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In This Recession, Small Business Survival Skills are Proving Invaluable

Tattoo Manufacturing Inc., in Tucson is a well-kept secret of success. This company with 95 employees bills itself as the world’s largest manufacturer of temporary tattoos. Indeed, it produces 6 million tattoos a day and has captured more than 90 percent of the temporary-tattoo market in the U.S.

Joyce Sinclair founded the company in 1985, serving fewer than 10 customers out of her garage. She eventually moved into the 40,000-square-foot building the company occupies today. Business exploded four years ago after Sinclair’s father, Jerry Nathanson, signed on and the daughter-father team ramped up production to include both retail-sold tattoos and custom tattoos purchased for promotional purposes by such customers as corporations, nonprofit organizations, sports teams and toy companies.

Steve Tooker and Grayhawk Capital in Scottsdale purchased Tattoo Manufacturing last year, and Tooker was named president and CEO. Although Tattoo Manufacturing produces a variety of specialty items, Tooker says 90 percent of the firm’s business is temporary tattoos. Half are sold at the retail level to Wal-Mart, Walgreens, Toys R Us and other chains. The other half is the custom tattoo side of the business, with more than 60,000 corporate customers. Twenty-five percent of the tattoo business is overseas for customers in 30 countries.

Tattoo Manufacturing had between $2 million and $3 million in sales in 2004. Tooker says sales will exceed $20 million this year, and he expects 25 percent annual sales growth for the next several years. Daily tattoo production likely will reach 7 million this year, and Tooker says that will translate into more hiring and the purchase of additional production equipment.

In this recession, companies like Tattoo Manufacturing are turning on its head the notion in business that bigger is better. Unlike the 800-pound gorillas of Corporate America, smaller companies avoided over-leveraging themselves before the economy tanked, mainly because they stuck to using the resources they had on hand.

“A big business is a legal entity and all its resources are whatever is in its pocket. A small business has the ability to rely on resources that a big business may not have. For example, managing the debt structure in a big business is mind-boggling,” says Bruce Hodgman, deputy director of the U.S. Small Business Administration in Phoenix. “On the other hand, a small business owner can draw on savings or dispose of a personal asset in order to lend to his company. These personal resources can be substantial and they can be quickly moved into the business. I think there is a lot of that happening.”

Small business success stories in the midst of this recession come as no surprise to Donna Davis, chief executive officer of the Arizona Small Business Association. She says many of her organization’s 3,400 members are keeping their businesses profitable.

“A good portion of them are hanging in there,” she says. “They are putting much more emphasis on watching unnecessary expenses. They are getting out and networking and outreaching. I’m really hopeful of what I have been witnessing.”

Nextrio is another Tucson success story. An information technology and computer network consulting company, Nextrio started in 2002 during the last recession and provides IT services for small and medium-sized businesses throughout Southern Arizona.

“We maintain computers, servers, networks, netbooks, cell phones and telephones — just about anything that has a plug,” says managing partner Cristie Street. The company also recommends, purchases, installs and configures hardware and software.

Nextrio started with three employees. By 2004, the staff had grown to six and Nextrio purchased the 9,000-square-foot building it shares with its investors. Today, the company has 20 employees. It started with one customer and now has more than 700. The customer base doubled and tripled the last four years after Nextrio invested in business-management software that allowed employees to “work on the business instead of in the business,” Street says.

Revenue has consistently grown between 25 percent and 50 percent annually since Nextrio opened. For the last two years, Nextrio has slowly restructured to create a diverse mix of income, according to Street. For example, 25 percent of the company’s business now comes from managed services in which customers lock in a fixed fee for ongoing IT support. Customers know what their IT expenses will be, and Nextrio knows it will have steady monthly income, Street says.

Income for 2009 is more uncertain because of the recession.

“If our revenue was an hour glass and you flipped it upside down, that would show the change in where our revenue comes from,” Street says.

Hardware sales, previously 40 percent of Nextrio’s business, have plunged as customers opt to squeeze more years out of their existing equipment. Now, service revenues are climbing as Nextrio devotes more time to maintenance, which Street says is more profitable than hardware sales. The company also has seen an uptick in business from bankruptcy litigation, which involves separating data, copying data and itemizing equipment at firms going out of business.

