with Stanley Rosen and Teddy Chadick

of Rosen & Chadick

New York.

The Opening of this Show.

In the Trenches

HATTIE: Fashion is a $17 billion business on the island of Manhattan. When we think of fashion, we typically think of famous designers, but there are hundreds of small businesses involved in this industry. And we're here to visit one of them.

STANLEY ROSEN (Rosen & Chadick): There's a little more than--close to 26 yards. I'm charging for 25 yards, OK?

We always give the customer what they buy and then a little more.

Unidentified Man #5: OK.

HATTIE: (Voiceover) For 45 years, Stanley Rosen and Teddy Chadick have been partners.

TEDDY CHADICK (Rosen & Chadick): We didn't know each other.

HATTIE: You started the business without knowing each other?

TEDDY: Without knowing each other. We were both working for some--he was working for someone and I was working for someone.

STANLEY: We both worked on the same floor.

HATTIE: In what kind of business?

STANLEY: His uncle used to buy remnants in the factories ...

HATTIE: OK.

STANLEY: ... and close-outs from the manufacturers.

HATTIE: All right.

STANLEY: And, the fellow I worked for did the same thing. So we got together.

HATTIE: (Voiceover) You can find them in their shop on West 40th Street in the middle of the Garment District and next door to their competitors.

STANLEY: I have a piece like wine. You'll see it right there. It's double and rolled.

Unidentified Woman #2: Oh, OK.

HATTIE: (Voiceover) I spent the day there and believe me, the owners are in perpetual motion.

STANLEY: That's all I have. Silk jersey is hard to get.

TEDDY: How much do you need of this?

HATTIE: (Voiceover) If they are not working with the customer in person, they are on the phone taking orders and shipping all over the country.

STANLEY: I'm going to give you two yards of that lace. How soon do you need it? I'll send it second day.

TEDDY: Does it have to match exactly?

HATTIE: (Voiceover) Through the years, they have evolved the business to meet the needs of customers and to carve out their own little niche in an ever-shrinking business sector.

TEDDY: Well, if it's not off the same roll, it'll never be the same 'cause every dye lot is different.

This industry is a dying industry. The fabric...

HATTIE: Fabrics and textiles?

TEDDY: Yes, because the woman that used to be at home sewing now has to work.

STANLEY: We've traded up. We're--because across America--middle America or whatever you would call it--they don't have this kind of merchandise that we carry. We carry the very expensive laces in the back which are from $50 to $200 a yard. We carry very fine imports from Europe in men's wear goods. And most of the goods we carry, they're upper--a better caliber.

HATTIE: You made that decision seven or eight years ago because...

STANLEY: No, no, it was always--it just happened. It flows. Sometimes, you know--sometimes the business grows in spite of yourself.

HATTIE: But is that because you are listening to your customers, your customers tell you what to buy, you buy what your customers want, and then it...

STANLEY: Well, yeah.

HATTIE: ...ended up trading up?

STANLEY: Exactly.

HATTIE: (Voiceover) Costume designer Beth Ann Boswell finds precisely what she needs at Rosen & Chadick.

BETH ANN BOSWELL (Costume Designer): And the advantage, of course, to shopping somewhere like here rather than some of the other stores in the neighborhood even is that they've got, you know, a large variety of the different colors all in one fabric. So if I have a client that says, `I want five things in an array of pastels, but it's got to be the same fabric,' I can come in here and I can get all of these pastels up here.

HATTIE: (Voiceover) We walked to the shop that designed and built the costumes for the hit musical "Beauty and the Beast." If you've seen the movie or the musical, you know that the costumes are what people talk about. These elaborate clothes literally create the character.

Look at that. Here she is. Here she is, the famous Mrs. Potts.

DAVID POLLIN (Costume Designer): They have always been very, you know, good to me. And for "Beauty and the Beast" and also from my own design work...

HATTIE: OK.

DAVID: ...so it's very helpful.

HATTIE: Do you think that customer service is something they do well?

DAVID: They do that--yeah--very well. And they also look for new fabrics and new--they're out there looking.

HATTIE: Trying to be different.

DAVID: They're out--they're looking for trends.

