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Posted: January 01, 2009

Business survival 101

Control costs and look for new opportunities in down market

Nora Caley
Busin101_SpicyPickle_lg.jpg

Marc Geman, CEO of Denver-based Spicy Pickle,says lease rates for commercial space are dropping. (Photo by Mark Manger)

This recession can’t last forever. Until the economic downturn becomes an upturn, there are some actions businesses can take to survive.

"A lot of small businesses think they’ve got to totally hunker down, put their head in the sand and ride out this economic downturn," says Russell Smith, Region 8 administrator for the U.S. Small Business Administration. "That is not a great approach."

Instead, businesses should rethink their spending, hiring and marketing. They should not be applying for another loan. "Cash is usually the answer, but debt may not be the answer," he says. "They should be looking for ways to expand business with current customers, enter new markets and control costs."

Some businesses say that’s exactly what they are doing, and they expect to survive this recession. Some even see opportunities as competitors struggle.

Commercial real estate
Barry Dorfman, senior managing director of tenant representation for Jones Lang LaSalle Americas Inc., says the firm counsels clients to take advantage of their current situation.

"Measure where your current lease is against the market," he says. "There might be an opportunity to restructure your lease, because some landlords are concerned, and they don’t want their building to sit empty."

Mark Ballenger, managing director for the Denver office of Grubb & Ellis Co., says landlords are eager to make a deal, but office tenants are negotiating slowly.

"What the tenant says is, ‘Let’s keep talking,’ because they want some time to see what the future is going to be," he says. "I hear stories about tenants looking for new space, and they end up renewing their old space for a short term." Landlords might not decrease rents, but they might pay for carpeting or other improvements.

In December, CIBER Inc., a system integration consultancy, moved its headquarters from the Denver Tech Center Parkway to the new Palazzo Verdi building, also in Greenwood Village. "We signed this a few years back," says Tony Hadzi, senior vice president of U.S. Commercial Operations. "No one could foresee even six months ago what would happen in the economy."

In the retail and restaurant space, two publicly traded chains see opportunities.

"Commercial real estate fell off the cliff in October," says Marc Geman, chief executive officer of Denver-based Spicy Pickle, with 41 restaurants in 14 states. "We suddenly are getting unsolicited offers from landlords, and six months ago we could not get them to move off what we considered to be rental rates that we could not afford."

Red Robin is also finding opportunities. "Other restaurants are going out of business, and we are presented with more opportunities for sites," says Katie Scherping, chief financial officer of the 400-plus unit chain based in Greenwood Village. To conserve cash, the company will slow its growth. In 2008, Red Robin opened 31 locations nationwide, but plans to open 20 or fewer in 2009.

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Employment
Hadzi, from CIBER, says the new building is the least of his worries. "I worry about our people," he says. "I am trying to hold onto all of them." He says the company might cut back on other expenses such as new furniture.

Ray Gonzales, president and CEO of the Brighton Economic Development Corp., says he’s talking to an engineering firm whose executives are considering foregoing bonuses and taking $10,000 pay cuts instead of laying off workers. "My response was, ‘Great, we need more companies like you.’"

Some companies laid off workers and still need to reduce costs. Homebuilder McStain Neighborhoods has cut its staff from 115 workers to 20 over the past two years. The Louisville-based company closed its office, and staffers work from home.

"It doesn’t matter to a customer who is buying a leading-edge green house what our office looks like," says Tom Hoyt, founder and president. "We have a project in mothballs in Longmont. When we start that back up, we will build some kind of team-meeting office as part of our sales facility up there."

Renewable energy companies are hiring people.

Vestas, a Danish wind turbine manufacturer, has conducted job fairs in Brighton and plans to hire about 1,400 people for new blade and nacelle facilities there. Germany-based Siemens Energy built a wind turbine research and development center in Boulder.

Andy Paliszewski, director of the Boulder office, says the company plans to hire about 50 people. "We’re hiring one person a month," he says. "We are being inundated with resumes."

Decreasing employee turnover is another way to cut costs. Karen Policastro, regional vice president of Robert Half International, says some companies are making counteroffers to top employees who turn in their resignations.

"Companies are still focused on keeping their best employees onboard," she says. The staffing company encourages employers to try low-cost retention strategies, such as offering movie tickets to reward accomplishments.

Government contractor SGIS plans to hire about 100 people in 2009 to work at Schriever Air Force Base near Colorado Springs. Executive Vice President Linda Harris says the company is advertising in the Schriever and Peterson Air Force Base newspapers, as well as on Craigslist, Facebook, MySpace and Friendster. There will be job fairs, too. "It will be a mix of near entry level with two years experience, up to retired military with 20 or 30 years experience," she says.

Some see hiring opportunities when competitors close. "As furniture stores like Levitz, Weberg, Rhodes and Homestead House went out of business, better salespeople and better managers became available," says Jake Jabs, president and CEO of American Furniture Warehouse, which has nine showrooms in Colorado.

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He also says that to compete with Wal-Mart and other low-price retailers, his company long ago started importing. "We had to buy at the best price to compete, and those prices were overseas."

Companies that have layoffs sometimes worry about another issue: lawsuits. "In a recession, people sue for smaller amounts of money, but the lawsuit becomes more important," says Stacy A. Carpenter, a shareholder in the law firm Baldwin & Carpenter P.C. "In good times people sue because they want a bigger piece of the pie."

She tells employers to be careful when they lay off workers. "You have to have legal and nondiscriminatory reasons, not because they were over 50 and making more money," she says.

Marketing
Some companies find they need to market more. Spicy Pickle, like many other restaurant companies, introduced a value item to encourage customers not to cut back on their restaurant visits.

Marketing is more complicated for bigger purchases, says James Schwartz, marketing manager for Calgary, Alberta, Canada-based Carma Developers. While other developers use gimmicks — such as prize promotions designed to encourage people to visit a model home — Carma is trying a different approach.

"You can do the diamond ring giveaways all day, and there will be a ton of people," he says. "But those are not people who will buy a home."

Instead, Carma, whose U.S. headquarters is in Englewood, hired a concierge who connects buyers with builders. The company is no longer running print advertising, concentrating instead on customer relationship management.

The future
Schwartz is optimistic the homebuilding sector will recover. "There is pent-up demand in housing," he says. "There are people wanting to buy, but banks are not lending, so once that adjusts, people will be in the market."

Hadzi, of CIBER, says 2009 will be a tough year for all businesses. "The companies that are resilient and have a positive attitude and outlook will find a way to get business, and getting business is going to be taking it from someone else."

Dorfman, of Jones Lang LaSalle Americas, is optimistic too. "People are not packing up and leaving Denver. Revenue is going to be off, and there are some layoffs and rightsizing of space, but Denver is a viable market."

Gonzales, of the Brighton Economic Development Corp., is also hopeful. "We have to stay positive during times like this and take a proactive approach because I do think this time next year we will look at something completely different."

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Nora Caley is a freelance writer specializing in business and food topics. She can be reached at noracaley@comcast.net.

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