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Advice for Small-Biz Owners

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It's no secret there's plenty of bad news about the economy and the state of business. The recession and its impact on business are making headlines every day. As with any economic slump, plenty of people have plenty of questions about what they can do to survive.

One organization is helping business owners in Southern California survive and even thrive. The Santa Ana District Office of the U.S. Small Business Administration and its resource partners, Orange County SCORE Chapter 114, Orange County Small Business Development Center and the Orange County Women's Business Center, have joined forces to form "tiger teams" to help small businesses that need assistance during these tough economic times. Tiger teams consist of representatives from each organization, who are selected based on the needs of each business. The tiger team will meet with businesses on-site to analyze their operations and make recommendations to help them stabilize and improve their businesses.

I asked one tiger team member his thoughts on the downturn and what biz owners can do to make it through. Brad Mix is an SBDC counselor and consultant who specializes in financing and loans.

What are the most common problems you are seeing right now?

During the past economic growth period, hyper-stimulated by a strong real estate market and anything related to real estate, many businesses grew too rapidly and got overextended. Now the SBDC is helping them become "right sized."

In addition, many businesses are suffering from increased or unaffordable occupancy costs; they either bought an over-priced building or their landlord bought an over-priced building. As a result, they cannot afford their mortgage or monthly lease payments.

For example: A number of local veterinary hospitals built their own buildings within the last six years. They had to increase their prices 300 percent in order to cover their occupancy costs. Unfortunately, most businesses, especially in the retail industry, can't raise prices and are being forced out of business from excessively high rent payments. Now even the veterinarians are starting to feel the impact of the recession.

If you had a couple pieces of advice for struggling business owners in this climate, what would they be?

1. In all business recessions, like in nature, there will be a natural and healthy thinning of the herd, where the strongest survive. This is an ideal opportunity for the better run companies to gain market share as other businesses struggle or go out of business. If you are financially healthy, this is an ideal time to buy out a competitor at a reduced price.

For example, during the past real estate orgy, there was an over saturation of real estate agents. Now the excess of real estate agents is gone, and the real estate agents that stay in the game will have positioned themselves to be market leaders.

2. The overwhelming consumer trend, even with affluent consumers, is to cut back on spending on high-end items. Therefore, businesses need to offer specials or moderately priced products. For instance, in Palm Springs, Calif., where there is a restaurant on every corner, moderate and low-end restaurants are better surviving the economic downturn than high-end restaurants.

3. With the rising unemployment rate, many people are looking at starting a business, not out of choice, but out of necessity. They can't find a job so they are looking to start a business.

For people starting a business, it's important to consider both industry and market trends. Some businesses actually do extremely well in poor economic conditions. Currently, locksmiths are cashing in on the real estate foreclosures. Look to start a business that is less economically sensitive.

Mike Werling, the managing editor of Sea Magazine, has written for Entrepreneur.com, Senior Market Advisor, Boomer Market Advisor and Broadmoor magazines.

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