The national real estate slowdown has hit this region like a ton of bricks, and business survival strategies are a hot topic in boardrooms and on sales floors.
The conversation is worth having. Companies that make the right moves before and during a slowdown can weather even severe storms, and economic storms—like hurricanes—give warning before they hit. “Economic downturns are slow in coming, so you should have some insight, barring something drastic like 9/11,” says Michael Barnett, an assistant professor at USF’S College of Business Administration in Tampa.
Barnett recommends freezing hiring, which he says is “easier than laying off people.” He also advises businesses to remain flexible. “If you’re in a situation where your existing markets are drying up, innovate and get into some new areas that are not affected the same way or that are even growing,” he says. “If you have the resources, you can take advantage of downturns.”
If you aren’t really in a position to diversify but think your market will start growing again, sometimes staying the course is the best alternative if you can afford it. Barnett points to Southwest Airlines, which managed to maintain staff levels following 9/11 rather than laying off a lot of employees. “That created less turbulence and fewer problems [for Southwest] when the market turned,” he says. “If you can float through the storm, even though it costs money, doing so might put you in a stronger position to recover from it.”
We asked the leaders of five longtime local businesses—which together have a combined 235 years of business experience—what they’re doing to stay alive right now.
DEALING WITH A DOWNTURN
Five tips for staying alive.
1. A buck in the hand is worth two in accounts receivable. Manage your cash flow. If you’re in a downturn, don’t rely on promises. Step up your collection efforts.
2. Employees are the firm. The term “human resources” is misleading. Humans are not just another resource to be reduced during a downturn. Employees should be the last to go. If you keep employees in tough times, you earn human capital, which can help you survive the downturn.
3. Out with the new and in with the old. Don’t swing for the fences with risky new ideas. Go for the base hits, the classics. Beef up your core instead of jumping into something unproven. It’s not the time to take huge risks.
4. Die to live another day. Failure is painful but sometimes you have to pull the plug. Businesses die all the time. Remember, it’s only a company, so don’t get too sentimental. You can always start a new one. You want to get out while you still have the opportunity to do something else.
5. There is a “U” in Team Up. Seek a partner, but choose wisely. Your partner could be a source of cash or talent. You don’t want to go in too hastily, though. Do the due diligence. Make sure you can work together. Don’t give too much control or you could suffer an agonizing partnership.
Living Walls opened in 1970 on St. Armands Circle, then Sarasota’s main shopping area. Over the years the Circle became more tourist-focused, and the furniture and design store made the move to downtown Sarasota in 1986. Today it occupies about 5,000 square feet on lower Main Street and employs eight people. Owner Alison Levin Bishop, daughter of the shop’s founders, had considered an expansion during the real estate boom but opted against it. And, boy, is she glad. “It would have been a very difficult situation for me right now if I had done so,” she says.
Strategies for 2008
Be smart about your expenses. “You can’t always do something about your sales or revenues, so that leaves the cost end,” Bishop says. “Use every strategy you can and get everybody on board. Every expense counts. I’ve seen business cycles before; this isn’t the first time there have been highs and lows in Sarasota or the economy. When you anticipate that kind of tightening, watch your overhead.”
Recycle. Living Walls reuses the second side of all paper that is nonconfidential. “Rather than throw away bubble wrap, popcorn and Styrofoam, we drop it off at shipping stores to save us the cost of garbage pickup. It’s a significant saving.”
Use your cell. Small businesses are the ultimate micromanagers. “If I’m only using 1,000 of the 2,000 minutes on my cell phone and I see my long distance charges are $500, I can use my cell phone’s additional minutes for free long distance.”
Keep up morale. “Focus on every customer who comes in the door. It’s really easy to give up and not make the phone call or push anything because you think nobody’s going to buy. Stay positive.”
Check and recheck. “I try not to make mistakes. Reread your purchase orders. If you place an order for a customer and it’s not right, you’re stuck with it.”
Stay fresh. “Even when times are tough, I won’t stay still in the water. Everything in the showroom is new. You have to stay current. I don’t have much in my warehouse because it’s not time to keep back stock.”
Advertising. “This is one of the hardest. I’m trying to make every ad count. When I don’t see a visible return, I shift my money, I don’t reduce the budget. Print is still the best for me.”
