You may have seen the articles that BJ Oelschlegel writes about island real estate for the Ocracoke Observer and the Island Free Press. We just posted her latest on this blog. For readers who may have missed previous articles, check here periodically to see what is new.

This article was published in July and is about the challenge of being a business owner on the island. We hope you find it interesting.

…ON BECOMING A BUSINESS OWNER

BJ Oelschlegel, Broker w/Ocracoke’s Lightship Realty


..before we had a lighthouse, we had a lightship to light the way for mariners.



This commentary is a partial reprint of one of my articles written a few years ago. At the time, the column was a response to what I felt was a neighbor’s lack of understanding of the complexities of starting a business. With the flood of tourists each summer, it looks easy and profitable to open a business; the reality can be quite different. A legitimate business has multitudes of hoops through which to jump. The hoops range from regulatory issues to accounting to employees.

On Ocracoke, a home owner has the opportunity to use 400 square feet of the residence for commercial purposes without needing to abide by all of the commercial regulations in the Ocracoke Building Ordinance. This “cottage industry” option is probably the path of least resistance, when it comes to housing certain types of small business, but it is not the story for most of the commercial spaces on the island.

The bulk of us have had to create a business plan, no matter how informal, and test the feasibility of our idea. Careful examination of the rules, regulations, and necessary licenses is prudent before expending any more time or energy on the budding idea. When a business opens its doors, the public trust is a primary responsibility and therefore a major hoop. North Carolina, as with all states, has regulations which are meant to protect the public. The retail owner has the responsibility to the public to be aware of and to abide by those regulations. Building codes are created for the safety of the public and to provide a consistent and enforceable guideline for the use of property within a particular township. One major example of a critical portion of The Ocracoke Building Ordinance is the very volatile subject of parking. There must be the required parking for your customers; two spaces are necessary for the first 200 sq ft of floor area and one for each additional 200 sq ft of floor area. Keep in mind the need to observe all building codes, apply for a building permit and get inspected by the county building inspector. The county health inspector might need to review your plans if food is involved and when meeting the requirement of providing bath room facilities for your employees. Once the regulatory stuff is in place, the proprietor will have crossed one of the hardest hurdles.

The question of sole proprietorship or some other form of business entity brings a lawyer into the picture to legally set up your business structure. Looking for a location is a “Big” one. Commercial rents, on the island, are running between $10 and $27 a square foot, depending on the location and the fixtures provided. Once you’ve secured the space, with the first month’s rent and security deposit, you need to set up the utility accounts. A checking account provides a safe depository for the daily income, along with the ability to track the income and out go of the proceeds. The business owner needs to apply for a license to collect and pay sales and use tax. The state of North Carolina has legislated that the sale of an item or the rental of a piece of equipment, requires the business owner to collect, report and pay a 7.75% tax on every dollar of income.

Insurances need to be considered. To start the list we have workman’s comp, fire/personal property, public liability and business loss insurance; the premiums for which are based on payroll, inventory value or income. An accountant can be helpful when it comes to getting started with keeping good and useful business records. These records are critical at tax time. Some degree of carpentry may be required to bring the floor plan into consistency with the picture, you have, of the flow of the business traffic. Equipment purchases are necessary to display or make your goods. Vendors, or suppliers, of your goods or their ingredients need to be researched and secured; not all vendors are willing to make the long trek down the Outer Banks to the island. Don’t forget signage and advertising and the permits required to even install the signs. A web site or face book page isn’t a bad idea. What about a cash register? And you haven’t even opened your doors yet….

