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Solitary struggle.

IN THE SECOND HALF OF 1985, AS recession chilled the 49th state's economy, Al Allen searched for work. Laid off from his sales job in August and still desperate for employment in December, the Soldotna resident reasoned he'd better create his own paying position.

With his wife, Sharon Allen, who previously had sold handicraft items, he set to work making jewelry from a friend's five-pound piece of mammoth tusk. Using an unsophisticated drill and accessories, the couple labored through the first five months of 1986 to manufacture ivory beads-slicing slabs, cutting squares and drilling each hole individually.

Al Allen tapped his 1970s experience of making hishi beads in Arizona, having helped to start a factory to manufacture the small beads from turquoise. Sharon Allen proved to have an artistic flair for creating designs.

On the Friday of Memorial Day weekend, Al Allen again donned his salesman's cap. Selling jewelry to Portage Glacier Lodge in Portage and the Alaskan Ivory Exchange in Anchorage, he came home from his road trip with $1,000 in hard-earned income.

By the end of 1986, the enterprise-Alaska Jade and Ivory Works-had grossed $10,633. Through hard work and reinvestment in new equipment and raw materials, the business' revenues have increased every year: to $27,700 in 1987, $47,500 in 1988 and $60,600 in 1989.

Demand for the company's jewelry now made from walrus and mammoth ivory, baleen (from whales), gems and metals - has outstripped the small business' ability to produce. Jade was originally intended as a medium, but Allen found it required more expensive tools to make and hasn't been able to afford the investment.

Although the numbers may indicate success, the Allens see perils surrounding their venture's progress. Among the challenges most threatening to survival: competition, dwindling and increasingly expensive raw materials, the ability to find and retain employees and the peak-and-valley cash flow created by the seasonal nature of the tourist market.

Ivory products are popular souvenirs. But Alaska jade's jewelry is considerably higher priced than most wearable ivory. Carried in ivory stores, art galleries, gift shops and fur salons, the firm's best-selling item last year was a baleen and walrus ivory necklace for $695; $795 in mammoth ivory.

Stephan Fine Arts Gallery outlets in Anchorage sell the Allens' distinctive jewelry. Gabe Stephan, son of owner Pat Stephan, describes the line as higher quality than most ivory jewelry available. He compares the designs to artifacts and says Alaska Jade products are one of very few jewelry lines carried by the fine arts gallery.

Often the jewelry is sold in necklace, bracelet and earring sets. Al Allen says retail sales average $800. "It's the most expensive ivory jewelry sold in Alaska," he notes. "There was one line more expensive but it went out of business."

Numerous carved ivory pieces compete in the same price category, and although original, the designs are not patentable; the pieces, which have been called Egyptian, Chinese and Athabascan in style, bear similarity to former pieces themselves. Allen worries that copying of the company's designs will increase.

But he's more concerned about competition for the shrinking supply of raw material. Demand for walrus and mammoth ivory soared following the international ban on elephant ivory adopted in mid-1989. Says Pete Vallejo, owner of Anchorage's Ivory Broker, "The price of ivory already has been affected quite a bit. It's up 50-80 percent over last year. Supply and demand is changing from elephant to fossil walrus and mammoth ivory."

Allen acquires his ivory from brokers and from private collections. The Marine Mammal Protection Act of 1972 made it illegal for anyone other than Alaska Natives to work with and to sell handicrafts of ivory or baleen harvested after Dec. 21, 1972 (some state-sealed ivory harvested between 1976 and 1979 is excluded). Allen must be able to prove ivory from a walrus or baleen from a whale is taken from an animal killed or found dead before that date.

He is particularly worried about his ability to continue to get baleen. "I've gone through every lodge, hotel and bar in Alaska and replaced their old pieces," he says. Although one option would be to joint venture with a Native, he says he hasn't met a suitable partner.

To ensure a continued supply of mammoth ivory, Allen began inquiring about the possibilities of obtaining ivory from the Soviet Union. The Soviet Far East terrain so similar to Alaska's is believed to contain numerous skeletal remains of the mammoths and mastadons that roamed the Earth more than 10,000 years ago. Allen sought the assistance of state and federal agencies and of privately owned Soviet-American trading companies in Anchorage and Seattle. He reports no one was able to introduce him to useful contacts. But Alaska Jade has been billed $500 by the Anchorage company for telephone inquiries.

