The Finance Minister is talking about the end of the recession, but data presented by the Arad Economic Development Unit (EDU) this week point to the closure of a considerable number of businesses throughout the city. This past year’s figures were even worse than those of the previous year, but EDU officials are optimistic: “Statistics show that the situation here in Arad is not as bad as people think – only 2.6% of all local businesses have closed or changed hands over the past year”
Seventeen business owners hung “closeout sale” signs in their shop windows and closed their doors forever this year. Seventeen had to fire all their employees; many remained unemployed themselves. The sight of a business declaring a “closeout sale” has become less and less rare in these parts. According to Arad Economic Development Unit (EDU) Director Topaz Carmi, there are about 650 businesses in Arad, of which 17 closed. In contrast, 49 new businesses were established over the past year alone, but don’t let the figures confuse you: Most of the new businesses are small enterprises run by people who work from home. “Many people prefer not taking chances, so they open small businesses. It’s become a kind of trend,” says economic consultant Inbal Turgeman. “They’re looking for a side income and prefer to work from home, opting for businesses such as catering, crafts, etc.”
The Arad-Tamar EDU, established by the Jewish Agency and the Municipality, assesses business plans and determines their economic feasibility and provides business mentoring by professional consultants who help entrepreneurs assess problems and obtain loans, all at no cost or at nominal fees highly subsidized by the Ministry of Industry, Trade and Employment.
Carmi and Turgeman explain the increasing tendency towards closing of businesses in Arad as the result of entrepreneurs’ independent, “gut feeling” activity and their failure to consult with professionals. “We could have prevented many business owners from making the mistakes that led their businesses to bankruptcy, had they only applied to us. For example, one local shop reached a situation in which the bank stopped granting credit and checks started bouncing. The owner came to us when his business was already dying, just before declaring bankruptcy. We assigned a financial consultant at once, who discovered that many suppliers representing various companies had sold the owner an excessively large stock of items whose pre-sale purchase and maintenance costs were very high. Obviously, we returned all the merchandise to the suppliers and initiated several other business measures. Today, the enterprise is thriving.”
But not all stories end in success and a full cash register: “A few weeks ago, a local resident approached us with plans to open a clothing shop at a huge investment of over NIS 140,000. Naturally, we rejected her idea because investment of such large amounts of money in renovation and image-building alone is nothing short of insane. She chose to do so just the same and her business did not survive. It was clear to us from the outset that income would not cover expenditure and we helped her minimize damage in closing the shop.”
Every year, the EDU receives requests for assistance and consultation from about 350 entrepreneurs, nearly 200 of them business owners who seek referral and guidance. “It’s not easy to open a business,” the two EDU officials explain. “The market in Arad is highly limited and based primarily on local residents. But the economic and commercial situation here is not as bad as some of us think. Our job is to help as many businesses as possible take shape and develop. We have consultants on call who specialize in proper financial management of businesses and provide entrepreneurs with mentoring all along the way.”
Tevet 5764 - January 2004