Lobby your public officials. “As small businesses, we need to find a way to speak out so we provide a large enough data point. My property taxes are over $1,000 a month—they’ve gone up 60 percent in the last two years—and it’s wrong. We have to pay sales tax on our property tax, too. We should at least exempt that.”
Turner Tree and Landscape
For 30 years, Bradenton-based Turner Tree and Landscape has designed and installed residential and commercial landscaping from Lakewood Ranch to Walt Disney World. The company primarily works in a 50-mile radius of Bradenton and owns six tree farms covering a thousand-plus acres. CEO Darrell Turner says he’s in survival mode. “Payroll is $100,000 a week and it comes every Friday,” he says. “We’re down 20 percent in revenues [in 2007]. We’re figuring it will be 18 to 24 months before things turn around. It was this bad in the early ’80s and ’92, and we survived those.”
Strategies for 2008 Layoffs.
Layoffs.“We laid off 17 people, bringing staff down to 100. It’s the first slowdown since 1992 where we’ve actually laid off anybody,” says Turner, and the process was excruciating. “You’re obligated not just to employees but also to their families. Some of these people live paycheck to paycheck. It’s like laying off family members.”
Shorter work weeks. “Crews are now working four 10-hour days. That cuts our fuel bill 20 percent right off the bat. We use a tremendous amount of ice for 20 coolers [for on-the-job drinking water] and each has two, three, four bags of ice. That’s $8 a crew, not much, but it adds up. Going to four days a week cuts that cost 20 percent. Cutting the work week cuts phone bills, too, and there’s little overtime that way.”
Making do with existing equipment. “We have 230 pieces of equipment and we’re not updating any of it. We’re just trying to repair and do with what we have.”
Part-time workers. “We have hired a couple part-timers, who were retirees, 30 hours a week, who don’t take benefits. If somebody leaves, we won’t replace that person. We’ll maintain with core employees.”
Find new markets. “We’re chasing some business we normally wouldn’t—smaller jobs and jobs outside the area that may have a plant list that requires 100-200 trees. Since we own our farms, we can offer a better price. We’re a bonded, A-rated company; we’re also chasing the bonded jobs. We qualify for Community Development Districts and are going to Charlotte and Hillsborough and Wachula for work.”
Network. “I attend two chamber events a week now; before I was lucky if we got to one. I attend more trade shows and networking events. These have all been a source of good leads.”
Do your research. “One thing we do now more than before is verify the client’s credit ratings or ability to pay before we sign a contract.”
Look to the future. “You can’t stop thinking long-term. We are expanding our tree farm, planting new crops of trees, so we’re ready for when this thing turns around in 18, 24, 36 months.”
Treat employees well. “We don’t have much turnover, maybe 5 percent, and we offer great benefits—a full-size gym, personal training three times a week and Blue Cross Blue Shield. We also provide an in-office massage therapist once a month. We’ve increased the percentage we pay of employees’ health insurance from 50 percent to 75 percent. It’s all about surrounding yourself with and keeping good people.”
Founded in Ann Arbor, Mich., in 1947, Carman’s Shoes moved to Sarasota in 1965 and has been a fixture on St. Armands Circle ever since. The women’s footwear purveyor owns its tidy white corner building with red awnings and employs as many as 10 salespeople during season. “[We provide] that different item that customers can’t pick up in department stores,” says owner and manager Bill Carman. “We try to offer something rare.”
Strategies for 2008 Zero in on your target.
Zero in on your target.“After being here for 42 years, we know our customer,” Carman says. “Our average customer in Ann Arbor was 20; here it’s 58, many in their late 70s. They’re interested in comfort, not high heels and high fashion. In retail, you can’t be a back-door merchant. That’s a person who comes in the back door every day, waits on people, takes their money, and never looks out front to see how the street looks, how the store’s windows look. You have to think of the big picture.”
Hold steady. “We’re not taking on any new lines. We’re working around what we need most. You cut back on marginal items.”
Retain staff. “We’ve always had part-time ladies who want to work a day or two a week. We try not to lay off people and we have no plans to do so. We take our employees to dinner and plays. We work around doctor appointments. We always have a waiting list of people who want to work here.”
