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Mixed Signals

Keep your business alive in an unpredictable economy.
September 1, 2005
URL: http://www.entrepreneur.com/article/79302

Words like variable and mixed are usually used to describe the weather. These days, they can also be used to describe the U.S. economy.

While the economy keeps growing overall, the combination of rising gas prices, a static job market and a potential housing bubble has left the U.S. consumer somewhat pessimistic. Consumer confidence fell for the fifth straight month in May--the longest consecutive decline since 2002. The Conference Board's "Consumer Confidence Index," a monthly survey of 5,000 U.S. households, tumbled 6.3 points between March and April alone. While the most recent figures from the survey indicate that consumer confidence may be on the rise--the index rose more than 2 points between May and June--entrepreneurs aren't out of the woods yet.

Americans aren't expecting the economy to derail, but they do expect more of the same, says Lynn Franco, director of The Conference Board's Consumer Research Center in New York City. "We're getting mixed signals," Franco says. "There's been economic improvement, but it hasn't been steady."

Mixed signals are no laughing matter for Chris Mazzilli, co-founder of Gotham Comedy Club, a 9-year-old comedy club in New York City with 35 employees and annual sales in excess of $1 million. The company offers comedy packages to corporations, and Mazzilli, 40, sees more moodiness and less consistency in his customers' buying habits. "They'll say, 'I can't do what I did last year,'" he says.

Patrick Calello is the founder of Automoblox, a Roseland, New Jersey, company that makes wooden toy car kits that retail for $32 at FAO Schwartz, Neiman Marcus and specialty toy retailers. Company sales this year will reach about $1 million. To convince hesitant buyers, Calello, 34, peppers them with Automoblox's success stories, offers them customer referrals and gives demos. "We feel confident their experience with the product will be positive," he says.

Entrepreneurs must stay confident if they want it to rub off on consumers, says Craig Stokely, founder of The Stokely Partnership, a Wayne, Illinois, marketing and research consulting firm specializing in business growth. Entrepreneurs should have a strong strategic plan, survey their customers regularly and listen carefully for signs of sagging confidence. "Consumer confidence will continue to go up and down," Stokely advises. "The smart entrepreneur takes steps to deal with it."

Entrepreneurs will need a stiff upper lip: Sam's Club surveyed 1,200 small-business owners in April and found only 45 percent felt confident the economy would get stronger by November--a seven-point drop from the same survey last year.