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Smart growth

Manny Otiko | 3/31/2010, 5 p.m.

Abandoned homes, empty store fronts and long unemployment lines. The signs are all there showing that we are in the worst economic climate since the Great Depression. However some African American entrepreneurs are thriving in the so-called Great Recession.
Selena Cuffe, president of Heritage Link Brands, a company that imports and distributes wines produced by Africans and Blacks in the Diaspora, said the current economic climate has made find financing a lot more challenging.
"It's not impossible (to get funding)," said Cuffe, a Los Angeles native. "But it's very critical to show you have a sound business model."
Cuffe, who funded her company with savings and credit cards, is used to operating in a tough economy. She and her husband launched Heritage Link Brands in 2007, when the economy was starting to dip under the policies of the George W. Bush administration.
Often operating in a recession means that both consumers and producers are forced to be very picky about their financial decisions. Cuffe said the key is making your product stand out from the thousands of competitors.
"You better do a better job than anyone else," the entrepreneur said. "If you are selling a product, you have to believe it is better than anyone else's."
According to Cuffe, the South African wine industry is a $3 billion a year business, but less than two percent of that is managed or owned by Black people. "Our wines are phenomenal," Cuffe said. "We have a powerful story. People want to support what we do."
Carl Dameron, founder of Dameron Communications, a marketing and public relations firm in San Bernardino, has seen the economy rise and fall in more than 30 years of doing business. Dameron Communications clients include LaSalle Medical Associates, Carden Virtual Academy and Four D College.
He says companies have to adapt their products and services to survive the economic roller coaster. "The key is to have counter-cyclical business lines," Dameron said. "We know there is an eight-year business cycle and that some products and services do well in good economic times and that some do well in bad economic times."
Dameron uses the auto industry as an example. Car dealers sell more cars during boom times, and do more repairs in down times, said Dameron, whose company services government, non-profits and businesses. "Advertising and collateral design and printing do well in boom times for business and non-profits," Dameron said. "In bad times, public relations, web and collateral development do well for government and nonprofit organizations."
The advertising and public relations industries have been badly hit by the economic downturn. Dameron said that about half of advertising and public relations firms lost 50 percent of their clients or went out of business in 2008 and 2009. Dameron said that agencies which focused exclusively on one market, such as real estate and the auto industry, failed. "Because Dameron Communications keeps overhead low and works in many product categories, we survived and are here to work with new clients," Dameron said.
The failure of advertising and PR firms means there are more clients who are looking to pick up new agencies. However, clients are more cautious about how they spend their advertising dollars. "Potential clients tend to have checked us out before they meet us and are ready to become clients when we begin the conversation, instead of after six weeks," Dameron said.
The Inland Empire entrepreneur added that the Great Recession has also made it tougher for businesses to get operating capital to stay alive. They are having to change their procedures to adapt to the new fiscal climate. "We make most clients pay in advance," Dameron said. "When they pay in advance, we are rarely left unpaid. However, many government agencies are unable to do so, so we will bill them. We know we will get paid from government clients."
Jack Garson, author of "How to Build a Business And Sell it For Million," said the recession is a great time to buy a business. Garson is the founding partner of Garson Claxton, a D.C.-area business and commercial real estate firm. He has advised companies involved with million-dollar deals.
The current economic climate is perfect for investors who are looking to acquire a business, and then sell it in a quick turn around, said Garson, adding that the American economy runs on boom and bust cycles.
He also pointed out that when real estate tanked in the 1990s, investors poured their money into technology. But in this current economic climate, people are leery about putting their money into either sector. Garson predicts that Americans are going to return to the old-way of doing business, by "starting a business, growing it like crazy and then cashing out."
But as they are doing so, the business landscape will be very different, said Barron Harvey, dean of the Howard University School of Business in Washington, D.C.
""Even though the economy has turned down, and from many vantage points may have bottomed out, as a function of that process many of the . . . less effective . . . businesses, particularly small businesses have gone by the wayside, and there is an opportunity to fill that spot," Harvey said.
The business educator noted that any entrepreneur who chooses to grow their company in a recession is probably very much aware of their market and some of the dynamics and shake-outs that have already occurred. Consequently, there is an opportunity to capture the customers that company has left behind.
But business owners must keep this in mind, cautioned Harvey: "There's been a significant pull back by consumers in certain areas. But those firms that provide good service, quality products and good customer service will continue to exist."
Our Weekly owners, David Miller and Natalie Cole, pictured on this week's cover, apparently didn't get the memo that America is in a recession. Instead of hunkering down and riding out the storm, the entrepreneurs in February expanded the reach of their five-year-old newspaper into the Antelope Valley with the launch of OurWeekly Antelope Valley.
Additionally, they introduced a new quarterly health-related magazine last year, "Healthier You," which distributes separately and differently from the newspapers. In March, they also re-launched the OurWeekly website (see www.ourweekly.com); and in April they are introducing a new stand-alone product, "Careers and Education," which is already meeting its revenue targets.
Cole, OurWeekly publisher and CEO, talked about why the company is forging such growth during what some consider the worst economic downturn since the Great Depression.
"As a business management graduate with a minor in economics, I learned that recessionary times often represent the greatest growth potential for business. It's a gutsy and risky move, but you learn to manage the fear and forge forward. Recessions force efficiencies that might otherwise not be as stringently committed to," continued the newspaper veteran.