TEDDY: I think we have the inventory that they're looking for. They can come in and they can do an entire show with the inventory we have. And also, we give them tremendous service. Tremendous service. If we don't have it and it's available, we'll get it for them within hours.

CHRISTOPHER HUNTE (Designer): This is a client of mine that's going to be...

HATTIE: (Voiceover) Again, just around the corner at Christopher Hunte Designs, Rosen & Chadick fabrics are stitched into customized wedding gowns and elegant streetwear.

HATTIE: And it won't wrinkle either.

CHRISTOPHER: They were always very helpful to me as a student. They always took precious time. Then I basically wanted to swatch their fabrics.

I always found that Rosen & Chadick had the type of fabrics that I always needed for the type of couture clothes that I do. And in running around over the years, I found I would canvass the entire industry and always end up back at Rosen and Chadick's. So rather than waste my time, I just go directly there and we have a pretty good working relationship. Yeah, I've been known...

HATTIE: Well, they love you. They said, `Oh, you've got to go see Christopher.'

CHRISTOPHER: I really do love them. They're really very special people.

STANLEY: OK. The fabric you're buying--miss, the fabric you're buying is a French import.

Unidentified Woman #3: It's a what?

STANLEY: It was--it's a French import. It was originally $25 a yard.

Woman #3: Oh, my God.

STANLEY: I marked it down.

HATTIE: (Voiceover) I saw plenty of customers in the shop, but I was captivated when I met Katie O'Keefe with the Metropolitan Opera Costume Shop.

KATIE O'KEEFE (Costume Designer): I come to Rosen & Chadick because they offer really wonderful new, quality silk fabrics. And yes we do. We turn them into these--to look like the real thing and it's really exciting to see new things look old.

The question is when I go out, is how to create a really wonderful color and to understand how two fabrics like this can create something amazing as it moves like water on stage.

They're very, very wonderful with service, helping me find things, shopping the market that I can't reach myself.

HATTIE: (Voiceover) As Stanley says...

STANLEY: We always give the customer what they buy and then a little more.

Man #5: OK.

STANLEY: A lot of our designers who come into the store who shop for their--for their companies or who are looking for things, they more or less tell you that--they ask me, `Do you have a yellow crepe.' So now I know I need a yellow--I should look to buy a yellow crepe because that's going to be good.

HATTIE: So what you're saying is, you listen to your customers.

STANLEY: Absolutely. I learned.

HATTIE: And you buy what your customers...

STANLEY: And you've got to work. You've got to work at this business. It just doesn't happen.

HATTIE: Do you work six days a week?

STANLEY: Uh-huh. Six days a week, yes.

HATTIE: (Voiceover) They have about 15 employees and many speak more than one language.

Unidentified Woman #4: (Foreign language spoken)

DAVID CHADICK (Teddy's Son): See these are custom --these fabrics are all custom dyed.

HATTIE: (Voiceover) I asked Teddy's son David how they find the right people.

DAVID: We sit and we talk to them upstairs and we interview them. And then we put--we have them hired here. We put them on a trial basis for a couple of weeks so we could see how their reactions to the customer is and how the customers' are--reactions to them. And if everything meshes and everything goes good, we just keep them.

HATTIE: (Voiceover) Like many family businesses, the children will continue in the footsteps of their parents.

DAVID: (Voiceover) I am 34 years old.

HATTIE: Thirty-four. How old were you when you started working at the store?

DAVID: I've been in here since I'm 22 years old. I'm here 12 years. I enjoy talking to people. I enjoy helping people. I have always done it my whole life. When I was younger, I worked in a nursing home and I helped older people. That's the way my family brought me up to be. And...

HATTIE: And so you really are now feeling like this is a part of you.

DAVID: This is me. This is what I do. People come in here to see me. They want me to help them. They call me on the phone. They want me to help them.

It's light, it's pretty. It's $9.95 a yard. This is a big fashion color right now. I'm sure you know. It's in all the magazines.

I try to target my business. I try to target where--I see my customers coming in, where they're coming from, who they are, if they're younger, if they're older, if they're male, if they're female. And when I go out and buy fabrics, I buy fabrics for a specific customer. I also know that we have a very big clientele of South America right now that are coming into our store. So what I'm doing is, I'm trying to expand my business to South American customers. Number one is I'm sending samples out, swatch cards out to certain customers. I'm creating a little portfolio of samples--of customers and sending samples out once every two or three weeks to my customers in South America.

