Strategists urge new thinking to weather economy

[caption id="attachment_63529" align="alignright" width="280"] Clockwise from top left: T.J. Van Voorhees, Kristin Johnson, Roy Martinez, Deborah Steinthal[/caption]

NORTH BAY -- While many North Bay small businesses continue to grapple with the lingering challenges that emerged during the worst part of the recession, regional experts agree that key strategies have helped some companies to position themselves more strongly in a changed business landscape.

Common strategies for small businesses that have remained successful in this period have included a closer look at individual performance metrics, a greater utilization of contract employees and an embrace of new markets for growth.

Yet the current period of slow recovery has left a number of enduring challenges for small businesses. Consumer habits have shifted, prices have risen for raw materials, and access to capital remains a primary concern, according to small business experts.

In a time of narrow margins, T.J. Van Voorhees, CEO of Larkspur-based small business consultancy, Pacific Crest Group, stressed the importance of looking at operating costs individually. By identifying how expenses like staff and other metrics affect cash flow, many companies that are currently well positioned have avoided making cuts that would cause long-term harm.

"If companies just say 'Well, this is what we have in the bank,' the results have been brutal," said Mr. Van Voorhees. "Sometimes people are reacting and cutting staff, but they're not cutting staff based on metrics. They're cutting staff based on their gut."

Small business confidence remains mixed during the recovery. Using 1986 as a benchmark of "100" on its confidence index, the National Federation of Independent Businesses found overall optimism was 92.8 in October. A fall in confidence began to reverse after reaching nearly 80 in early 2009, after peaking near 110 in late 2004. The Bay Area Council found an overall optimistic outlook for the third quarter, with its composite index showing 61 out of 100, and values above 50 showing confidence for growth.

In Sonoma County, a composite index compiled from surveys of company executives by the Economic Development Board found small business confidence at a five-year high in the second quarter of 2012. Responders remained cautious about the economic recovery, expecting a full recovery is one to four years away, according to the report.

A sense of caution towards hiring continues both locally and nationally, and some employers have been able to expand operations by hiring contractors instead of full-time employees. The decision can allow for savings in insurance, tax and other employee costs. But Kristin Johnson, regional director of the Northern California Regional Small Business Development Center that oversees programs in the North Bay, cautioned that the IRS is increasingly pursuing cases of improper classification.

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