Small businesses search for ways to ride out economy downturn

The economic crisis on Wall Street hit much closer to home this year, affecting small businesses in Southeast Missouri.

"We've been through recessions before and we will recover, as we always do," says Bill Vickery, director of the Small Business Development Center at Southeast Missouri State University. "Later on down the road, it will slow down again ... but I don't see us getting out of this in one year. We didn't get into it in one year."

Vickery adds that there's no way to tell how the economy will fare after new administrators take office next year, or how much of the "campaign rhetoric" about small businesses will come to fruition. Those that take action now will survive the recession and fare better in the future, says Vickery.

"The slow economy has an impact on small businesses, but it's not the same impact for all businesses, even in the same industry," he says. New home construction is down, for example, but home improvement sales are up because people are making repairs instead of buying new things. Auto sales are down, but service and repair industries are doing well because people always need to maintain their vehicles. In other words, if an industry isn't doing well, it doesn't necessarily "trickle down" to the service industries, explains Vickery.

Sandy Donley, owner of Divine Homes Realty in Cape Girardeau, says she has not seen a decrease in home sales. In fact, she believes home sales in Southeast Missouri are actually on the rise.

"We've sold as many new homes as pre-owned this year," says Donley, who has worked in real estate for over 30 years. "There has always been a demand for new builders. We may not sell a lot of expensive homes, but people are still buying the average $130,000 to $150,000 home."

According to Donley, most coverage about the economy is based in large cities, but people in the outlying areas are still buying homes and making sensible choices; repossessions are uncommon.

"I think because we're in a smaller market, banks are more willing to work with the owner so they can keep their home," says Donley. "In Missouri itself and in the Midwest, the economy is more likely to go up gradually, and not peak in fast and slow tracts."

She also believes that the traditional Midwestern work ethic and values make area homebuyers more likely to make a commitment and stick to it.

Tracy Vincent, owner of Remodeling Room in Cape Girardeau, has definitely noticed a trend of remodeling. Business was slow in 2007, but increased significantly in 2008. She estimates that she's just as busy now as she was during the 2004-2005 housing boom, and she expects business to remain steady in the next year.

"There are not as many home sales because people are remodeling just to stay in their own homes," says Vincent. "We've been very busy and blessed."

Other industries are less fortunate.

"Retail is the biggest challenge I see," says Vickery. However, it remains difficult to measure success: Bleak sales have been predicted for the holiday season, but Black Friday sales were higher than expected. "Big sales don't necessarily correlate to profits," he warns.

To cope with the economy, local businesses are doing all they can to maintain their cash flow. This may include keeping a close watch on accounts receivable to make sure that everyone is paying their bills on time, or seeking extended terms on accounts payable. If businesses normally pay in 15 days, for example, they may want to pay in 30 days in order to "hang onto their cash longer," explains Vickery.

Other retailers, like Carrie Tracy of Bloom in Cape Girardeau, rely on loyal customers and careful decisions to keep their businesses afloat.

"I've felt very thankful for those that have continued to shop here and find things for their gift-giving," says Tracy. "I have seen a change in what people are purchasing. Practical gifts seem to be more popular this year."

Bloom is offering more incentives, such as discounts and specials on certain items, to help boost sales.

"I feel that this tough economy is temporary and that we just have to stage our plan accordingly," says Tracy. She adds, "I am excited to see what next year brings. I think that business will be slow in the beginning of the year due to the economy, but hopefully pick up by the end of the year. I will buy accordingly for the next two seasons. I've been watching what products are selling versus those that are not."