Inc.com > Personal and Professional Growth

Business Owners Plan to Grow Despite the Recession

Meredith Maines — 2009-07-09T14:34:05-05:00

Entrepreneurs see the glass half-full when it comes to the recession. According to a random-sample, third-party survey of 1,000 Intuit Payroll customers, 61 percent of the small business owners expect their companies to grow in the next year.

Laurie Sheflin, Intuit's group marketing manager, said this percentage is optimistic even in the face of the belief that the recession will more than likely continue two more years.

"It's being realistic about the economy but at the same time, not being downbeat," she said.

Of those polled, 57 percent believe now is a good time to further invest in their business. Sheflin said even though the survey didn't dig deeply enough to find how the funding to invest would appear, Intuit did find that three main categories were the most popular areas for the increased attention: advertising and marketing, employee training and development as well as new equipment.

Newer and smaller business showed more likelihood to invest compared to their more established counterparts. "They are often just getting started and have high hopes and clear goals for growth," she said. "Growth is an important metric for them."

But in order to grow, these same business owners won't be relying on government hand-outs, with 84 percent of the sample subscribing to the belief that the economic stimulus plan won't directly benefit or help grow their business in the coming year. Sheflin said this sentiment may be a byproduct of the entrepreneurial spirit.

"They're a very self-reliant group," she said of the business owners, 98 percent of which haven't yet received money from the government's plan. "They're very confident they'll survive, even in hard times."

Economy Got You Stressed?

Kelly Faircloth — 2009-05-13T15:54:56-05:00

Are concerns about your business surviving through the recession keeping you awake at night? If yes, then you're not alone. A survey of 500 small business executives, conducted by Reno, Nevada-based workman's compensation insurance firm EMPLOYERS, revealed that 65 percent have the same concern.

"About 20 percent of respondents said their main concern was the economy. But many other responses, from new avenues for growth to operation expenses, are also functions of the economy and point to a general sense that the business environment has them worried," says Martin Welch, president and COO of EMPLOYERS.

Todd Uterstaedt, CEO of Baker Daboll, a Cincinnati-based executive coaching firm, makes a living by helping business owners and executives cope with stress. "I've been coaching for 10 years; even during the last couple of recessions I don't think I've seen this number of people struggling to handle stress or the intensity of the stress they're dealing with," he says.

The troubled economy can be especially stressful for small business owners, adds Dr. Paul J. Rosch, president of the American Institute of Stress. "The CEO of a huge corporation who has to give pink slips to 5,000 workers he has never met would not be under as much stress as the head of a small firm who is forced to fire a few employees he has known and worked with for years," Rosch says.

So what can CEOs do to help their stress levels?

Rosch recommends leaning on a social network and sharing problems with peers—which is especially challenging for CEOs.

Uterstaedt agrees. "Finding someone you can trust and just talking through things is critical," he says. Uterstaedt suggests looking to others, such as clients and employees, for help. "Ask clients how they're engaging with their teams and how they get through tough times," he says, adding that too often, CEOs hunker down and depend only on themselves.

"They often feel like they've got the weight of the world on their shoulders, and they forget the strengths of the team around them," Uterstaedt says.

Executives should also devote time to whatever helps them recharge their batteries, whether it's a 45-minute walk every morning or painting every Sunday afternoon, Uterstaedt advises.

"Stress is for the long haul, so you have to develop routines for yourself and for team leaders that allow you all to recharge," he says. "People say, I don't have time, but do you have time for the consequences if you don't?"

Fix-it Entrepreneurs See Increased Business

Kelly Faircloth — 2009-05-13T13:28:50-05:00

The neighborhood plumber is one entrepreneur that's not hurting during the recession, finds a recent study. In fact, most fix-it entrepreneurs are benefiting from the consumer trend of repairing necessary items rather than buying new.

New data from Raleigh, North Carolina-based financial analysis provider Sageworks, shows consumers have cut back on all but the bare necessities. Big purchases are down sharply: Car dealership sales are down 9.7 percent over the last 12 months and home builders have seen sales slide 5 percent.

The good news is that instead of buying new, consumers are turning to car mechanics and repairmen to stretch the life span of their possessions. Business is up 2.4 percent at auto repair shops and 4.6 percent for building equipment contractors like electricians and plumbers.

"People are economizing—they're not buying new things, they're just fixing what they have," says Sageworks CEO Brian Hamilton.

He's finding businesses that provide items or services people consider non-discretionary are insulated from the worst of the downturn. Other strong sectors include accounting (10.2 percent), dentistry (6.9 percent), and personal care services such as haircuts (4.5 percent).

"The categories doing well are selling stuff people need," he says. "These are stable industries that tend to stay the same regardless of cycles."

