How To: Survive the Recession

Scott Neville is battling the struggling economy at his business.

Neville and his father, Ron, purchased Ozark-based awning maker Welhener & Saville Co. in October, just as the depths of the recession were beginning.

"Construction is way down," Neville said. "We do a lot of recovers as well, but people are waiting right now - they figure they'll get another year out of it. We're not seeing as much business as we should."

The recession is now about to enter its 21st month, and small-business owners seem to be in shell shock.

"Everyone I've talked to says they're focused on cost reduction as opposed to how you're gaining more market share or increasing sales," said Tom Dapp, owner or founder of multiple small businesses and franchises, including Exact Tax & Accounting and the Springfield franchise of Dagwood's Sandwich Shoppes. "There's a pall over the economy, and we're waiting for some good news that just isn't coming yet."

But an economic downturn doesn't necessarily mean there is no hope for struggling businesses, and industry experts offer several tips for navigating rough terrain.

Watch the fundamentals

Rayanna Anderson, director of the Small Business and Technology Development Center at Missouri State University, said knowing the ins and outs of the company balance sheet is important at all times for a business owner, but the numbers become even more important when times are rough.

"Knowing how much it costs to keep the doors open is vital, and then, looking for ways to either decrease those costs or find niches to increase revenue," Anderson said. "Look at payroll, figure out ways to reduce it, and then with cost of goods sold, go to vendors and ask for deals like price reductions or extensions of terms."

Payroll is usually the largest single expense a business has from month to month, meaning that examining employment numbers is a necessary evil. It's a task Neville admits he's done in recent months.

"It's an awful thing to say, but you have to look at your employees and say, 'Do I need this current work force the size it is - do I need all of these people?'" he said. "How many of these people have key jobs that others can't reproduce?"

While the exercise was uncomfortable, Neville - who continues to constantly monitor payroll expenses - hasn't yet let any employees go.

Remember company image

When the company balance sheet gets ugly, company owners' first inclination is usually to cut costs - and much of the time, one of the first cuts is in the marketing and advertising budget.

Anderson said that's absolutely the wrong approach if it can be avoided.

"That's the one thing that statistics tell us: If you do have the money to advertise in a slow economic time, and all your competitors have reduced their advertising, it's a real chance to gain market share," Anderson said. "You're getting your name out there when others aren't."

Increasing advertising, however, is not always enough by itself.

Brett Baker, managing partner of sales and marketing advisory firm TrustPoint Management Group, said companies also need messages that make them stand out from competitors.

"Businesses need to constantly study the art of differentiating themselves from everybody else doing what they do," Baker said.

"Whether that's a banker or a guy selling copiers, it's about constantly standing out from everybody else."

Examples, Baker said, include looking at advertising in different media or offering "expert" advice about the appropriate industry.

"When people do slick fancy marketing, that's what gets them in trouble," he said. "If they just go to the truth, they become trusted advisers much quicker and they get more respect that way."

Waiting out the recession

Regardless of how much advertising a company throws at the recession or how much rebudgeting business owners do, Dapp warns that anyone expecting a quick turnaround will likely be disappointed.

"There's no quick remedy," he said. "Marketing takes a lot of commitment and a lot of time. You can open your doors and send out coupons, and that will get a response, but how do you continue to grow your business? That just flat takes time."

He added that it will take the banks loosening their lending standards to right the economy and give businesses the chance to pick up momentum.

In the meantime, access to capital is where the U.S. Small Business Administration's America's Recovery Capital program comes in.

Launched in June, ARC provides interest-free loans of up to $35,000 to existing small businesses that need help with regular debt payments.

The federal stimulus program set aside more than $255 million for the SBA program.

But Walter Cowart, branch manager of the SBA's Springfield office, said only about 500 loans have been made nationwide, putting the program on pace to only loan about half of the available money before the program expires in September 2010.

Cowart cited two factors for the slow beginning: lack of awareness and the amount of paperwork required, which may be dissuading some banks from participating. Of the 73 banks in the Springfield office's 28-county coverage area, six made ARC loans in July, up from two in June, he said.

"The bank is in business to make profit," Cowart said. "A $35,000 loan is just as expensive to put on the books as a $3 million loan. It's labor-intensive ... and the interest the government is paying on this loan is 2 percent over prime, so many banks have made the decision ... that they're just not going to fool with it."

Melissa Gilmartin, owner of American Electrolysis & Laser LLC, is borrowing an undisclosed amount through The Bank of Missouri to help cover business-related credit card debt. She said she hadn't had much credit card debt until business took a downturn in November and December.

"It will give me almost 20 percent more revenue coming in," Gilmartin said of the loan, which should close in early August. "I can maintain health insurance for my employees and then look at where I need to cut other expenses and save even more money to get ahead in this economy."

Don't give up

As rough as the economy may seem, however, Baker encouraged companies to buck the trend - and their inner instinct to curl up and hide from adversity - by raising their expectations in the face of a tough market.

"Sometimes people want to fall back, put their head in the sand and have hope as a strategy," Baker said. "But we find that people who pull themselves out of a struggling situation are those who set their sights higher. Everyone is cutting expenses, going lean and building that war chest, but eventually you have to raise your expectations."

That's what Neville said he's trying to do; his company will be increasing its advertising budget for both TV and radio in coming months.

"That's just because our competition is not advertising," he said.

"It's rough. I hate this market as much as anybody. But we're going to take a chance - that's all this is."