Recession Has Hit Advertising Agencies Hard : Heavy dependence on real estate business hurt. Diversification is now the name of the game.

During her first decade in business, Claudia Roxburgh struggled with the problems of a growing company. But that was nothing, she now says, compared to what it took to shrink that company.

“In retrospect, that is much more difficult,” said Roxburgh, president of the Roxburgh Agency Inc. in Costa Mesa. During the recession, her advertising and public relations firm let go half its 47 employees.

The difficulty has been in choosing whom to lay off and how, in keeping employee morale up during uncertain times, and in finding new business in a shrinking market.

Roxburgh’s agency is one of a handful in Orange County that once relied on the real estate industry--builders and developers--for 75% or more of their work. Bent but not broken by the nearly 3-year-old real estate slump, those agencies are in the process of reinventing themselves.

They have had to cut at least 50% of their staff, forgo raises and relocate to smaller offices. And most say they are aiming for a client mix that includes no more than 30% in real estate.

“The key to survival in any business is diversification,” said Jim Hughes, president and creative director of TH&M; Advertising Inc. in Irvine. “I know that; I’ve always known that. Why I let myself get up to 70% (real estate business) . . . Well, when you become an expert in any field, it’s easy to say ‘yes’ when the phone rings.”

Hughes had 32 employees before the recession, now he has 17. When his director of real estate business left a year ago, Hughes decided against filling the position.

Of course, real estate is not the only industry that was affected by the recession in Orange County. But it has taken one of the more dramatic tumbles.

Permits issued to build single-family homes numbered 3,540 in 1992, contrasted with a peak of 11,514 in 1988. The value of non-residential construction was $569 million last year, versus $1.6 billion in 1988.

Some affected advertising agencies have moved into new industries. Roxburgh, for example, is seeking women-owned businesses, consumer electronics and asset management firms, which she believes are segments poised for growth. Hughes said he is looking for high-tech clients and recently signed on a medical device company.

But branching out can be hard.

“It’s not an easy thing to do,” said Donna Hahn, an industry observer who in 1990 left InterCommunications Inc., a mid-size agency, to start her own company. “New clients won’t necessarily give you the work when you haven’t established your credibility in their field.”

Rather than leave the field of real estate altogether, agency owner Joe Martin said he is looking into projects in other states. He is president of Martin Advertising & Public Relations in Santa Ana, which handles the financially strapped home builder William Lyon Co., among others. In three years, Martin’s staff has shrunk to nine from about 48.

Toni Alexander, president of InterCommunications Inc. in Newport Beach, said she is looking as far as Las Vegas, Hawaii and Indonesia for business. In Indonesia, her company is marketing luxury homes at a 7,000-acre resort in Jakarta.

Alexander has cut her staff by about 15 people during the recession, to 20 full-time workers. Before, about 75% of her business came from real estate clients; now, she said, such clients represent about 50% of her business.

“We’re where we want to be,” Alexander said. “The real estate industry isn’t going to just fold up and go away.”