To appeal to budget-conscious consumers, small businesses that can are shifting their offerings. Hamilton points to entrepreneurs like independent builders and electricians moving to repair work as an explanation for their stability.

"That's why I think these sectors are more stable—they're finding way's to maintain sales and profit margins, because for them, less earnings means less income."

Beauty on a Budget

Kelly Faircloth — 2009-05-13T11:43:24-05:00

Women like to feel pretty. So despite the ailing economy, they are still buying beauty products but on a budget—providing a great opportunity for entrepreneurs that supply discount stores with skin and hair products.

According to a recent survey of 1,000 U.S. women by Mintel, the Chicago-based market research firm, 40 percent of women are waiting longer between purchases. The study also revealed that one out of every three women is switching to cheaper products. Mintel senior beauty analyst Taya Tomasello calls this trend "econochic," when consumers struggle to balance hard times with their cosmetic concerns.

"Women are focused on getting the most out of their beauty dollars," she adds.

Consumers aren't slashing their budgets wholesale—for every individual, there's at least one product they refuse to give up, Tomasello says. But they are experimenting with new, less costly alternatives sold in discount and drugstores.

That's good news for CEO Ido Leffler, who has witnessed firsthand consumers' growing interest in drugstore brands. His company, Yes to Carrots, sells its line of beauty products in stores such as Target, Rite Aid Pharmacy and Walgreens at wallet-friendly prices. Despite the global slump, he forecasts a 30 percent increase in sales this year.

Leffler attributes their growth to the way they've positioned their products—high-quality at low prices.

"Our philosophy has always been guilt-free beauty," he says. "We didn't want consumers to see their credit card bills and feel guilty—that defeats the purpose of buying beauty products."

StartupNation Recognizes Mom Entrepreneurs

Alexandra Johnson — 2009-05-07T17:35:51-05:00

Mother's Day came early for one lucky mom: Yana Berlin was named the winner of StartupNation's first ever Leading Moms in Business competition. Berlin is the founder of Fabulously40 and Beyond, a San Diego-based social networking site for women over 40.

The national contest, hosted by StartupNation, a popular business radio show and networking site, ranked mom-run businesses across the United States. Thousands of self-nominated contestants entered and more than 600,000 votes were casts to choose the top 200 moms.

"The ability of moms to be the CEOs of families, in many cases, as well as of their own businesses, is extraordinary, and deserves special applause," says Rich Sloan, "chief startup-ologist" and co-founder of StartupNation. "You could almost compare children and husbands to customers and employees," adds Sloan. "Managing those dynamics requires a skill set that I think transfers beautifully to running a business."

Berlin agrees. "These days, a lot of moms run businesses," says the mother of five, "and the office is never closed." Launched in 2006, Fabulously40.com has thousands of members around the world. But despite her business's growth, Berlin always manages to gather her family for dinner. "Moms have a lot on their plates, and we have a hard time saying no," she says. "It's all about balance and priorities."

Berlin adds that many women choose to start their own home-based businesses for the flexibility and freedom self-employment affords. "You can walk away for an hour or two, or a day, to do what you need to do for your family, and the rest can wait," she says. "If you set your business up right, then it won't fall apart."

Of course, running a business can also be a good way to teach kids about goals, hard work, and determination. "I think the best thing we can give our kids is a good example," Berlin says. "Hopefully, they'll emulate us—if we did it right. And if we did it wrong, they'll do it better."

Survey: Owners Toughened by Recession

Kelly Faircloth — 2009-05-07T12:28:17-05:00

Entrepreneurs think the recession is making them better business owners, and, according to a recent report, they're beginning to feel cautiously optimistic.

The American Express Open small business monitor surveyed 727 owners of firms with fewer than 100 employees and found 77 percent think managing through the last few months has made them better at managing their businesses.

According to Alice Bredin, a small business advisor to American Express Open, gloomy economic circumstances have forced entrepreneurs to perform at their highest possible level, giving them more confidence as they face new challenges.

"In boom times, there's a lot of demand for services and products, so you can run an okay business and do well," Bredin said. "But when times are tough and competition increases, you have to do a great job even just to survive. Your staff has to be top-notch. You have to be careful about expenses. You have to renegotiate your lease and supplier contracts."

Optimism has also stabilized, with 4 out of 10 respondents feeling positive about their short-term prospects, even with this time last year. Retailers were the most upbeat sector, showing 47 percent with a positive outlook, on par with last fall's 48 percent. Hopeful manufacturers, on the other hand, fell from 52 to 34 percent.

"They've had several months of rough going, and so many are probably feeling they've made the tough choices and learned to survive in lean times," Bredin said.