"Cost cutting measures during such periods is smart business. However, it is unwise to attempt to 'save your way to prosperity' indefinitely. You've heard the saying, 'you have to spend money to make money,' well, this certainly rings true as it relates to growing your business. Increasing spending to grow your business during a recession makes perfect sense, provided you are in a growth business, have a strong strategic plan, can dedicate appropriate resources to meet objectives of the plan, and can appreciate economies of scale.
"There are numerous benefits associated with such growth including better market and industry rates as demand drops in key areas; negotiable rates as vendors seek new business; and competitive advantage as you advance the game at a time when competitors are dead in the water, etc. Growing business during recessionary times has the greatest upswing potential, and for some reason, it reminds me of the saying about banks, if you can prove to banks that you don't need money, you are in a better position to get money and similarly, if you can spend money at a time when others are dropping out of the market, it speaks volumes about your staying power," Cole noted.
Miller, OurWeekly executive vice president and general manager shares similar sentiments.
"Although many people may feel that there is an extreme need to cut costs during a recessionary period, sometimes you have to take risks in order to achieve your desired goals. It always helps to diversify.
" In this business, it is imperative that you develop a portfolio of products and services that you are able to offer. It becomes a one-stop shop which allows customers options for marketing their goods and services. The portfolio of products can fit any customer's need not to mention budget."
Sometimes and entrepreneur even needs to re-invent their business.
The Great Recession forced Los Angeles resident Cheryl Lawson, owner of The Perfect Date, an event planning and marketing firm, to change the way she did business. Lawson's firm specialized in organizing corporate meetings, association conferences and gala celebrations. However when the economy began to slow down, companies began to cut back on spending.
"At the end of 2006, I began to see a slow down in a few of my smaller corporate and medical meetings," Lawson said. "While I wasn't too alarmed then, by the end of 2007, it was quite obvious that a shift was happening. Many people were losing their jobs, companies were downsizing and having something to celebrate was not on the priority list for my clients, who had been using events to celebrate and reward employees."
Lawson watched as the economic climate moved from one where wealth and luxury was celebrated, to one where corporate spending was seen as offensive, when many Americans were struggling to pay their bills. Companies were forced to tighten their belts.
"The AIG luxury retreats caused even the president to make statements about corporate meetings and retreats that would scare even the most frugal small business CEO," Lawson said. "These things forced meeting and event planners to really get back to basics."
The new climate of frugality meant that service companies had to justify their costs. Clients wanted to see a return on their dollars, Lawson said.
Realizing that business was slowing to a trickle, Lawson had to come up with a way to reinvent herself. She had dabbled in the social networking field when she was creating online communities for her clients. Lawson discovered that using sites such as Xanga, Facebook, YouTube and Twitter was a great way to create awareness and drive registration to her events.
"What I found was that more and more clients wanted me to not only help with their events, but also create an online community that could sustain their event/brand until the next event," Lawson said.
She realized that social media marketing was a new trend and a fundamental shift in the way marketers do business, communicate and connect with clients. "Social networking sites or social media allow you to connect, and collaborate with your attendees in a whole new way before, during and after your event. And the best part is most of it is free," Lawson said.
Like many displaced workers, Lawson realized that she had useful skills which she could impart to new entrepreneurs. In 2007, she created a course called "Event Planning," which she now teaches at Riverside Community College's Community Ed program. The class covers areas such as event basics, career opportunities for aspiring planners, event budgeting and negotiation skills.
Lawson's reputation has grown in the higher education world, and she has also taught classes at Devry Online and the University of California, Riverside's Extension Center. She has recently started teaching a social media marketing course. "Now, I am asked to speak and coach others how to utilize the social networking tools for their businesses," said Lawson, who said she gained a lot of valuable lessons as a business owner and instructor.
She also said that African Americans needs to be able to transfer their skill set to a new industry or career, because you never know when market forces might sink your current industry. Although she now works in social media, Lawson still see herself as event and marketing specialist.
Business owners also have to be passionate about their career field. "It sounds like a cliché, but if you are doing what you love, you can make it through any hard times," Lawson said.
Unlike the other entrepreneurs, Marlo Afflalo and her husband Mordecai were not operating business, when the recession came barreling onto the scene. Instead the Culver City entrepreneur were in the start-up phase of launching their staffing franchise. Not only had they invested $27,000 in purchasing the Express Employment Professionals territory, but they also accumulated the $180,000 in operating capital needed. Unfortunately, the process took about a year, and consequently, when they were ready to open in 2007, the recession was at the door.
""We were thinking 'are we gong to close or what,'" explained Marlo, when she and her husband realized that what was happening in the economy could negatively impact their fledgeling company. "We had put so much into (it), and it didn't seem like an opportunity we should walk away from."
Additionally, the couple had a higher calling in mind with their business: "We wanted to provide jobs for people working for us and the people looking for jobs," explained Marlo.
Going ahead with their venture the couple knew they would have be extremely creative in building the business.
"We were able to take advantage of the federal stimulus dollars," said the franchisee, adding that they hired three employees whose salaries are being paid for six months.
Marlo said they also focused on presenting the value-added solutions their company offered to prospective clients.
"You have to show how you can save the company money. They say, 'if we can hire the person directly, why should we hire you and pay you?' We have to always show how the services we provide bring value but also save the company money."
Afflalo and her husband are not the only people starting a businesses in this recession. According, to the outplacement firm Challenger, Gray and Christmas, start-up activity among jobless managers and executives hit a four-year high in 2009. The agency found that 8.6% of unemployed workers started a business last year, compared to 5.1% in 2008.
Additionally, government statistics also reported that the number of self-employed Americans rose to 8.9 million in December up from 8.7 million a year earlier.