Ivory Broker's Vallejo notes he's heard rumors of huge stockpiles of Soviet mammoth ivory, which had been exported commercially before the 1917 Bolshevik Revolution. But he complains the lack of reliable price, quality or quantity information has precluded business dealings. Sam Stoker, owner of Beringian Ivory in Fairbanks, has found trading partners with which to negotiate ivory purchases but doesn't consider a transaction likely in the near future.

Allen considers finding suitable hired help another challenge to Alaska Jade and Ivory Works' survival. He admits the work is unappealing. "It's not the most glamorous: Ivory stinks; it's dusty and dirty," says Allen. He's had the most success using part-time people, and recently began negotiating with the Women's Resource Center in Anchorage to train workers for the business.

The four Allen children, ranging in age from 8 to 17, help to manufacture the jewelry. Sharon and Al Allen were relieved to learn their oldest son, Christian, plans to delay college a year after he graduates from high school this month to work in the family business. "We wouldn't have asked, but we're awfully glad he chose to do that," adds Al Allen.

It became obvious in 1988 that Alaska Jade could have sold more jewelry if it could have produced more finished items for the peak summer season. Because retail outlets typically won't buy until May when the tourists start arriving, Allen decided to borrow money to get through the winter and produce as much as possible during the slow season.

The small-business owner recounts he sought funding and/or advice from the U.S. Small Business Administration, the agency's Service Core of Retired Executives, the Small Business Development Center, Alaska Industrial Development and Export Authority, commercial lenders and private investors. "Nobody wanted to give us a shot to help us to grow, because after-tax income didn't support a family of six and pay off debt," he says.

Allen recounts that the Service Core of Retired Executives advised him an enterprise such as his needed $25,000 in startup capital to make a go of it. He also discovered that he couldn't qualify for an SBA loan because he couldn't produce three years of tax returns with one year of profit. To even approach the SBA he had to already have been turned down by two financial institutions and complete paperwork they required. SBDC worked with him to revise his SBA application, which still was turned down.

"There's not a single agency of government in Alaska to help the really small-businessman make it," says Allen.

Ron Veitkamp, assistant district director in the Anchorage office of SBA and head of business development, explains that to minimize risk and maintain services lenders must require records. "A couple years of successful operation gives an indicator of ability to pay back," he says. Loans typically depend on collateral only as a secondary source of security; the primary source is cash flow of the business, Veltkamp explains.

SBA direct funds - those available without refusal by commercial lending institutions-are available only to certain groups. Veltkamp adds that it's understandable that financial institutions shy away from small loans - say, $10,000-because such loans cost as much to service as those that produce higher revenues.

Allen did find one private investor interested in the business, but terms weren't satisfactory. "I could have lived with the 25 percent interest," says Allen. "But the other strings I couldn't agree to." The lender wanted both a percentage of the business and a voice in running it.

"It's funny how it worked out," says Allen. "I looked and couldn't find money to save my life. Then I quit looking, and the next week a guy calls me to come see him about buying some ivory and says he thinks he can help me find an investor."

That person became an investor himself, and when the oil-spill cleanup put a lot of cash in a friend's pocket, he offered to invest as well. Alaska Jade and Ivory now has two outside investors: one who's loaned $16,000 and the other a tax consultant and investment counselor who works ivory on the side and has poured about $6,000 into the business.

Allen says, "Everybody told me I couldn't compete. They said that this was a dumb business because it was too small. But we're doing it."

Proud of the enterprise built by the labors of his family, Allen boasts Alaska Jade and Ivory Works has survived despite many obstacles because of its founders' tenacity: "The only way we are where we are is because we're sticking to it and not letting people convince us it won't work. It's a shame with all the money that's here in Alaska, a guy who really needs it can't get it."

The Allens found the business community offered little support or solace for a struggling. company run more by sweat and persistence than by textbook principles. But Sharon Allen credits "the Alaska neighborly lifestyle, almost like a cooperative," with the family's survival on revenues from the slowly growing, but very small business. She explains that her husband has been able to trade game he's brought home from hunting for neighbors' garden or fish harvests. "I don't think there are very many places outside Alaska that you could do what we've done," she adds.
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Title Annotation:Celebrating Small Business; Alaska Jade and Ivory Works
Publication:Alaska Business Monthly
Article Type:company profile
Date:May 1, 1990
Previous Article:Small business combat.
Next Article:Cargo boost (United Parcel Service of America Inc.) (Alaska Business Briefs)

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