Despite Overseas Pressure and Tight Labor Market, They See Opportunity
Economists can forecast. Accountants can tabulate. But no one has a better feel for the economy’s ebbs and flows than the folks navigating it. Local entrepreneurs and small-business advocates recently took some time to share lessons from the past year, as well as their insights into what’s ahead for 1999. Staff writers Marla Dickerson, Lee Romney and Vicki Torres and freelance writer Juan Hovey got responses to the following questions:
What is the most important thing that happened to your business or agency last year that’s relevant to other small firms?
What do you see happening globally, nationally or locally in 1999 that could most significantly impact your organization or small business in general?
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Esther Dunbar, president of G.S. Dunbar & Co. garment contracting, Montebello
In 1998, we completely automated our facility to try to stay competitive with low-wage foreign contractors. We also searched for new niches, such as the production of military uniforms, but those contracts aren’t easy to come by.
In the coming year, I see more and more apparel production moving offshore. I don’t want to go to Mexico. We’ve got loyal employees who have been with us for 25 years. But to compete, we need to become even more efficient. Right now I can’t tell you how we’re going to manage it. We’re already fully automated and my wages keep going up, while Mexican contractors pay workers $7 a day. It’s going to be a big challenge.
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Gerald Washington, president of I/C Cals facilities maintenance, San Bernardino
We’re a one-stop shop for exterior facility and site maintenance, a concept that really caught on in 1998 as more companies out-source this type of work. It’s a unique market niche that allowed us to grow 400% this year. My problem area is finding enough motivated, qualified employees.
Looking ahead, my business would probably suffer in a general economic downturn because maintenance isn’t the first priority of companies in tough times. So we’re continuing to add to our menu of services. Next year we’ll have our license to clean up hazardous waste and bio waste, which will help us broaden our one-stop service concept.
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Sharon Merino, president of the Small Business Consulting Agency, which helps small businesses get certified for corporate and government contracts, Pasadena
Changes in affirmative action policy have actually helped my business over the past year. By moving away from gender and ethnicity standards to award contracts based on whether companies are “small” or “disadvantaged,” the government has opened the doors for a lot more businesses to become certified. Meanwhile, private-sector companies continue to stress supplier diversity because they know it’s good for business.
We created a new supplier diversity database this year that contains verified information on more than 5,000 certified small businesses. In 1999, we plan to grow that list to more than 10,000 companies and take our services throughout California. Technology is going to be key to our growth. By utilizing the Internet, we plan to go nationwide within two to three years.
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Victoria Fullerton, chief executive of Managed Care Solutions, provider of medical review audits and cost-containment services, Long Beach
Welfare reform has impacted my business in a positive way, since several counties have hired us to do disability reviews for welfare recipients still on the rolls because of medical conditions. My business is up 400% and we’ve had to expand our building. But I also came down with pneumonia and was hospitalized for 8 1/2 days. I learned the importance of delegating tasks and authority.
Our company will continue to benefit from welfare-to-work efforts next year, but as a taxpayer and a business owner, I’m more concerned about seeing some true, long-term positive outcomes. A lot of the programs still aren’t focused on the needs of small-business owners who are creating all the jobs in California.
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Jeri J. Harman, managing director for Van Kasper & Co. investment bankers, Westwood
The most important trend in the last year has been the volatility in the markets for initial public offerings and even for secondary issues for small and mid-sized businesses. The window for such deals actually closed in the latter part of the year, and many companies turned to the private capital markets for financing. They found a lot of capital available there. In fact, the supply has been building for two or three years. The private markets typically don’t value businesses as highly as the public markets do, but private and institutional investors still want opportunities, not just in leveraged buyouts but in growth companies as well. I think we’ll see continued volatility in the public markets next year, and companies seeking financing will need contingency plans if they can’t go to the public markets. But as the private markets gain visibility, especially for mezzanine financings involving subordinated debt and warrants, more and more companies will see them as a solution. That means more growth.
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Hector Barreto, chairman, board of directors, Latin Business Assn., and owner of Barreto Insurance & Financial Services, Los Angeles
The creation of the Latino Business Expo brought 2,000 businesses to downtown Los Angeles Nov. 4, with 140 corporate sponsors and Small Business Administrator Aida Alvarez. We did 300 procurement appointments. We actually [arranged meetings between] procurement officers at major corporations . . . and our members . . . instead of just having the companies exchange business cards. The bottom line is a lot of members got business from the expo. It took our association to the next level.
There are 370,000 Latino-owned businesses in the greater Los Angeles area with $25 billion in sales and 140,000 new jobs [created] in the last five years. Those numbers will double in the next five years. We’re the largest Latino market in the nation and our market is exploding. One out of every two businesses created is Latino-owned.
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Johnathan Hou, president, Asian Business Assn., and owner of Axiom Engineering & Science, Irvine
The passage of Proposition 209, that really created a big problem in terms of the business environment for small business. Pre-209, there were goals for government contracting for women and minorities. After 209, there are no longer goals. Not just minorities but all small firms are suffering because the prime contractors don’t have to share [government contracts]. Although Prop. 209 passed in 1996, it’s had a lingering effect and the impact is still going on. I know a lot of folks who actually closed their doors.
