Stitches

Back From the Brink

There’s more than one way to sink a shop – from unavoidable and unexpected disasters to everyday business blunders – but these stories of crises averted share a common thread: the owners’ passion and determination to bounce back – no matter what

Dave Filip knew the flood was coming. He could see the waters of the Cedar River creeping up the parking lot of Bimm Ridder Sportswear in Cedar Rapids, IA, as the June day wore on. Earlier, city officials had alerted the shop that his factory building might be soaked in an inch or two of water, so Filip and co-workers prepared by clearing items off the floor to keep them from getting damaged.

No one expected the 2008 flood to get as bad as it did. “It was just an epic flood,” Filip says. “It flooded 10 to 15 blocks each side of the river. Our facility was four feet above street level, but we still had eight feet of water. Everything was under water.”

The last thing Filip did before workers evacuated was to grab the shop’s computer servers, on the advice of his IT staffer. “Had we not done that, I don’t know if we could have gone on after,” he says.

Filip wouldn’t see the inside of the shop again for another week, and when he did, it was worse than he could have imagined. “It just looked like someone had filled the place up and swirled all the water around.”

Bimm Ridder’s machines – 40-plus embroidery heads and three automatic screen-printing presses – were caked with mud and grime. Inventory was strewn about the shop, saturated in contaminated river sludge, ruined. Then there were all the items that didn’t belong, most memorably a mounted deer head that had floated in from 15 miles upriver.

“We were just in shock initially, deciding if we were even going to try to salvage the business,” Filip says. But Filip and the other partners in Bimm Ridder decided not to give up on two decades of decorating. “It’s what we know, and it’s what we love,” he says.

The screen-printing presses were shipped back to the manufacturer, but the embroidery machines were a total loss, and the shop hadn’t been able to afford flood insurance to buy replacements. The factory building couldn’t be salvaged either. Nearly debt-free, Bimm Ridder took out a million-dollar loan to get set up in a new location with new inventory, new computers, new furniture and refurbished equipment.

It took more than five months for the shop to get back into production, but Filip says customers didn’t even notice a blip in service, because Bimm Ridder contracted out its orders during the rebuilding phase. The shop never replaced its embroidery machines, however, continuing to outsource its stitching needs.

Since the flood, Bimm Ridder has grown every year, with sales of around $3 million, close to double what they were six years ago, Filip says. “We’re bigger and stronger, and we’ve become more efficient throughout our entire operation. A lot of good came out of it once we got through the shock. We’re prepared not just for emergencies, but for day-to-day business.”

Like Bimm Ridder and any other type of business, decorators encounter grave challenges such as natural disasters, possible bankruptcy of a family business due to mismanagement or the death of a key executive. You’ll learn how to handle situations that are potentially life-threatening to your firm – and how other decorators have bounced back from almost having to close their doors.

Cover Yourself

After decades in the embroidery business, Joyce Jagger has more than her share of wisdom – most of those lessons learned the hard way. The author and trainer known as The Embroidery Coach has devoted herself to keeping other shops from repeating the mistakes she made over her long career, one of which is not carrying enough business insurance.

Jagger learned that lesson back in January 1994. It was late on a Saturday night during a heavy snowstorm. Jagger had just left her shop in Endicott, NY, happy to have closed out her bookkeeping for the previous year, ready to send it all to her accountant. Once she was home, she received a call from the police department. The roof of her embroidery shop had caved in under the weight of all the snow. “It almost literally sank me,” she says. “I didn’t think anything like that would ever happen,” she says.

The collapsed roof destroyed everything in Jagger’s office, including her computer. Luckily, her embroidery equipment and inventory were spared, but the shop still was closed for three months. Right after renovations were complete and the shop was poised to reopen, Jagger suffered another devastating setback: She fell and broke her hip on the way out of church, keeping her away from the business for another three months. “It was a total disaster, but I was determined to come out of it, and we did,” she says.

It would have been a lot easier to prevail, however, had she had enough insurance to cover the income lost while her shop was out of commission. Business interruption coverage is something most shop owners don’t know about, or don’t consider seriously, since such plans generally don’t come cheap, says Jimmy Lamb, an industry veteran who weathered many hurricanes when he ran a shop along the North Carolina coast. But, he adds, if it’ll take half a year to get your equipment back up and running, “How do you eat for six months?” With business interruption coverage, shop owners ensure they’ll be able to put food on the table and pay the bills while they get back on their feet, says Lamb, currently the manager of education and communications for Sawgrass Technologies.