Thank you.

Unidentified Woman #5: (Foreign language spoken)

Unidentified Man #6: (Foreign language spoken)

DAVID: We hope to see you soon.

Man #1: Thank you.

HATTIE: Would you do this again?

TEDDY: Yes. And I enjoy doing it and I love it.

HATTIE: You think you'll ever retire?

TEDDY: No. No. I'll take more time off.

STANLEY: I've thought about it, but, I don't know, my wife says...

HATTIE: She says I married you for better or for worse, but not for lunch.

STANLEY: Yeah. Right. She says she don't want me--exactly--she don't want me following her around the kitchen all day.

HATTIE: What are you thinking about for the next 45 years? How are you going to make it work?

DAVID: I'm very scared. I've watched how successful my father and my father's partner have been. I listen and learn every day.

STANLEY: This is very classy, too. It's beautiful, in fact.

HATTIE: The world does come to New York.

DAVID: It does come to New York, and hopefully it comes to Rosen & Chadick, which is important.

HATTIE: (Voiceover) Here's what I learned from Stanley, Teddy and David: A partnership requires understanding, forgiveness and patience more than a lawyer. Offer products and services no one else has the courage to offer. And love your customer.

STANLEY: Put this up to her chest. I want to see how beautiful that color is. It's gorgeous. Stop the presses. Give her that receipt.

Law Talk

HOST: A lot of small-business owners have employees who receive income from tips. It used to be up to the employees to report that income, but now employers, too, have responsibilities as John Patrick Dolan tells us in this week's Law Talk.

JOHN PATRICK DOLAN (Legal Consultant): Well, there's an IRS ruling about tip income, and it's pretty interesting because the burden has been shifted to the employer. If you're an employer, if your employees receive tips, like you own a pizza franchise, or a small restaurant or a delivery company, and they earn more than $20 a month, you are required to seek out information from your employees: `How much money in tips have you earned this month?' Then you are required to withhold from their other wages an amount that would pay the FICA on that tip income.

HOST: What happens if you don't withhold the income?

JOHN: Well, the regulation provides that within a three-year period after April 15th of the year that the income tax would have been due, you, the employer, can be made liable for that income tax.

HATTIE: Information is power. Or to put it another way, information is money. There's a lot of information right here in your monthly phone bill as Cliff Holtz tells us in You're Wired.

HATTIE: Help me understand how I can use the information on my telephone bill to grow my business.

CLIFF HOLTZ (Communications Consultant): Sure. There's two classic ways you can do that. One is, you can use the information on your bill to better manage your costs by knowing who in your company are making calls, or in your small business are making calls, and who's calling you. You get a chance to better manage the cost of the telecommunication service.

Additionally, and not obvious to everyone, is the opportunity to take a look at that same information and use it as marketing intelligence. For example, with 800 service, we are able to help you understand the number of people that are calling you, the geographies from which they're calling, the time of day that they're calling, maybe in response to some advertising or some direct mail that you sent out, all of which helps you better fine tune your own marketing program.

HATTIE: So if you know who's calling you, then you also know who's not calling.

CLIFF: Well, there are other capabilities. By taking a look at folks who actually are calling you, you can kind of profile that base of customers and we have the ability to try to present to you a similar set of customers from the same profile who have not been calling you in order to help you generate new leads and new opportunities to market your products and services.

HATTIE: So that's a good reason to have an 800 number.

CLIFF: That's a great reason to have an 800 number.

HOST: Many professions that were once male-dominated are changing. With every year's graduating classes, more and more women are entering professions like accounting, law and medicine.

This week, Naomi Rhode talks about the difficulties professional women face when trying to balance a personal life with running a Smart Practice.

NAOMI RHODE (Consultant): We had just returned from Russia, and I had the opportunity to speak on leadership and entrepreneurship to a group of the foremost women leaders in St. Petersburg. And I got right in the middle of this conference, this high-level conference, and this woman went, `Nyet, nyet, nyet,' which means, `No, no, no.' She didn't want to hear about leadership. She didn't want to hear about entrepreneurship. She wanted to hear about women's issues in America, and very specifically, the feminist movement in America.

