 employees still hadn’t bounced back to 2007 levels, the start of the recession.

The recession was particularly hard on small businesses, said CJ Seitz, director at Western Washington University’s Small Business Development Center. A lack of operating capital during a time of curtailed business lending weighed heavily on small businesses. The magnitude of this last recession also led to a lower tolerance for risk, such as starting a new business or expanding.

“Maintaining business health during the recession demanded both creative solutions and adherence to good business practices,” Seitz said.

The past recession was a double-whammy for companies of any size, creating a climate where taking a risk seemed unwise. At the same time that sales slowed for companies, getting access to business loans became extremely difficult because many banks, particularly community and regional institutions, were in financial trouble. According to data from the Federal Deposit Insurance Corp., 297 banks failed in 2009 and 2010; last year the total was 14.

The improving business lending climate and the fading memory of 2008 has led to a burst of startup activity and expansion. Data is not yet available for the first quarter of 2015, but Seitz said the local SBDC office has seen more clients coming in with questions about business lending and hiring.

“Additionally, we are having more conversations with clients regarding long-range planning and succession,” Seitz said. “This tells me that our clients are more certain of their economic future.”

When Cinnamon Berg and Jamison Rogayan were talking about opening a cafe in 2014, the deciding factor was that they were ready to do it, but it helped that the economic climate was right, Berg said. They opened Cosmos Bistro in the Herald Building two months ago.

During the process of starting a business, Berg and Rogayan worked closely with the SBDC. When it came time to get financing, it came together fairly quickly with Coastal Community Bank of Everett, Berg said.

“It (getting financing) was much easier than a few years ago,” Berg said.

The first two months of business at Cosmos have been a whirlwind experience for Berg, with higher-than-anticipated sales. The bistro recently added employees and started serving breakfast on the weekends. Berg said they now need 10 employees per shift, up from six when they first opened.

“Both of us felt like it was going to work and we’re happy people are digging our food,” Berg said.

Whatcom County was a little slower than some areas to bounce back in business growth, partly because of the economic makeup of this area, said Hart Hodges, director of Western’s Center for Economic and Business Research. With several public sector institutions like Western among Whatcom’s largest employers, it’s taken longer to get back on track in a recovery that’s being led by the private sector.

Hodges expects company growth in Whatcom County to continue to be led by the small startups and micro-businesses, especially ones that can take advantage of the flexibility of small size and get capital.

The number of mid-size firms in the 50-99 employee range also took a hit in 2008 but has seen some growth coming out of the recession, rising from 155 in 2011 to 168 in 2013 (it remained at 168 last year).

TriVan Truck Body of Ferndale is one mid-size company that was initially hit by the recession and is now in growth mode, said co-owner Cason VanDriel. Seven years ago the company had around 50 employees and had to lay off about 10 people as orders dipped for its custom trucks. Last fall the company participated in a national manufacturing day event, providing tours for students and actively trying to find more employees to add to its 85-person workforce.

VanDriel said the key to getting through the recession was a diverse client base. The company was fortunate, he said, that when one client was holding off on orders another happened to be adding trucks. TriVan clients over the years include those working in the harsh weather near the Arctic Circle, movie production companies, mobile butcher shops and the Red Cross.

Surviving as a business also came down to the basic axiom of making sure the company had more money coming in than going out.

“You really have to keep your eye on the ball and mind the small things,” VanDriel said.

This story was originally published June 6, 2015 at 10:44 PM with the headline "As Whatcom economy recovers, business startups return."