Whew! I’m tired just thinking about what it takes to get started. The absolute “Biggest” factor in the start up of a business, is the capital. Getting your foot in the door requires funds to pay for all of the services, equipment and inventory necessary to give your business a good face. You either have to have a rich family, a really fat mattress or the ability to borrow. A line of credit can be invaluable as start up cash but also a god send when a hurricane blows a hole in the stream of tourists. Isabelle provided a lesson in patience and faith. The long delay in being able to open up the island and then the trickle of business afterwards simmered a fear for most business owners. The ability to borrow is one half of the capitalization question, the ability to repay is the other half. Borrowing only goes so far. A business owner can learn from year to year how to streamline their operation, but there is no guarantee that the weather, or the economy or any one of the many choices that you have made in preparation for the season, won’t work negatively to affect your ability to pay your bills, including loan payments, and have something left over for living.

There are the hoops of all of the State and Federal requirements, if employees are going to be involved. We start out thinking that we can do it all ourselves and of course that doesn’t last through the first season. We ultimately need to set up payroll records and arrange for the assortment of liabilities that lie in wait for the employer. The State and Federal governments obligate the employer to report and pay different taxes. Out of every paycheck, the employer has to withhold a portion of State and Federal taxes; quarterly the employer has to turn the withheld sums over to the respective agencies along with matching sums out of the employer’s pocket. If my memory serves me, the employer pays, to the government, an additional 7.65% of the hourly wage, directly out of their pocket. This 7.65% is over and above what they pay the employee per hour; the hourly wage plus the percentage, just to have an employee! We haven’t even mentioned the Employment Security Commission, that requires the employer to pay out of pocket, a percentage of the gross payroll, to fund the Federal unemployment insurance; a State unemployment agency takes their percent every quarter also. EMPLOYEES DO NOT PAY INTO THEIR OWN UNEMPLOYMENT FUND!!!!! ALL THE MONEY AVAILABLE FOR THE WINTER UNEMPLOYMENT CHECKS IS PAID BY EMPLOYERS!!! I guess you can tell that unemployment is a sensitive issue; every time the insurance gets used, the rate goes up.

That’s the money side of having employees. The head trip of trying to get a disjointed group of people to work together happily; follow your directions, use some common sense, see things the way you do, respect the money that you are trying to make to pay the bills, present your face to the public, work the way you do and generally be courteous is dizzying. Not to mention the departure dates for college that do not coincide with the end of the season; or the “no shows” who had something better to do that day; or the personality conflicts that require mediation; or the employees who really didn’t have a place to live….or bathe; or the scheduling nightmare for the employee who has two jobs.
Having employees demands many skills and is yet another big hoop.

The owning, and running of a business is a serious step to take. Hard work, over a long period of time, and a line of credit as a safety net are critical factors in any business’s success. The variables, not within our control, make it tenuous, at the least. With so much at stake, business has to be based in the “black and white”, the bottom line.

I personally love the challenge of making it work and the chance to creatively grow a business. Ah….but the hoops.

“YOU CAN HAVE IT YOUR WAY”

by BJ Oelschlegel

In the last couple of months, we have had a noticeable increase in the number of inquiries into real estate sales on the island. A half a dozen contracts have been accepted, indicating some kind of energy coming back into the market. More than once, we have been puzzled by an assumption voiced by these potential buyers. Listing agents, add a rider, with their names, on the “for sale” sign. These buyers have been assuming that the rules dictate that all inquiries for that particular property need to go through the agent named on the sign.

I am here to say that a prospective buyer is in the driver’s seat and can take the car wherever they choose to go. A buyer can interview numerous agents and then decide to work exclusively with the agent of their choice. A friend can recommend an agent, based on their own experience. A real estate purchase is a journey to be taken with a person with whom you have trust and confidence. The agent with whom you choose to work is strictly based on your personal preference.

The system by which agents can sell the listed property of other companies is called co-brokerage. When one company sells another’s listing, the commission is split 50%-50%, between the two companies; half to the listing side of the transaction and half to the selling side. It still costs the seller the same agreed upon commission described in the listing contract. Co-brokerage is a wonderful thing. It allows more exposure for a seller’s listing by opening up the number of agents who can sell the property. It frees a buyer to find the right person with whom to work.

You really can “have it your way”.