But small business owners remain cautious. A record-low, 42 percent, plan to make capital investments in the next six months, down from 53 percent a year ago. Only 28 percent plan to hire this spring, and 30 percent have stopped taking a salary to conserve cash.

A substantial minority, 18 percent, have even taken a second job to ride out the downturn.

"I think entrepreneurs are seeing the beginning of the final days of this, and they're doing whatever they have to do to get through to the end, to find a way to stick around," Bredin said.

Applicant of the Week: Plus1 Marketing

Alexandra Johnson — 2009-04-29T13:51:17-05:00

As applications for the 2009 Inc. 500 | 5000 arrive, we thought it would be worthwhile to shine a spotlight on some of the companies that are vying to appear on our ranking of the fastest-growing private companies in the U.S. (For more information and to apply, go to http://www.inc5000apply.com.) One that caught our eye was Columbia, MO-based Plus1 Marketing.

Serial entrepreneurs (and brothers) Brant and Brock Bukowsky knew the importance of successful online marketing strategies; they credit online marketing for the growth of their ticket company ShowMe Tickets and mortgage company Mortgage Research Center, which landed on the Inc. 500 | 5000 in 2005 and 2007, respectively.

"We started doing online marketing in '99," says Brant. "We found that it was a strong area to be in and we focused a lot of resources on that. We applied those marketing principles to specific industries, and that's the reason that we were able to grow at the pace we did."

Recognizing the talents of their online marketing team, they founded Plus1 Marketing after selling ShowMe Tickets in 2005 to help other companies grow with the same techniques, as well as investing in companies through angel investing and growth partnerships. But what Brant is most proud of is the people working for him.

"We have a fantastic team. I know people say that all the time, but every business we've started has been focused on having a foundation of good people to start it," he says. "Then, we let them take over. It just grows from there."

For more information and to apply to the 2009 Inc. 500|5000, go to http://www.inc5000apply.com.

CEO Passions: Ballroom Dancing

April Joyner — 2009-04-27T18:27:05-05:00

When Promise Phelon heads to the dance floor after work, she is not just rehearsing party moves. Phelon, CEO of Upwardly Mobile, which operates the career planning site UpMo.com, has been competing in Latin ballroom dance contests for seven years. This year, she plans to compete in six events, which won't be easy to fit into her schedule. But Phelon says dancing makes her a better business owner. "Sometimes, when you go out onto the floor, you have to adjust your choreography on the fly," says Phelon, pictured here performing the cha-cha with her dance partner, Boris Glants. "And that's what's really awesome about business -- you always have to innovate, change, and adapt."

Her favorite dance The samba. "It's a very rhythmic dance, and it's very playful," Phelon says.

Most challenging dance The paso doble, in which the leader portrays a matador and the follower represents his cape. "It's technical and rigid," Phelon says of the dance, which originated in France and Spain.

"Dance is all about communication and agility. Sometimes, you're a leader; other times, you're a follower." -- Promise Phelon

Paul Graham’s 13 Pointers for Launching a Successful Startup

2009-04-27T18:22:28-05:00

Venture capitalist and e-commerce pioneer Paul Graham gives 13 pointers, including "Get ramen profitable." Huh? See paulgraham.com/13sentences.html.

"Ramen profitable" means a startup makes just enough to pay the founders' living expenses. It's not rapid prototyping for business models (though it can be), but more a way of hacking the investment process. Once you cross over into ramen profitable, it completely changes your relationship with investors. It's also great for morale.

The Mother of Reinvention

Patrick J. Sauer — 2009-04-27T17:15:27-05:00

In The Republic, Plato famously wrote, "Necessity is the mother of invention." What the esteemed Greek philosopher failed to mention is that reinvention is the way to build the mother of all companies.

Innovation is the current buzzword, but in many ways, it's become an overused term that means all things to all people. Anything can be "innovative," regardless if it's more of the same, or a revolutionary product that doesn't make things better. (Did the Segway really change your life?) A reinvention, however, is specific: It involves taking something that already exists, improving it, and making it the industry standard. A reinvention has the added benefit that somebody else has already done some of the legwork of getting established in the marketplace.

"The most successful things find a new way to differentiate on top of a set of established behaviors," says Eric Ryan, co-founder of San Francisco-based Method, a company specializing in green cleaning products with sleek designs. "We didn't invent home cleaning, we just found a new way to do it."

It may sound less sexy than "invention" and less futuristic than "innovation," but throughout the history of American business, reinvention has been the backbone of entrepreneurial success.

Henry Ford is one of the first titans who, in essence, reinvented the wheel. He was far from the first auto manufacturer to develop a four-wheeled gas-powered car. That would be Gottlieb Daimler in 1886, 17 years before the Ford Motor Company was incorporated. Ford, however, pioneered features such as lightweight vanadium steel, removable cylinder heads, a suspension designed to handle America's rural roads and a one-piece underside shell in his easy-to-maintain-or-modify Model T.

