Business Owners Look for Bright Spots

The unstable economy is causing many Americans to change their spending habits, which for some industries might not be a bad thing. Entrepreneurs, from green builders to cosmetics consultants, are seeing some positive effects of the economy as consumers prioritize their wants and needs.

Kathy Deck, director for the Center for Economic Development and Research at the University of Arkansas, said businesses that offer cost savings or provide necessary services are the ones consumers are going to seek out.

“I don’t think that there is a such a thing as a recession proof industry,” she said. “But some industries obviously have to go on whether or not there’s prosperity, such as health care, education and government services.”

Other service providing industries are only going to thrive in a recession if they make economic sense, she said.

“Things that are actually efficiency enhancing and have long-term benefits will be even more attractive in a recession in the same way a small car is attractive when gas prices are high,” she said. “It’s not because that industry is recession proof but because people are substituting one thing for another.”

For example, she said, the data in Arkansas shows that the hospitality industry is not being hurt as bad as the rest of the nation, which can be attributed to people staying closer to home.

“Smaller indulgences are perhaps where folks are looking to have their discretionary purchases,” she said.

Lipstick Effect
Cosmetic companies have historically seen an increase in sales during times of economic slumps. The theory, coined the “Lipstick Effect” was first identified in the Great Depression when cosmetic sales surged and was reinforced when sales of lipstick doubled after the 9/11 attacks.

Kristie Morrison, an independent sales director for Mary Kay Cosmetics from Bella Vista, said she’s seeing the same phenomenon in the current economy.

“Women will do without a lot of things but they won’t do without their face,” she said. “Makeup makes you feel good, it gives you confidence.”

Women may not be going out and buying expensive outfits, she said, but they’re treating themselves to more affordable luxuries such as mascara and moisturizer.

Morrison began as a sales consultant for Mary Kay six years ago and has seen her sales improve each year. She is now an independent sales director, leading a team of 50 women and earning up to $4,000 to $6,000 a month.

Last summer, her team’s sales earned her a 2009 Saturn Vue and put her in line for the most coveted prize of all, the pink Cadillac.

Morrison never expected to have a full-time job as a Mary Kay sales consultant. She worked as a legal assistant and started selling the products part time to earn extra shopping money.

But the money and the flexibility lured her away from her corporate job.

She works about 20 to 30 hours per week on average and sets her own schedule.

Part of Morrison’s job, and what earned her that shiny new Saturn, is recruiting other women to become sales consultants.

Lately, she’s finding that to be easier than ever.

More women are interested in joining the Mary Kay team, she said, especially now that many families are tightening their budgets.

“I can’t think of an easier way to supplement your income,” she said, “And you can do it on your own schedule.”

Part of the appeal, Morrison said, is that the job doesn’t require any prerequisites.

“You don’t have to be from a certain background,” she said. “You don’t have to have a degree.”

There are women that just get into the business to earn a little extra money for groceries, Morrison said, and there are women that are looking to replace a full-time income.

“You grow it to the level you want to grow it to,” she said. “And if you work hard for yourself, it pays off in huge dividends.”

Green Dollars
Orlo Stitt, president of Stitt Energy Systems in Rogers, said the green building company is fielding more inquiries than ever as people begin to see the value of energy efficient homes.  

“People are seeing the economics of it and they’re buying in,” he said.

More than ever, people are looking to save money on their utility bills, Stitt said.

Federal tax credits for energy efficiency have also provided a significant boost in consumer interest, he said.

Tax credits are available at 30 percent of the cost for geothermal heat pumps, solar panels, solar water heaters and small wind energy systems.

David Stitt, vice president and sales and marketing representative, said people are starting to realize that the world’s resources are waning.

“The world’s population is higher than ever and there are fewer resources,” he said. “People are realizing that we can’t be a wasteful population anymore, they’re finally waking up to the fact that we can’t keep consuming.”

David said the economy has taught people to be more conscientious about what they spend their money on. They’re more likely to invest in energy efficient building techniques.

“We always said if the economy slowed a bit, our business would pick up,” he said.

The company recently completed a renovation and 1,000 SF-expansion of its offices on South 8th Street in Rogers.

The new facility will be submitted for a Leadership in Energy and Environmental Design Platinum rating from the U.S. Green Building Council

Web Marketing
The economic slump has also changed the way small businesses are investing in their companies. Declining profit margins have challenged some small businesses to expand their reach by building their online presence.

That’s where Web solution companies like The Belford Group can benefit.

Angela Belford, who started the software company with her husband 10 years ago, said the business launched a web division last May in response to client demand.

“People are figuring out they need to be on the Web,” she said. “They may have had an outside sales rep, and they can’t afford that now so they need a Web site.”

The company has developed 30 Web sites in the last 10 months and recently added three full-time employees.

As a result, the company’s revenue has grown from $50,000 a year in annual sales to an average of $30,000 a quarter.

Belford said the company offers a price point that falls somewhere between the price of create-your-own site builders and professional Web designers.

The Belford Group will build a basic Web site for about $750, she said, while some Web designers charge up to $10,000.  

“When we went into Web development, there was that market in between that was not being met,” Belford said.

The company has expanded its services in the last year to keep up with changing demand.

“We’ve continually diversified,” she said. “We’ll do their website and then if they need a logo, we’ll develop a logo, if they need business cards, flyers or brochures, we’ll do all that.”

Belford said adapting to the changing needs of the business community is what makes the company successful.

“We’re seeing the best year of our 10 years in service,” she said.

Changing Economy
As consumers look to save money, businesses that offer services at a lower price are going to hold up better than others, Deck said.

“We’ve certainly seen a short run in improvement in the savings rates of consumers,” she said. “Certainly, the bigger question is once the economy picks up again and employment rates get better, will the short-run changes become long-run changes.”

If consumers continue their spending and savings habits once the economy picks back up, some service providers and retailers will have to adapt.

“Some businesses may have to reexamine their business models,” Deck said.