Turn It Up a Notch

Analyzing the Recovery

Though the circumstances of every business differ during this iffy time, there are plenty of common dynamics you can take into account as you make decisions about whether, where and to what extent to invest in your company during the coming months. Consider these factors:

* The small-business cycle: Everyone is eager to say the economy has turned the corner. Yet, even if recovery seems to have taken hold, it still may not be reflected in your company's numbers. That may be because the small-business arena is one of the last sectors to participate in an economic uptick, trailing large and middle market companies by six to eight months, says Mike Price, senior vice president of small-business banking for National City Corp. in Cleveland. He sees a small-business recovery in the second half of 2002.

Michael Butler, vice chairman of Key Corp., another Cleveland-based bank, adds "Small business might be in for a longer downturn and a slower recovery, or an even longer [period of] flattening out."

* Wisdom in numbers: The more sober outlook, bankers say, is reflected in the persistent caution exhibited by many entrepreneurs well into 2002. The majority of business owners continued to hold back from major new outlays in the second quarter. They're heeding the advice of people like Butler. "The last thing we want owners to do is gear up their business too far ahead before orders start to flow in, especially with capital expenditures," says Butler.

Of USBX Advisory Services LLC's three dozen entrepreneurial clients, "only three or four are making investments in their businesses," says Brooks Dexter, senior managing director of the Santa Monica, California-based investment bank. "The [others] are taking a cautious approach."

That's why Janet Dagle, owner of Basket Gourmet, which sells specialty foods, gourmet coffee and gift baskets, isn't spending the thousands she would like to invest in new displays and fixtures for her store in Selinsgrove, Pennsylvania. "There's nothing wrong with what I have, so why should I spend money now?" says the 45-year-old entrepreneur, whose company boasted 2001 sales of more than $100,000.

Similarly, David Gonzalez would like to buy some laser-equipped marking tools for his Toledo, Ohio-based company, but he doesn't trust his order flow enough yet to do so. "Customers are still only buying what they need, and they're buying in very small quantities," says the 43-year-old president and owner of Tooling & Components Corp., whose sales are about $1 million a year.

To Spend or Not to Spend?

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This article was originally published in the July 2002 print edition of Entrepreneur with the headline: Turn It Up a Notch.

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