Smith, McCarty quoted in Wall Street Journal article

Wall Street Journal
By Diana Ransom

August 27, 2009

When Sarah Pace, the founder of Brooklyn, N.Y.,-based caterer Rabbit Mafia, wanted to devise a dining concept that would appeal to hungry, cash-strapped New Yorkers, she knew she’d need help. Pace’s plan was to revive the supper club, a Depression-era tradition that draws on chefs, bar tenders, musicians, promoters and a critical mass of popularity to gain traction in the community. Fortunately for Pace, the idea appealed to a lot of her friends, too.

Diners at Pace’s parties, which are held at least once a month at various Brooklyn eateries and event spaces, typically pay about $26 to $30 for a seat at her giant table. “It’s kind of like Thanksgiving dinner with a bunch of people you don’t know,” she says.

It might be more expensive, too. Feeding roughly 30 people three courses and plying them with cocktails, as well as entertainment for an entire evening, isn’t cheap. In the interest of keeping the entry fee low, Pace tapped into her network of friends and business contacts.

For help in the kitchen, Pace lassoed Suzanne Barr, a chef and the founder of Brooklyn’s Sweet Potato Bakery. She also regularly drafts a musician friend — preferably one with an album to promote. At Pace’s most recent event, which took place last week, the Brooklyn-based business incubator and event space Green Spaces offered to host the club at in its offices for free. A friend helped out with marketing. Vodka maker 44° North volunteered to prepare cocktails.

Rabbit Mafia’s Sarah Pace (pictured right) and Suzanne Barr from Brooklyn’s Sweet Potato Bakery team-up to cater a recent supper club. (Photo by T.I. Williams)
Teaming up is not a foreign concept to start-up business owners like Pace, who often have less capital and fewer resources than larger, more established firms. However, as the economy continues to soften, many small businesses — even those that have been around for decades — are not only trading services, but also combining forces, says Jeffrey Carr, the executive director of New York University’s Berkley Center for Entrepreneurial Studies.

According to the National Small Business Association’s mid-year Economic Report released in July, 27% of business owners surveyed said that they’re planning to use strategic alliances to expand their businesses over the next year.

That’s the idea behind Denver web technology company Akavit’s recent business trade-off. Rather than funneling thousands of dollars into an advertising agency for re-branding and a public relations firm to peddle its name, Akavit worked out bartering deals with its ad and PR firms, in which it will build their web sites in exchange for their services. Building a single web site can cost Akavit roughly $30,000 and take the firm as long as six months, but Akavit president and founder Rob Davis says the exchange is worth the company resources. “What we have them doing for us, we would have to pay an outside agency to do or hire someone to do it internally,” he says. “We are proactively helping grow business for ourselves by developing our brand without incurring the added costs.”

For other business owners, collaborating is more a matter of playing to their strengths. After witnessing a 50% drop in January sales this year, Erin Smith, the founder of the Stitch Smith, a custom embroidery and screen print apparel company in Greenwood, Ind., teamed-up with Susan McCarty, the founder of Franklin Printing, a nearby print shop with troubles of its own. Their plan included co-branding their companies and combining their manpower. Both firms continue to keep separate books. However, Susan now supplies the operational muscle behind both businesses while Erin hunts down sales. Together, the two owners were able to hire back a worker who had been laid off, and they’re on pace to increase their combined annual revenues by 15%, Smith says.

Similarly, last December, Kelly Elizondo, the founder of Sara Langley Designs, an accessories and handbag designer in Rome, N.Y., teamed up with graphic designer Jill Lenzi-Davis, the founder of Lemons & Limes, a paper shop in Fayetteville, N.Y., to jointly produce a line of stationery products. Under their pact, Lenzi-Davis designs the graphics, while Elizondo handles marketing and relationships with their wholesale clients.

Of course, efficiencies spring from sticking to what you do best. But saving on costs is the biggest reason for teaming up, Carr says. “Everyone is looking for more and more ways to get the most out of their limited resources,” he says.

To that end, Elizondo and Lenzi-Davis are also planning to share the costs of attending the National Stationery Show in New York City next spring. “It can be lonely forging ahead as an entrepreneur,” Elizondo says. “This joint venture has provided us with a way to not only manage costs and expenses but also bounce things off one another and tackle challenges together.”