Recession viewed as opportunity by savvy entrepreneurs

After five years at heavy hitter Yates Construction, Ray Waddell decided to leave and start his own electrical company. Though Waddell had dreamed of starting his own company for a while, the current downturn provided the opportunity he was looking for.

“We just felt the timing was right with the economy being down and us being able to take advantage of the timing,” Waddell said. “We’re leveraging relationships at a time when a lot of people won’t make it, but we felt that if we started now and did a great job of leading and positioning in this economy, it’ll help us down the road to establish ourselves as a successful company.”

Waddell joined with friend Victor Garcia to form CEC Electrical Inc. in June, a minority-owned electrical firm based in Fort Worth with plans to purchase a few small, struggling local companies with solid customer bases – something that wouldn’t have been possible were the country not in a recession, he said.

And Waddell isn’t the only North Texas entrepreneur who sees the recession as a good time to start a business.

More and more, entrepreneurs are crawling out of the woodworks, seeking loans and a place in today’s market so they can establish themselves while the recession continues and get into position before the tide turns.

Leaders of Fort Worth’s Village Homes are trying their hand at a new business called HD Homes, a newly established arm of Village Homes that will offer homes at a lower price point than Village (or the company’s top-of-the-line V Fine Homes) can.

Michael Dike, president of HD Homes and a partner at Village Homes, said lot prices made the new venture too good to pass up.

“With lot prices so low, especially in some areas outside 820, we’re picking up lots for dirt cheap and that allows HD to offer them at a lower price point,” Dike said. “We can add some of the modern amenities and quality design that Village is known for, but HD can offer it at a lower price point, which will really make the homes stand out in the way they look at feel.”

Dike said HD homes will range from 1,700 to 2,600 square feet and run from $150,000 to $350,000, thanks to cheap lots picked up in north Fort Worth and northeast Tarrant County – some for 30 cents on the dollar. HD Homes also has built a few lower price point townhomes in Lower Monticello. Those homes are priced in the high $220s (typical Lower Monticello homes are above $400,000) and one has a pending contract.

Jim Harris, partner at HD Homes, said Village wanted to grow and the recession gave company leaders their chance.

“We want to grow and we needed some room to do just that, and suburban areas was the key given the prices on lots,” Harris said. “There’s a big enough margin that we can get in there and build a quality house for a good price.”

In fact, out of the 68 district offices of the Small Business Administration throughout the nation, the Dallas-Fort Worth office is No. 8 in size, as measured by the number of small businesses within the district, with 649,000 small businesses in the area. But according to Herbert Austin, district director of the Small Business Administration’s Dallas-Fort Worth office, the local office is ranked as the No. 2 producer of loans in the country, having recorded $436 million in lending since the start of Fiscal 2009, which was Sept. 1, 2008.

Guy James, senior vice president of Community Bank, said he has seen a few start-up loans recently, and the key to their success is all in the financial statements.

“The key [is] having the financial statement to support it,” James said of the requested loan amount. “… The key is getting that stabilized income, that’s where proper borrowing really comes into play. Typically, a two-year average from the business tax returns reflecting a two-year income to support the loan is critical.”

Harris said his company is counting on the current downturn – at least in real estate – to continue for the next few years, which means an emphasis on distressed property.

“This is going to be the reality for the next couple of years, and this is the time we’re building up to be able to offer that supply and that product when the market turns around,” Harris said.

And rising unemployment also is a help, Harris added, saying HD Homes recently hired Eric Zimmermann, who worked at Centex Homes for 10 years, as its manager of construction and purchasing operations.

“There are good people available right now,” Harris said. “There’s good talent and as companies continue to re-trench and become diverse, we’ll see more of that. So we jumped on the opportunity to bring in Eric now to prepare us for when the market comes back. It’s all in the planning, right?”