Beginners’ luck

With work, these start-ups took off despite recession

Brewer and cofounder Dann Paquette, at work at the Pretty Things Beer and Ale Project’s Westport brewery, has beaten the odds. Brewer and cofounder Dann Paquette, at work at the Pretty Things Beer and Ale Project’s Westport brewery, has beaten the odds. (John Tlumacki/ Globe Staff)
By Kathleen Pierce
Globe Correspondent / March 31, 2011

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The day Dann Paquette brewed his first barrel of beer in fall 2008, the US Senate passed the $700 billion bank bailout bill. If timing is everything, he couldn’t have chosen a worse date to launch his Somerville company, Pretty Things Beer and Ale Project.

“We called it a ‘project’ so we could close it down if we had to,’’ said Paquette, who co-owns Pretty Things with his wife, Martha Holley-Paquette. “If nothing else, we’d sell that batch and would be known as the people who made these crazy beers,’’ he said.

Soon after the bailout bill became law on Oct. 3, 2008, the Dow Jones industrial average dropped below 10,000, further stoking a recession.

Since those dark days, however business at Pretty Things has increased more than a hundredfold. “We had some luck,’’ said Holley-Paquette.

The company’s survival also took pluck and cultural forces such as a younger generation of beer drinkers interested in new styles of ale and more women developing a taste for craft brew. The couple’s $9,000 investment was enough to spark an enterprise that expects to generate $1.2 million in sales this year.

Pretty Things is one of several small start-ups in the Boston area that launched as the economy was tanking and emerged from the downturn 2 1/2 years later as profitable operations. Their success against conventional odds illustrates the tenacity and acumen entrepreneurs need to thrive in adverse times, said Bill Vernon, Massachusetts state director for the National Federation of Independent Business. “Whether it’s sanity or insan ity, willingness to take on risk, ability to somehow sleep at night or creativity . . . it comes down to hard work and long hours,’’ said Vernon.

Even in boom times, many new companies fail, he said, making those that succeed during an economic meltdown “very remarkable.’’

According to the US Small Business Administration’s Office of Advocacy, 30 percent of new businesses close within two years.

Shortly after moving to Charlestown in 2006, Abby Gray realized her neighborhood was long on charm but short on shops. Gray, who was laid off from her job as a publishing executive in the spring of 2008, saw an opportunity and decided to open a boutique in a vacant space in City Square.

She called it Olivia Browning and filled the space with “something for every socioeconomic group, from the mothers in the projects to the mothers on Monument Square.’’

She planned to open in April 2008, but construction and permitting delays pushed it to November. “The next day the market tanked,’’ she said.

Looking back, Gray said, her smartest move was to “secure all my financing by May 2008.’’ If she had waited a few months, she suspects, the $250,000 home equity loan she needed for construction, furniture, and to hire staff, would have been denied by her lender. Still, after being open for less than two weeks, Gray’s $40,000 line of credit was cut to $12,000 as worldwide credit markets became paralyzed.

“I took all the money I’d ever earned and put it where my mouth is,’’ said Gray, who owns the store with her husband, Richard Gray. “We were scared.’’

The boutique specializes in wedding and baby gifts, handbags, and designer candles, and is doing well as the economy slowly rebounds. In fact, Gray said, it’s moved from breaking even to becoming cash positive every month since September.

To make it this far, Gray retooled her business after the first 18 months. She opened with one full-time, well-paid employee, and soon realized the expense was crushing her bottom line.

Gray now employs six part-timers “for what I used to pay one’’ full-time worker. She still doesn’t take a paycheck herself, however, and the event planning side of her business has helped the store thrive. And being part of the community she became a member of the newly created Charlestown Chamber of Commerce, does in-store trunk shows and book signings, and has gone door-to-door to market her shop.

“Even through the recession, people still get married, still have babies, [and] still have birthdays,’’ Gray said, so they buy gifts. “That’s not going to change.’’

Another thing that hasn’t changed is people’s need to sometimes splurge on dinner, even as they monitor household budgets. Or so Julio de Haro and his partner Lara Gavigan believed when they invested $600,000 in a raw space on Harrison Avenue in Boston for a 76-seat Spanish restaurant. Estragon Tapas Bar opened in June 2008 and for the first year, “business was suffering,’’ de Haro admitted.

In November, de Haro scrapped his late night weekend menu — the place was empty by 10:30 p.m. And all the corporate holiday parties he booked that December were canceled.

Seeing his urban eatery with a 1930s vibe sit ghostly quiet most Monday and Tuesday nights “was eerie,’’ de Haro said. On some evenings “there were eight people dining out,’’ he said. “That feeds into itself. No one wants to come to a place that isn’t busy.’’

To stay afloat, the Madrid native overhauled the restaurant to cut costs. He took over the kitchen when his chef left and retooled an “esoteric’’ menu that featured pig ears and baby octopus with blood sausage to offer classic Spanish fare such as seafood paella that would appeal to a wider customer base. At the same time, he lowered prices by 10 to 15 percent for food and 20 percent for wine, while adding pre-Prohibition cocktails — like gimlets made with green tea — in an attempt to spur spending.

The moves worked, and de Haro staved off disaster. Today, the restaurant has become a neighborhood mainstay.

“There’s been an upward trend in business, and we’ve been able to forecast gains,’’ said de Haro. “It’s a relief.’’

The restaurant’s annual net income went from a loss of $200,000 in the first year to a projected $50,000 profit for 2011.

Although he sometimes feels overwhelmed by bills, each month is better than the last, de Haro said. “It’s rewarding to see the results of your hard work and to have customers recognize that. The economy is doing good and people are starting to enjoy themselves again.’’

Paquette at Pretty Things is also looking ahead with optimism. As the company’s beer portfolio has grown to 13 different styles, it’s hired a full-time employee in Massachusetts and a part-timer in New York. The ale, brewed in Westport, is served in white tablecloth restaurants such as Craigie on Main in Cambridge and also flows in pubs from Providence to Philadelphia. The company also intends to open a small brewery and tasting room in Somerville.

Paquette believes consumers have become less hesitant about spending money on something that makes them happy. He cites as evidence the popularity of his flagship Jack D’Or beer, which costs $5.99 for a 22-oz. bottle.

“At the end of the day, what we are selling is fun,’’ he said.