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Business survival 101: Control costs and look for new opportunities in down market

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Posted 01.01.2009

Business survival 101

Control costs and look for new opportunities in down market

By Nora Caley

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.