By Karen E. Klein Times are rough, and small companies are among the hardest hit. Some are not going to make it into 2002, others will limp into the New Year, and still others will hang tough and ride into better times. How, as they hunker down, are successful entrepreneurs formulating their survival strategies? Smart Answers talked to two CEOs who are expecting the best, but preparing for the worst in the New Year.
Ron Bension, president and CEO of Sega GameWorks, LLC, heads a 4-year-old multi-unit entertainment company that operates 22 interactive-game and restaurant branches in the U.S. and three abroad, with another four under construction. Gerald W. Chamales, chairman of RhinoTech Omni Computer Products, manufactures laser and inkjet printer cartridges. Both companies are based in Southern California.
Q: As a leader of a company in a turbulent economic climate, what lessons have you learned?
Chamales: In turbulent times, it's my philosophy that you have to double your efforts and stay focused on key results like manufacturing, sales and marketing, and finance. You have to keep your eye on the ball and manage your expenses aggressively, because, as your sales dip, the only thing you can do to cope is handle your money wisely.
Bension: Right now, we have to go back to basics -- block and tackle -- and do it right. We're checking all our systems, going over everything, and making sure we're running a tight ship.
Q: How has your business model changed in response to the current economic climate?
Bension: We're pulling back on traditional growth and doing joint partnerships now. For instance, where we had traditional landlord/tenant relationships with developers and landowners, now we've got them partnering with us on new sites.
Q: Many companies have laid off employees during the last 12 months. Have you had to downsize?
Chamales: We made a sector-by-sector assessment and we reduced a little staff in manufacturing. But, at the same time, we are expanding our sales department, because we feel that bringing in new customers is one of the best ways to ride out a recession. We have a staple product -- it's a consumable that there will always be a need for -- and now is a good time to pick up market share from the weaker players. So we're advertising more, creating a stronger brand identity.
Bension: We're not replacing employees in certain jobs who leave, but we haven't had to lay anyone off.
Q: In a down market, how do you determine where to cut expenses first?
Bension: We went directly back to our stores and asked our operations managers what we were doing -- what systems and ideas and requirements had we put in place over the years that we can do away with now. As long as it didn't relate to safety, we wanted to throw out the rule book and get rid of the operational things that were costing us 40 hours a week to do just because we put them there. The results were great. We renegotiated maintenance contracts, recalibrated machines, and worked with vendors and suppliers to get better deals, among other things.
Chamales: We've been keeping a closer eye on the money and where it's going. We're getting our financial statements within three days of the close of the month now, where it used to be a week or 10 days later -- because we need to look at the big picture faster -- so we can trim our sails and change our course quickly if we need to. We may also tell our vendors we're going to pay a little slower, because our clients are paying slower. Being candid...is the best policy. As long as you communicate clearly, people tend to be pretty flexible.
Q: How do you maintain the motivation of your key performers in the midst of the turbulence?
Chamales: Communicate. We tell everyone what's happening and make sure our employees know that we'll survive. We have a lot of employee lunches to try and counteract the bad economic news and the rumor mill.
Q: What leadership skills have you had to rely on most these past months?
Bension: I've had to throw out the idea that we have to get big, quick. I'd rather be small and profitable than big and broke. I'm out in the marketplace looking for partnerships and I'll continue to expand my efforts in that regard. And I'm being very, very careful with every dime we spend. After our employees, our cash is our biggest asset. We can't get funding now, but we do have cash and we have to spend it wisely.
Chamales: As a business owner, I've had to become a professional optimist. If you play to win, you're going to go through difficult times, but tough times provide us with an opportunity to act courageously. At the end of the day, it's important to see the glass as half full -- not half empty.
In a capitalistic society there are business cycles and we will get through this one with good old American ingenuity. Even though the economy is contracting in many areas, we still live during one of the most amazing periods of prosperity in history. Even with 5.6% unemployment, we have to keep our minds on the 94.4% of people who are employed in America. Have a question about running your business? Ask our small-business experts. Send us an e-mail at email@example.com, or write to Smart Answers, BW Online, 6th Floor, 2 Penn Plaza, New York, NY 10121. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.