But right now in California, the outlook is good for small, minority and women-owned businesses. The Democrats are in charge of the Legislature and Gray Davis is sympathetic to small business. Small businesses will have time to get out of the tight-squeezed environment they’ve been in, and, hopefully, the business climate and culture will change.
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John Rooney, president and chief executive, Valley Economic Development Center Inc., Sherman Oaks
The most exciting new product that our company has launched is the Small Business Administration Micro Loan Program throughout Los Angeles County and in partnership with FAME Renaissance Economic Development Corp. We make loans under $25,000 to businesses, a portion of them start-ups. We’re hoping to bring the Korean Youth Community Center on later [as a partner]. We started a couple of months ago and we’ve had 200 applications. We’re doing 10 loans every week. It’s a high volume of activity.
The year 2000 issue is going to be bigger than most people realize in 1999. The federal government says only about 50% of its computer systems are certified and government contractors could be severely damaged. Most small businesses have not really taken any action yet. Their equipment needs to be certified and they need to find out what will happen with their big clients and customers. A lot of businesses are taking loans out now because there may be a need for real cash. They also need to take a look at business-interruption insurance.
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Betty Jo Toccoli, president, California Small Business Assn., and owner of financial and consulting service Total One, Culver City
The most important thing we accomplished in 1998, both nationally and at the state level at the California Public Utilities Commission, was the recognition of the need for increased protection and focus on the small-business market. The CSBA is an “official intervener” at the CPUC for small business, which was recognized as an underserved constituency that needs a voice. A small-business ombudsman position may be created at the CPUC if the state finds the funding. And we have made a number of filings to protect small business.
In 1999, I think Y2K will have more of an impact on small businesses than they realize. I think the Small Business Administration has done a good job getting out information, but a lot of small-business owners think that it just involves computers. But it can involve elevators, telephones and other equipment. If small businesses wait too much longer to do something, there could be major problems. For example, on one of my insurance policies, I got a notice that Y2K is not covered under my policy. I didn’t even think that people might sue me if problems occur.
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Renato “Mingo” Lee, co-owner of Santa Ana-based Wahoo’s Fish Tacos
In 1998, we expanded outside of our territory into L.A. County. Even though it’s only 40 minutes up the freeway, a lot of people haven’t heard of us. We had to up the marketing budget quite a bit just to make sure we were drumming up enough noise for the store, [whereas] the last three units we opened in Orange County, once we opened the doors we didn’t have to do any more advertising. In Manhattan Beach we’re having to go back to a real guerrilla form of advertising, going into the local papers, into the local schools. It’s a smaller community, very tightknit, and you have to really go the backdoor route to get the word out.
We have a hard time finding employees [in this strong economy], and we’re planning three new openings, in Yorba Linda, Aliso Viejo and Torrance next year. The big challenge that we’ve been wrestling with in the last two or three months is getting a little more innovative with our benefits packages. Wahoo’s has companywide profit-sharing, from the general manager all the way down to the dishwasher. Now you almost have to go headhunting for hourly workers.
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Nuria Finch, president, Bravo Enterprises Inc., a distributor of Salvadoran products and importer of tequila and other specialty alcohol, Commerce
We have gotten more involved in tequilas, which have gotten very big here. The economy has slowed down tremendously, but when it comes to tequila, it’s booming. But one thing that’s extremely sad to say is, I have never seen so many people bouncing checks as in 1998. When you’re dealing with bars, sometimes it’s so difficult to collect. A lot of the businesses I dealt with in 1998 are no longer in existence and the bills are still outstanding. For the first time in my life, I started using collection agencies.
With my products it’s easier to go north, and we’ve gone all the way to San Francisco. I want to go nationwide. There are very few people with the licenses I have. I want to take advantage of that and go ahead and register as many products as we can handle. But I’m trying to make my company into a company that whatever product we commit to register and sell will be a product of quality.
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Maria Molina, vice president, Interior Demolition Inc., Tujunga
We were able to bid for bigger jobs. We expanded our bonding capability and just got a huge job with the Los Angeles Unified School District for $800,000. We have grown financially, by about 40%, and we’re teaming up with other companies to be able to bid on larger jobs.
One of the problems we might have in 1999 is with recycling. Asia used to buy quite a lot of recycled metals, like copper. With the economy going down there, they’re not doing that any more. We used to sell the stuff [from our demolitions], help the city with the dumping problem and also make some money. Now it’s not worth it to take it to a recycling site. This year, what they pay for recycled metal went down from $100 a ton to $25 a ton.
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Carmen Trimino, president, Sav-On Plating Inc., Paramount
Our sales went up by about 14% and we’ve automated our equipment both here and in Arizona. We were forced to do this because of the competition. For hardware and fasteners, the competition is from [Asia]. Auto accessories and garment industry products--hangers and clips--that’s all gone to Mexico, along with locks and hardware for homes. Automation . . . [has] eliminated manpower. We hate to do that, but we made room for those employees somewhere else.
We’ll probably have a recession by the middle of next year, looking at what’s happening in Asia and also looking at what’s going on in Latin America. The impeachment is going to hurt us. Another thing that’s going to hurt us is if [the Legislature] restores daily overtime. How can we compete when [a foreign worker] is making $5 a day and your average man here is making $9 an hour? I’m not saying they shouldn’t restore daily overtime, but I don’t think that this is the time.