Take time off. “It’s a bad sign if you’re open seven days a week. Everyone needs time off. And separate business from family. Otherwise you’ll lose your family. I’m a former air traffic controller and I worked in Saigon [during the Vietnam War]. When you left a tower, you put it away. When you leave the store, you have to have a switch. Otherwise business will eat you alive.”
Conserve. “We’ve always turned off the air conditioning at 5:30 p.m.”
Don’t overstock. “We’re very careful. We try not to have too much merchandise at one time. Insurance won’t cover it if you’re overstocked during hurricane season and lose everything.”
Ask if it’s worth it. “Since 2000 my taxes have gone up 194 percent. We may retire.”
Detweiler’s Propane Gas
When Sarasota-based Detweiler’s Propane Gas started out in 1951, it was mainly a propane gas delivery company that serviced mobile home parks. Today, the company still delivers propane gas to residential, commercial, industrial and agricultural customers, but it also rents, sells and installs propane tanks and repairs propane gas appliances. Detweiler’s is the largest family-owned-and-operated propane gas company in Manatee and Sarasota counties, and it’s run by Ken Detweiler, grandson of the original founder, and his wife, Michelle. Here’s what Michelle advises:
Strategies for 2008 Every penny counts.
Every penny counts.“A lot of small businesses don’t look at their numbers,” she explains. “You have to know exactly what’s going out and what’s coming in. We take a fine-tooth comb through every area of our business to make sure it’s running efficiently. If it isn’t, we adjust it right then.”
Talk about it. “Communicate with all of your constituents: vendors, customers and suppliers. I just sent a letter to all of our customers saying we’d be raising our rental prices on tanks due to the cost of doing business and the fact that we haven’t raised our rates for so many years. Our customers are shopping around, so I tell them how we price. We’re communicating with our employees, too, about our bottom line. We met with staff today; we’re $85,000 down in revenue in labor. We need to work smarter. Our employees are loyal and they understand. Most have been here 10 years. We didn’t have to do this a year ago. We were giving jobs away then.”
Stand firm. “Our people trucking in gas raised our freight recently. I told them to cut me some slack somewhere. You can’t just say OK to every increase. Xerox will say, ‘Your lease is up, and we’re bringing in a new machine and it costs more.’ Wait a minute. I don’t need a new machine. I’ve had a Pitney Bowes postage machine for seven years. I don’t need a new one.”
Reevaluate the old ways of doing things. “Fuel alone is unreal. We have 10 trucks on the road, so we’re looking at our route system and we’re analyzing our travel to make it more efficient fuel-wise. If it’s not an emergency we need to be disciplined and make sure we’re in the right geographical area, which will save time and money.”
Crowder Brothers Ace Hardware
Crowder Brothers Hardware got its start in 1955 in Sarasota and grew to include 10 stores in Southwest Florida. Today Ron Crowder, son of one of the original founders, owns the stores in Bradenton and Holmes Beach, with a new outpost opening in Lakewood Ranch in early 2008. The company has prospered despite the prevalence of Home Depot and Lowe’s on the local landscape. And after moving to a new location in Bradenton in 1999, it joined the Ace Hardware network to take advantage of Ace’s name recognition and product selection. The housing slowdown and resulting effects on the local economy have impacted sales, but the company deals mostly with individual consumers, not with the hard-hit big builders.
Strategies for 2008 Stay the course.
Stay the course.“We’re not doing anything drastic,” says general manager Bob Dannemiller. “We’re constantly trying to improve inventory and receiving processes, trying to be more efficient so we can do more with less. We’re reevaluating order points, how much of a product we get at what point we order.”
Focus on customer service. “Competition is stronger than it’s ever been. The way we deal with [that challenge] is having a large staff on hand. Our employee to customer ratio is much lower than our competitors’. [We’re also] looking for some new product lines to carry and stepping up our training program to help better train our people to be more knowledgeable and to find out what our customers really need when they come in. We have a mystery shop program through Ace Hardware, and these shoppers give us input on what we need to improve. If you treat your customers right and put all your efforts into that, you have a better chance of being successful than if you don’t.”
Seek new opportunities. Crowder Brothers also opened the Crowder Gifts and Gadgets shop at its Bradenton store in 1999, which greatly expanded on the gift items the company has always carried. “It’s been a huge success,” says Dannemiller. “It has increased customer counts and brought in customers who maybe would have never come to our store before.”