Small businesses don’t have it easy when it comes to weathering a slow economy.
The rising cost of materials, labor, energy, fuel, rent and insurance are just some of the challenges they’re facing. Add in competition from bigger businesses,which have deep advertising pockets,and small businesses can be swimming in some rough waters.
“It’s a war zone out there,” said Javad Mokhbery, president of Irvine-based Futek Advanced Sensor Technologies Inc. “We have to work harder and get stronger at this time.”
Futek employs 85 workers and generates about $10 million in yearly sales making sensors and related instruments used to measure everything from torque and water pressure to heat and force. The company’s sensors are often attached to equipment used to manufacture textile, automotive, aerospace and technology products.
It’s investing more money on computer software that will better track orders, inventory and operating costs. The company paid a pretty penny for the equipment, Mokhbery said.
“You have to look at it as an investment. In the long run you’ll have a better-run company and when things start to look up, you’ll be ahead of your competitors,” he said.
Futek is also beefing up its research and design work so that it can offer more products to customers who are looking for variety, he said.
The company is also offering discounts on orders that are placed on its Web site, Mokhbery said.
And there’s no type of small business that isn’t feeling the effects of the economy.
Small retailers may have to slash prices or offer more specials to generate business, according to Shaheen Sadeghi of Costa Mesa-based Lab Holding LLC, which developed, owns and manages The Lab and The Camp in Costa Mesa.
Both malls have seen a slight dip in sales, according to Sadeghi. He’s counting on each mall’s tenant mix and the stores’ unique products to keep traffic coming.
“The economy is obviously affecting everyone across the board,” he said. “Overall total spending is going to be down. We’re finding that people are buying less, but buying better.”
Dana Point-based mineral makeup maker Colorescience plans to focus on keeping the company a niche one, according to founder and Chief Executive Diane Ranger.
The company, which employs 100 workers and generates more than $40 million in yearly sales making mineral makeup for women with wrinkles, fine lines, acne, discoloration and other skin conditions, is staying away from big retailers. Instead it’s opting to continue selling its products through plastic surgeons, dermatologists and upscale spas, hotels and resorts,higher-end sales that can generate more profits.
Selling products through a specific channel helps keep Colorescience’s brand distinct, which makes customers feel like they’re buying a product that’s unique at a time when they’re being more careful with their spending, Ranger said.
Colorescience also is using gorilla-marketing tactics to generate exposure, which could help the company drum up more sales.
The company, like most small businesses, can only spend a limited amount of money on traditional advertising, Ranger said.
Rather than placing a bunch of advertisements in fashion magazines, the company is eyeing direct consumer contact by hosting mineral makeup seminars at hotels and plastic surgeon and dermatologist offices. The tactic allows people to try the products firsthand, Ranger said.
“We can’t play the same game that bigger companies play. We don’t have big advertising dollars so we have to be very clever with our marketing,” Ranger said. “You have to get the most bang for your buck.”
Watching Prices
Restaurants also are watching their prices.
Lazy Dog Cafe, which employs 450 workers and is targeting $6 million sales this year, operates several American comfort-food restaurants in Westminster, Orange and Torrance.
It’s trying to attract more customers by keeping prices low.
The average check at Lazy Dog is about $16 per person, according to founder and President Chris Simms.
The restaurant chain, like others in the industry, is battling rising food costs and a minimum wage hike, which makes it difficult to not pass the added expenses onto consumers, he said.
Since Lazy Dog only has three restaurants, it’s able to keep a close eye on how much food it’s wasting in order to make better purchasing decisions on produce, meat and other cooking supplies, Simms said.
“It comes down to having good controls in your restaurant,” Simms said. “We watch every scrap of food to make sure we’re not wasting anything.”
Keeping close ties with vendors also gives Lazy Dog more room to negotiate prices, Simms said. Customer service is another key part.
“The restaurant business is probably the most difficult it’s been in years,” Simms said. “We’re being very cautious about our guests’ experiences.”
Hiring
Smart hiring is another important tactic for some small business owners.
O’Quinn Clothing, a Huntington Beach-based maker of men’s clothes inspired by skateboarding, surfing and other action sports, counts about five full-time workers.
Hiring fewer people who can multitask gives O’Quinn an opportunity to get the most productivity out of workers while keeping labor costs low, according to cofounder Dean Quinn.
“You have to keep your headcount low and capitalize on your employees by hiring talented people who can wear multiple hats in multiple areas,” Quinn said.
Businesses that have kept their spending conservative during economic growth periods should find ways to invest in their businesses now in order to get a competitive edge when the economy looks up, said Chris Lorenzana, business development director with the Small Business Administration in Santa Ana.
Building up a stronger sales team that can aggressively nab new and profitable clients when competitors are scaling back is key, according to Lorenzana.
Investing in real estate, machinery, equipment and software that will help run a smoother operation are other ways to improve business not only during a recession but after one as well, Lorenzana said.
“Now is the perfect opportunity to expand a business,” Lorenzana said. “You can invest for the long term.”