More importantly, Ford reinvented Oldsmobile's rudimentary assembly line. "He was the first to bring the work to the workers, making this a real assembly line and one that remains the standard," says Russ Banham, author of The Ford Century. "Previous manufacturing methods, in which workers moved from one part of the factory to another building a car, took so much time the finished automobile was unaffordable for average Americans." By adding a movable conveyor belt to the assembly line, Ford cut down production time from more than 12 hours to 93 minutes. Between 1913 and 1927, the company would produce some 15 million Model Ts, changing the automotive and economic landscape forever.

The 21st century version is perhaps best exemplified by the iPod. Although the digital music player is now nearly as ubiquitous as a toaster in the kitchen, the device only made its debut in November 2001, a few years after mp3 players like the Rio PMP-300 hit the market. And while the original scroll-wheel iPod was powerful, offering 5 GB of storage that could hold 1,000 songs, it was also expensive, at $400. The iPod proved so popular that even at that price, many users quit (or at least slowed) their illegal downloading by switching to the more streamlined and user-friendly iTunes.

"It seems to me that the true visionaries are the ones who look at the same equation that everyone else is looking at and still come out with something that changes the game," says Robert B. Tucker, president of The Innovation Resource, a consulting firm based in Santa Barbara, California, and author of Driving Growth Through Innovation. "In the case of Apple, they saw the growth of mp3 along with the problem of illegal downloads, so they came out with iTunes, a system that offers a complete solution to the customer."

Apple had the same impact on the marketplace as Ford, selling more than 210 million million iPods worldwide. As of June 2008, 5 billion songs have been downloaded from iTunes, which has also become the dominant player in digital TV and movie downloads. Apple is constantly reinventing its successes. "The iPhone is nothing more than a product extension of the iPod," says Ryan. "It's a major breakthrough in the way phones are set up, but before it came out, any of us who has a Mac or an iPod knew how it worked." Available for less than two years, total sales of the iPhone (and iPod touch) have hit 37 million.

Being a "lead user" of a product is often the first step on the road to reinvention according to Eric von Hippel, professor in the innovation and entrepreneurship program at MIT, and author of Democratizing Innovation (available here as a free download). "Successful entrepreneurs are often the lead users of the product themselves who try different variations while the market is still small and uncertain," von Hippel says. "The opportunities come out of understanding the communities they serve."

A prime is example is Under Armour, which came out of Kevin Plank's desire to have a workout T-shirt that deflected perspiration rather than absorbing it. As a former University of Maryland football player, Plank knew the ins-and-outs of the athletic community he targeted.

Is it possible to set out with the goal of achieving a reinvention? Ryan says that Method has always been a "challenger" brand looking for ways to upset the status quo. They've even gone so far as to downplay the key aspect of Method's products because it could have thwarted their plans of reinvention. When the company launched in 2001, being labeled "green" was a detriment, so Ryan and co-founder Adam Lowry minimized the environmentally friendly aspects of the cleaning products, even though it was the heart of why they started Method.

"Our company philosophy is to not sell poison, but for the first two years, we didn't have anything on the front of the cleaning products about being non-toxic, we focused on the packaging and fragrance," Ryan says. "Only after customers got it home and found out it works would they have the discovery it's also good for the planet." Times have changed, and the $100 million company now features the eco-properties of the brand more prominently in Method's marketing. Ryan says the company is currently aiming to reinvent personal care with its lotions, body washes and baby bubble bath.

Reinvention is not just for upstarts anymore, as corporate titans have learned in recent years. Travelocity founder and former CEO Terry Jones built the online travel agency company while working as CIO for Sabre, which was in the in-house IT arm of American Airlines. American's CEO provided the funding, Jones says, because he knew a shift to online booking and ticketing was inevitable. Jones moved his team off campus and put together a staff that mixed younger IT folks with veterans from travel. Created in 1996, Travelocity would eventually become its own entity, but the incubator for the first online travel agency was at American Airlines. Jones's experience as a start-up tucked away inside a huge corporation shows it's possible for business owners of any kind to create the company mindset that leads to reinvention.

"Our philosophy was we were still a travel agent, just a very different kind of travel agent, but we had a culture that celebrated experimentation and didn't punish failure," Jones says. "You never know where the idea is going to come from that breaks the paradigm."

These days, one of Jones's endeavors is serving as chairman at Kayak.com. It's a search engine referral service for flights, hotels, cruises, and such, but it doesn't issue tickets like Travelocity. Rather, Kayak directs customers to the airlines and so forth, so it's not a travel agency in the traditional sense.

In other words, a reinvention.