Well, my mind scrambled a bit and I started to talk with her about my perceptions of the women's movement from the '60s to the '70s to the '80s and into the '90s. And what I shared with her was--and with the whole group--was that I think there's been a tremendous paradigm shift into the '90s. And I believe that shift has been most articulated by women saying, `Yes, we want to climb this ladder of success.'

Success in business, that's important to us. Being able to be leaders and entrepreneurs, that's important to us. But if we forfeit our families, if we forfeit our marriages, if we forfeit friendship, recreation, health, if we forfeit those things, then have we really been successful? I believe that that's been quite a paradigm shift. And I believe that, yes, if we're going to really, really feel when we are finished that we were successful, the balanced life, the well-rounded life, the healthy life in relationships is very important to the success of us as businesspeople, as businesswomen.

HATTIE: For years, big businesses have been automated when it comes to reaching their customers. Now all of us can take advantage of technology and machinery to ensure our message gets through. People like Ray Sparks teach small-business owners what the big companies already know. Ray gives us all some money-saving advice on how to Deliver Your Message.

Deliver your Message

RAY SPARKS (Consultant): Well, one of the easiest ways is probably to do bulk mailings. If you have about 200 pieces or more going to--at any one time, you can qualify for bulk mail rates. In bulk mail rates, the postage is much lower than single piece first-class rates. So, you know, you automatically get some savings right there.

HATTIE: So that's all I need, are 200 pieces. Do I need to do anything else?

RAY: Well, there's a certain amount of preparation that you have to do. You have to presort it. In other words, put it...

HATTIE: What do you mean by presort?

RAY: Put it in ZIP code order, group cities or states or whatever together in bundles. The other thing you have to do is you have to bring it to the Postal Service rather than just dropping it in the corner mailbox. Plus, you need a bulk-mail permit.

HATTIE: Now how do I get one of those?

RAY: Well, you can apply for a bulk-mail permit at any post office, the post office which is most convenient for you to do your mailing. It costs $85 a year.

HATTIE: What am I going to save if I do this?

RAY: Well, the basic rate for bulk third-class mail is 22.6 cents, which is almost 10 cents apiece off first-class rates.

HATTIE: So it's worth a little effort.

RAY: Sure. And the more effort, basically, the more savings. It's--the more presorting you can do, the more the discount--the postage rates are discounted.

Business Basics: Creating a Business Plan

HOST: If you want to take a trip, you can go where you want to go faster with a map than you can by guessing whether you're headed in the right direction. Well, that's what a business plan is. It's a road map that describes and analyzes your business and gives detailed projections about your future.

(Voiceover) Bakery owner Jerry Shapiro created his own road map by answering questions right out of a book.

JERRY SHAPIRO (Petrofsky International): This is the book that I happen to use quite often. It's "How to Create a Winning Business Plan." And the types of questions that this book would ask is, for instance, who is your competition? What price are they? Why do you think you could succeed better? Is there a competitor? Everything there is to know about a marketplace that you really should know before delving into it.

HOST: (Voiceover) And Jerry has successfully developed Japan as a market for his product...

JERRY: Delicious.

HOST: ...bagels.

(Voiceover) In my opinion, another great workbook on the subject is "The Successful Business Plan: Secrets and Strategies" by Rhonda M. Abrams.

RHONDA ABRAMS (Author): The most important reason to plan your business or to develop a business plan is so that you know what business you're in and what you're doing, and to look at the factors that are going to ultimately make you a success. And I think one of the things that frightens people is they're afraid if they look at the hard questions affecting their business, that their dream will go away, that it won't stand the light of day. And one of the things I tell people is--I reassure them that, `If you look at this carefully, probably you'll make a much better business. I know you'll make a better business, and you'll probably still want to go into the business.'

HOST: What would you say most people do wrong in developing a business plan?

RHONDA: One of the mistakes I see most often is that people underestimate the competition. I see this over and over again. And it's understandable. First of all, we've been taught that if you build a better mousetrap, people will beat a path to your door. That's the old saying. It's not true. You have to build a better mousetrap company. And that means knowing who your competition is.