Street attributes Nextrio’s success to its ability to adapt quickly to changing market conditions and keeping employees apprised of the company’s financial condition. She also points to Nextrio’s entrepreneurial culture.

“We have a sense of all being in it together and accountable for each other,” Street says. “You don’t get that in large companies. We know we are all lucky to be working together, and we hold everybody accountable for pulling their fair share.”

Nextrio’s experience is a good example of how small businesses can alter direction and strategies quickly, allowing them to respond rapidly to changes in the marketplace.

“The secret to small businesses successfully riding out a recession is flexibility,” Hodgman says. “Small business owners have the ability to quickly adapt to a situation. A small business owner can gather key employees or family members in a matter of weeks and make a decision.”

Mary Schnack Media Services in Sedona is truly a small business. Owner Mary Schnack has only two employees. Yet, unlike some larger firms, the company’s revenues are growing. Schnack Media Services is a full-service public relations consulting company. A separate division, Communication Bridges, sends Schnack around the world to give presentations on communication topics for small businesses, corporations and nonprofits. Schnack started her public relations business in 1992 in Los Angeles, then moved it to Sedona in 1996, where it occupies the ground floor of her home.

Schnack says public relations revenue dipped a few years ago, then rebounded, with 2008 income doubling over 2007. She attributes the resurgence to a lowering of her fees and hiring full-time help.

“Having full-time employees really made a difference,” Schnack says. “It allowed me to really go out after new business more effectively.”

But the main reason is her customers’ appreciation of the expertise she offers.

“Through this downturn, I don’t see people cutting PR like they have before,” Schnack says. “There is a lot of publicity out there about why now is the time to crank up your PR. There isn’t a lot I have to say. Now people are approaching me.”

Schnack expects 2009 revenue to increase at least 50 percent.

“I think we can keep going on the uphill route,” Schnack says.

She expects small businesses will drive the economy’s recovery.

“Small business is what will bring us out of this recession,” Schnack says. “It will not be the corporations. It’s the small businesses that have fueled my growth.”

BestBill, a Phoenix company that uses technology to relieve its customers of the time-consuming task of generating and delivering invoices, has caught the attention of the SBA, and is its Best Business of the Year for Arizona for 2009.

Dan and Susan Haugland started the company out of their garage in 1999 to help medium- to large-sized businesses improve their cash flow.

“We don’t collect the money,” says CEO Dan Haugland. “We help our customers get their cash faster by taking data they provide to us, generating invoices from that data and delivering them either online or through the mail. We also can generate online payments from the consumer back to our customer.”

Growth has been the touchstone at BestBill since it opened. After occupying space at other locations, BestBill built its own 26,000-square-foot facility and occupied it in 2006. The company grew from 10 employees in 2003 to 33 in 2008. When the Hauglands first started, they generated 5,000 paper invoices a month. In 2008, they produced more than 34 million paper and online invoices, and they expect a 30 percent increase in billing transactions in 2009. BestBill opened for business with three customers. That number has grown to 130 nationwide in such industries as health care, utilities, manufacturing, transportation and property management.

Revenue increased 120 percent from 2005 to 2008. In 2008, gross income jumped 25 percent over the prior year, and the Hauglands expect a 30 percent increase in revenue this year. Net income doubled from 2005 to 2008.

BestBill has not been immune to the recession, however. The Hauglands note that their 2008 net income was flat and they have reduced staffing to 24 as they streamline to better confront the economic downturn. Still, they say they are on the path to continued growth and plan to open a second office in the Midwest in the fourth quarter of this year.

BestBill is a high-performing company because it does not waiver from its core business, Dan Haugland says. Susan Haugland, who is president of the company, attributes BestBill’s success to an emphasis on value.

“Not only do we feel that value, integrity and commitment matter, but we really value the client relationship,” she says. “I think that really matters — having solid client relationships. Those clients are happy to refer us to other clients.”

www.bestbill.com
www.communicationbridges.com
www.nextrio.com
www.prworks.ms
www.tattoosales.com

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