Opening a Small Business & Rural Economic Life

Center for Small Towns staffer Kelly Asche has returned after taking a leave of absence from the Center for Small Towns to start his business in New London, MN. We asked him to share some reflections of his time starting his business and being a part of the business community in a small town .

My business partner, Josh Reed, and I took on a project that many 20 to 40 something year olds dream about; we started a brewery. And yes, it has been exciting, great, mind-expanding, terrifying, insane, and one of the most stressful experiences of my life. But, this post isn’t about beer or how to start a brewery. In fact, those aren’t even the most interesting aspects. What has been fascinating to me is how the business community functions together to get through the slow shopping months of winter.

Like all small towns, New London, MN has a specific set of assets and disadvantages for starting a small town. It is a growing community within a growing County. The community has experienced consistent in-migration of young families and households over the age of 50. This trend isn’t something you typically see in this area of the state. Typically, a community/region is good at attracting one group but not the other.

One of the key factors presenting New London with specific advantages and disadvantages is its location in the middle of a lakes region. You always know you are in the middle of a lakes region when the surrounding township has more residents than the community itself.

This obviously presents a lot of advantages for businesses. You have a larger population that typically has more disposable income to spend in local businesses. In addition, the region has a significant number of resorts, giving the region a lot of summer tourism. However, the challenge is with these regions being fairly transient; resorts shut down and 2nd homeowners in the region stop coming to the area after labor day. In fact, looking at the decennial census housing vacancy status information can give you a clue how transient an area will be.

The above chart shows occupancy status of households in New London Township ( the region surrounding the City of New London). Over 15% of the households are 2nd homeowners. That number can be near 30% – 50% in some of the other townships in the region. That is a pretty significant number of households. A significant challenge for businesses is how to ramp-up for the busy summer months while allowing flexibility to downsize during slower winter months.

Another challenge with 2nd homeowners is determining how much they will actually spend locally. In a report written by Ryan Pesch from the University of Minnesota Extension titled “Profile of Second Homeowners in Central and West Central Minnesota”,it was calculated that 2nd homeowners in the central and west central Minnesota lakes regions annual spend $480 (median) on restaurants and bars. According to the Consumer Expenditure Surveys from the Bureau of Labor Statistics, households in the New London region spend over $2,600 on average annually in bars and restaurants. Yes, I am comparing a median to a mean (the Pesch study had to due to some very high upper ends that threw off the mean), but it is still very interesting to see the big difference. Second homeowners are spending less money than a full-time household, and spend it in a very concentrated amount of time.

A lot of small communities that function in an extreme seasonal market have many of their shops close up during the slow winter months. This is somewhat true around New London, however, almost all the shops in downtown New London stay open. And they have done this by positioning themselves as a “destination”, drawing shoppers from over 60 miles around the region.

Retail is thriving in downtown New London, which consists of a number of boutique clothing stores, antiques, a thrift store, a coffee shop, four restaurants, and a brewery. It has been interesting for me to see how they adapt to the slow winter season. The businesses have formed a “Merchants Association” which functions like a Chamber but is attended and run by business owners. This group works to bring everyone together to develop unified promotional campaigns that continue to bring shoppers into town throughout the winter. For example, they organize a campaign targeting a special set of customers, “Ladies Night Out”, where retail stores provide special deals on products and shoppers are entered into drawings and giveaways for walking into a set-number of stores. Another example is organizing a themed Holiday festival that takes place on two separate days and involves community members caroling throughout the day, shop owners dressing in costume relating to the theme, and tours offered of area attractions. Promotion of these events are coordinated through the Merchants Association, utilizing the attraction of all the shops rather than just one. Many of the events focus on giving shoppers an experience, not just shopping.

Will we get as much business as the summer? No. But that isn’t the point. The point is to build a sustainable business model that allows us to get through the slower times reasonably well without having to shut the doors every year.

I always make a point to ask my customers at the Brewery where they are from and I’m continually amazed how far folks will travel. We do get a fair set of regulars, but we also get a lot of people that wanted to get away for the day and do something different. I continually reminded of Ben Winchester’s explanation of households life patterns; we live in one town, work in another, shop within a 45 mile radius and play within a 90 mile radius.

So downtown New London has positioned itself to take advantage of the full-time households, seasonal residents, and provide folks living within driving distance a place to experience something different. This isn’t a model for all small towns to follow, but New London does provide some interesting strategies and ideas for other resort-type, seasonal market communities.

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