HOST: Now how can I best impress a lender with my plan?

RHONDA: I think the best way to impress the lender is with experience and with honest, realistic figures.

HOST: (Voiceover) SBA lender Bob Hays explains.

BOB HAYS (SBA Lender): Well, the business plan itself really isn't what is going to decide whether we can provide financing in a given situation or not. Really what we're going to look for in a situation where a business plan would be applicable, which is generally a start-up or an expansion type project, we're going to first and foremost, look at the borrower or applicant's experience within that industry.

RHONDA: You know, if you've run a successful business and you've proved you can do it, that's going to impress an investor more than anything. So the second time's easier than the first.

The second thing is honest, realistic figures. Every business plan is a reflection of optimism, but it shouldn't be fiction. And so if you can show figures and show where you got those figures and be realistic about it, it will inspire confidence in every other decision you've made about your business. A lender wants to minimize risk. They get your--their money back if you don't fail, so they want to show that you are not going to fail. An investor wants to make sure you're going to succeed because they participate in the upside of a business.

HOST: Right. OK, RHONDA, let's cut to the chase. How much money do I need?

RHONDA: More than you think. One of the things that I see a lot of people do is--because they're afraid to ask for too much money, especially of an investor--so they underrequest money when they're planning. And while there is this fiction that most businesses fail because they're undercapitalized--and it is fiction--one does need to look at how much money do you really need to make this business a success. And invariably, it's probably more than you think.

You know, the standard line is that 50 percent of all businesses will fail in the first five years, but that's mixing apples and oranges. Fifty percent of all businesses will--new businesses will close within five years, but many of them close being successful without being in debt, without being--going bankrupt because people who decided, you know, this is just too hard.

HOST: How much time do I need to spend developing my plan?

RHONDA: Well, first of all, you shouldn't spend so much time planning your business that you never get around to running your business.

HOST: Right.

RHONDA: Generally, you need to take only enough time so you can really sit down and look at the key factors in your business and then get on with it, and then get starting--started on it. And that probably can be anywhere from--you know, from six weeks to a six-month process.

HOST: OK. How do I know when my plan's done?

RHONDA: Your plan is never done.

HOST: Good news and bad news.

RHONDA: Good news and bad news. Your plan is never done. As a result, at some point you have to put it on paper. You know, a year from now you can look at it again and I recommend annual updates for everybody's business plan. And I certainly recommend making the business plan a working document. Don't just write it, put it on a shelf, forget about it. Certain kinds of things, your mission statement, your definition of your marketing plan, various other kinds of things should be working guidance for you that you use all the time. And yes, it'll change.

HOST: So is writing a business plan worth it? You bet. It helps you get money. It helps you improve your business concept as you see parts of your plan interface, and it helps you stay on track because you'll anticipate problems and solve them before they become disasters.

Streetfighter Marketing

HATTIE: Jeff Slutsky's street fighter philosophy is simple: Don't outspend your competition, outthink them, even if they're next door.

JEFF SLUTSKY: Street fighters are very competitive, but what do you do when a major competitor opens up right next door? Sometimes the smartest thing to do is nothing.

Now take for example a McDonald's in Virginia Beach, Virginia. They owned the marketplace in this little peninsula for years. Wendy's decides to move right next door. What are they going to do? They're going to take over 40 percent-50 percent market share. McDonald's was smart. See they waited till the grand opening of the Wendy's. And they advertised this thing. They were going to be all excited, all kinds of advertising, promotion, everything. Anyway, so the day of the grand opening, McDonald's puts up a big sign right underneath their regular sign. It says, `In honor of our new neighbors right next door, we're going to be closed today.' Well, Wendy's gets inundated. I mean, they were out of food by noon, people are waiting in line, they are very upset, going around complaining about how bad the Wendy's was. In six months, McDonald's was the only player in the marketplace. That's real street fighting.

HOST: There's more how-to information for you next time on SMALL BUSINESS TODAY. We'll go to Maine where a businesswoman has decided to fight the odds in the shoe industry. And LawTalk's John Patrick Dolan gives us the pluses and minuses of the different ways of forming your business.

The Closing of the Show.