No profits, no loans: How to survive

Finding alternative revenue streams is a necessity for business owners trying to weather the recession.

Kyle, Sarasota, Fla.
We’ve run a dinner theater for three decades, and make most of our money during the tourist season between Thanksgiving and Easter. The rest of the year our audience is local residents. We’ve been operating at a loss for the last couple of years, and are unable to get a bank loan. We own the land and the theater building, and have put them up for sale with no success. We even closed the theater for two months this summer to save money. We don’t know what to do.

By Coeli Carr, CNNMoney.com contributing writer
You're in a tough spot. A traditional lender won’t provide a loan to help you keep your business, and you can’t find a buyer to take it off your hands.

But there are upsides to your situation.

You own both the property and the building on it. Edward Indvik, a vice chairman in the investment services group of Lee & Associates in Los Angeles, suggests heading to your city’s planning department to find out the allowable uses of the building and property. Then look for ways to generate supplemental revenues from the space, especially during the non-peak season.

Some possibilities, says Indvik, are reaching out to companies that might be interested in using your space as a site for seminars or conferences. People might also consider getting married at the theater and hiring you to do the catering. Let the community know your site is open for other business, such as providing recital or practice space for other budding artists.

Joel Shulman, assistant professor of entrepreneurship at Babson College and an entrepreneurial finance expert, concedes that such measures will probably take you out of your comfort zone. But injecting fresh blood and ideas into your operation is essential. Invite local business leaders you respect in for a brainstorming session, enlist their expertise and partner up, he advises. “An alternative business model is something you must consider given the current economic market,” he says.

A partner who creates a complementary business on the premises could pay rent and give you a percentage of the take, says Shulman. Such a person could also act as agent and bring you clients who could use the space during non-peak season or during the day.

Another approach, says Shulman, is to do simple market research by asking local residents on your subscriber list what would inspire them to attend performances more frequently. Perhaps, he says, patrons would prefer to see only the show and would rather dine elsewhere. “It’s easy to lose money on a food business,” says Shulman, who cites spoilage, theft and labor costs as problematic issues.

If you eliminate the dinner, you might be able to raise the price of the theater ticket. By no longer serving a full dinner, you might attract a partner who’d want to set up a cafe or other type of eatery on your premises.

Increasing revenues in whatever way you can will make your business, even in a sluggish economy, attractive to potential buyers or lenders. With recent losses, your negative trend line is the worst thing to bring to a bank, says Shulman. However, non-traditional sources of loans are still available.

For instance, businesses that can't find bank loans can still apply online for loans from microfinance institutions like Accion USA. Premal Shah, president of Kiva, a global organization that helps people make loans to individuals in developing countries, also suggests visiting Prosper.com, a person-to-person lending site.

“It’s the eBay for loans,” he says. But first, try to boost your sales, he recommends. “It’s very attractive to a lender [if] you’ve found alternative revenue streams. It shows you’re a good entrepreneur.”

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