Print

Email story

Comment

Email editor

Owners refocus to avoid taking a hit in economic downturn

By ASSOIATED PRESS
Published September 24, 2006

If you believe the surveys, small business owners are growing less optimistic as they see the economy slowing. Look closer and you might find that owners can be pretty upbeat - provided their businesses are well-positioned to weather a downturn.

Even though the housing market has slowed, John Reinhardt is positive about his Brooklyn real estate company.

"I'm really excited. I wasn't a few months ago, but the numbers are doing real well - if I took my average monthly production, it's up 20 percent the last month and a half or two months," said Reinhardt, owner of Fillmore Real Estate.

Reinhardt said the slide in home prices has made buying a house more affordable for many first-time home buyers, including blue-collar workers who are being priced out of the rental market. "Many of them are saying, 'Maybe it makes sense to buy,' " he said.

Reinhardt put his company in place to benefit from this shift by diversifying away from a focus on more upscale housing.

A survey of small company owners by the National Federation of Independent Business found that they were less optimistic last month. The NFIB's small business optimism index fell 2.2 points to 95.9, the lowest reading for the index since March 2003. The survey found that more businesses are borrowing - a possible indication that cash flows are slowing along with the economy.

But two components of the index - the number of job openings and owners' plans to create jobs - rose last month. That indicates that even as small business optimism has ebbed, many owners are comfortable enough to think about expanding.

Some business owners are upbeat because they're in industries that stand to benefit from a downturn.

Lew Freeman, whose Miami businesses include forensic accounting and real estate consulting concerns, specializes in helping lenders who are worried about borrowers who look like they're heading for default. Business is up right now - "bad is good," Freeman said - because lenders are seeing more signs of trouble as the economy slows, and they don't want to wait for a default to occur.

Freeman's company looks over a borrower's books and determines whether it's likely to default. After the real estate and mortgage boom of the last few years, "I think we're going to see a lot of setbacks," Freeman said.

That will keep his revenue increasing, but Freeman noted that he's not immune from the challenges other small business owners are contending with. He's had to deal with rising expenses, including higher energy prices and the increasing cost of property and casualty insurance.

Other business owners had the foresight to make their companies less vulnerable during a downturn.

Jon Bailey, co-owner of Bailey Gardiner, a San Diego marketing firm, described himself as cautiously optimistic about his company because it diversified away from a heavy dependence on clients in the real estate industry.

"We are continuing to grow when I see competitors failing, and I think that that has to do with smart business planning and a lot of crystal balling about the future," he said. "We looked at indicators, attended seminars about the future of the industry and realized it wasn't going to remain at that breakneck speed."

More of Bailey Gardiner's clients are in industries such as tourism and hospitality. Bailey said the company has had a slight increase in revenue and profits this year, and said "that has been a very happy experience."

Memories of the dot-com bubble and bust contributed to Bailey Gardiner's change in strategy.

"We had layoffs, salary cuts - we didn't want to go through that pain again," Bailey said.

Jennefer Witter, owner of New York marketing firm the Boreland Group, said that while her company is steadily growing - "I've already started to get nibbles from people who are doing their business planning for 2007" - she's preparing for a possible slowdown.

Witter, whose market is businesses that are too small for the big public relations firms, said she hired a business consultant to help her plan her strategy if she starts to lose clients. She's creating a contingency plan rather than waiting to deal with problems when they arise.

"I've plotted out what I will be working on this quarter in order to start 2007 on the strongest footing possible," she said.

[Last modified September 23, 2006, 20:59:23]