Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 11, 1991 TAG: 9104120027
SECTION: NEIGHBORS PAGE: S-2 EDITION: METRO
SOURCE: DANIEL HOWES and DEBORAH EVANS/ BUSINESS WRITERS
DATELINE: LENGTH: Long
This time, the results appear mixed.
A few Roanoke Valley firms have managed to weather the twin whammies of war and recession; others have found themselves teetering on the brink of bankruptcy - or in it. In the first quarter of this year, 142 Roanoke-area businesses filed for protection of the bankruptcy court.
Downturns usually lead to reduced sales, and as sales fall so does already-scarce working capital, said John Jennings, an analyst with the Blue Ridge Small Business Development Center.
"Small businesses generally don't have the assets or collateral to get through a recession that large businesses do," he said. "Even Donald Trump got a loan when things got tight."
But the smaller the business, the fewer the options.
"Small businesses generally operate on a slimmer margin to begin with," he said. "A recession eats up their cash and suddenly they are hurting."
And while smaller businesses are more likely to be in a better position to make quick changes in hopes of offsetting the recession, Jennings said, these changes frequently don't affect fixed expenses that can still land them in trouble.
Nevertheless, whether a business - large or small - survives the recession ultimately comes down to how well it is managed.
"The recession serves to weed out the weak businesses, and they make the recession seem worse than it might really be," Jennings said. "The recession may have been the trigger, but the problem is not the recession, it is mismanagement."
Virginia Tech professor James Lang agrees. The recession "becomes a scapegoat that may or may not mask other problems that a business may have."
The owners of BLJ Hair Design on Melrose Avenue are accustomed to weathering brief economic downturns, especially during the months "after Christmas and before taxes," said Lisa Preston, a co-owner. But this recession is the first since she and partner Jeanette Dickerson opened their business five years ago.
They were prepared for the downturn.
Preston had been watching the headlines and knew that consumers were expected to cut back spending on all but essentials. And rather than risk being stuck with a lot of expensive supplies and no customers, the shop made some quick changes, such as placing orders on an as-needed basis rather than in bulk.
"I was just trying to be prepared for whatever," she said.
Preston's frugality has proved unnecessary so far. Customers do talk about their new financial hardships caused by shortened work weeks, layoffs or a husband still serving in the Persian Gulf. But, surprisingly, they are still spending money to get their hair done.
"It's an uplift," she said. "It just makes them feel better. They look better, they feel better."
Preston remains hopeful that the economy will improve - and grateful that the impact of the recession hasn't hit her business any harder.
"Everyday I say, `Thank you Lord for another day.'"
Bob Ward, owner of Ward's TV & Appliance, has seen four recessions in the two decades he's been in business. The Gulf War seemed to make this downturn the worst - while the shooting lasted, that is.
"As soon as the war was over, business started picking up," he said. "I think people were more scared about the war than they were about the recession."
Business at Ward's stores in Vinton and on Grandin Road in Roanoke stayed steady throughout the first two months of the year, and March sales figures look to be about 10 percent ahead of last year's.
"I'm not worried at all," he said. "I've been in business 20 years, and when you treat your customers right, they come back to you."
Changed, however, have been customers' reasons for buying. Before the recession, more customers bought appliances to outfit new homes they were building. Now they're remodeling instead. Either way, Ward said, they need what he sells.
Unsure how deep the recession would cut, Ward fashioned contingency plans - as did others like him - which kept overhead down and inventories low. Indeed, economists agree that low inventories at many businesses should help a recovery begin sooner.
For Jack Bennett, owner and manager of Perfection Auto Body in Roanoke, business is "sort of soft." He's contending with a two-week backlog instead of the customary six-week wait, so he's not hurting.
The 11-year-old shop's reputation for customer service, touted recently in a national trade publication, may be the one thing that helps him ride out the recession.
"Hey, our customers are our business. You take care of them and you're going to be taken care of," he said. "I love my customers."
Still, Bennett is noticing "a lot more damaged cars on the highway" and he suspects that could be attributed to the recession as car owners decide to postpone cosmetic repairs.
"I think people are getting money from their insurance companies and spending it instead of getting their cars fixed," he said. Such small repairs have dropped off in recent months, replaced with work from accidents, insurance claims, state inspections and what Bennett calls "have-to stuff."
He, too, is starting to see a slight post-war surge in business, but "it's not as good as in the past . . . by any means."
Model train dealer Sam Putney's business actually boomed during past slowdowns, said the owner of Roanoke Rails, and this one may be no exception. "Business," he reports, "has held up well" so far this year.
His theory: While consumers may postpone major purchases during economic downturns - pinching car dealers, real estate agents and others peddling big-ticket items - they still look for little ways to reward themselves.
Putney isn't selling as much of his most expensive model trains, some costing as much as $2,500, but sales of the less expensive lines are going well. Christmas sales were the best ever.
"They are still buying their toys," he said. "You deserve something yourself, to make yourself feel better."
Putney's strategy for survival: "I see what's selling and I order it. I talk to my customers and see what they want."
Sales at Country Charm Gift Gallery have climbed more than 70 percent in the three years Linda Hudson has owned the Salem shop.
War and recession haven't dampened sales. "There's been no slack at all," Hudson said. "I think people are going to continue buying for themselves, for satisfaction."
March sales slowed from the first two months of the year, a curious anomaly Hudson ascribes to "Easter and tax time." Still, the months that others have bemoaned for lack of business have proved a boon for Hudson's handmade gifts, reproduction furniture and gift baskets.
A move of only a few blocks helped, too. "I'm doing in one week what I did there in one month" last year, she said. Sometime, it pays to be small.
Memo: correction