Your insurance policy should cover everything it takes to run the business, not just the price of embroidery equipment, Lamb says. Factor in the cost of all your software – for digitizing, bookkeeping and productivity – as well as any stock designs you may have purchased, he says. For home-based shops, remember that homeowners’ insurance isn’t likely to cover business equipment.

The best thing to do is review your coverage with your agent and figure out exactly what you have and what you don’t have, says Jerry Ford, a New Jersey insurance agent who helped many clients through the aftermath of Hurricane Sandy. “Generally speaking, there’s always a way to tailor your coverage to your needs, but you have to take the time to sit down with your insurance agent,” he says.

All in the Family

When his first-grade teacher asked him what he wanted to be when he grew up, Luke Sanders had an answer at the ready. His classmates wanted to be firefighters or astronauts, but the Texas boy never dreamed of shimmying down a fireman’s pole or taking one small step for mankind. Instead, he wanted to walk in his father’s footsteps and become a small-business man, taking over RiverCity Sportswear, the San Marcos, TX, company his father started in 1978. “The company is older than I am. I grew up in it,” he says. “It means everything to me.”

But he almost didn’t get the chance to live his dream. Sanders’ brother, 11 years his senior, took over RiverCity while Sanders was still in college. Thanks to the recession and some poor business decisions, the elder Sanders brother nearly ran the shop into the ground. In 2007, RiverCity had bought a local competitor and its building, increasing overhead and adding 20 new employees. Then, the economy collapsed, leaving RiverCity with large banknotes and revenues that had plummeted by about 50%. Sanders’ older brother was looking for a way out, and Sanders was happy to oblige, buying the family business on the cheap. “I’m the one who cleaned up the mess,” he says.

Since Sanders took over in 2009, RiverCity’s gross revenue has tripled, going from $2.7 million that year to $8 million in 2013. This year, the shop is on-pace to bring in $10 million, Sanders says. RiverCity owns three companies in San Marcos, employs 75 people and operates more than 40 embroidery heads. “We’re kind of a go-to shop,” Sanders says, noting that the recession forced RiverCity to streamline and cross-train. “You find out what’s really necessary and what’s not.”

RiverCity’s tale has a happy ending, thanks to a new beginning under Sanders, but most family businesses don’t fare so well in the long run, experts say. Only about one-third survive the transition from one generation to the next, according to Pete Walsh, owner of Phoenix-based Peak Performance Coaching. In addition to business coaching, Walsh oversees a website that provides family businesses with free tools and videos to help them succeed.

Walsh says family businesses tend to make three mistakes when developing a succession plan: not starting early enough, not communicating about the process and not creating a formal training plan. “Successful families put the potential successor through a rigorous assessment and training process,” he says. “Today’s business climate demands highly effective leadership, and families shouldn’t risk all of their hard-earned assets on the school of hard knocks for their new leader.”

A good succession plan is a five- to 10-year process, he says. “Too many families wait until something dramatic happens that forces their hand to make a decision,” Walsh says. “Then the family and the new leader are trying to make a successful transition during extremely stressful times – a recipe for disaster.”

When to Walk Away

Sometimes the most important thing to know is when to walk away. Steve Freeman, owner of Qdigitizing (asi/700501), made that difficult choice in 2003, after a decade and a half of running his own production company.

Since the late 1990s, he had been losing customers as the Internet gained traction and digitizing migrated overseas, but it was the tragic events of 9/11 that really precipitated the decline, with sales dropping nearly 60% in one week. It didn’t help that Freeman had taken out a line of credit to buy new equipment shortly before the tragedy. He ended up using the money to make payroll because he didn’t have the heart to lay off his staff. When business eventually picked back up, Freeman still needed new equipment, but no longer had the funds. “I felt like I was working for the bank,” he says.

Freeman managed to keep the shop going for a few more years, but he was no longer having fun. “We were surviving, but I wasn’t enjoying it anymore,” he says. “I felt like after 15 years, it shouldn’t be so hard.”

So he sold his shop, broke even and moved on. After bouncing around in various industry jobs, he had the opportunity to be a business owner again. In 2008, he started Qdigitizing, focusing on the part of the embroidery business he’s always enjoyed. “I’m no artist. I can’t even draw two stick figures, but I’m a really good digitizer,” he says. “I love the fact that I can produce something beautiful and artistic without being an artist.”

The new business has been a success, with sales increasing every year, but more importantly, Freeman says, he loves his job once again. “Sometimes you have to recognize when enough is enough in order to reinvent yourself,” he says. “When I reinvented myself, I took the parts that I liked and left behind the parts that I didn’t like.”