Recessions challenge all businesses, weeding out the weakest and denting the profitability of even the strongest. So how can businesses best survive a recession?
Business leaders in Durango offered several tips for staying in business during a downturn. Among them: Watch your debt.
"If (businesses) go into it with a lot of debt to begin with and they're somewhat marginal in their profitability, then their chances of survival are very low in a downturn like this," said Joe Keck, director of the Small Business Development Center at Fort Lewis College.
Businesses often take on debt when they seek to expand. An economic downturn can make it difficult for businesses to keep up with their payments.
Keck encourages businesses to tightly manage their cash flow, tracking sales on a daily and weekly basis. He also recommends having a plan for raising additional capital if needed.
Businesses that tend to survive recessions "are the ones that have the best business management practices in place," he said.
Ed Morlan, executive director of Region 9 Economic Development District of Southwest Colorado, said business owners should keep in touch with vendors and creditors rather than avoiding them.
Also, businesses can manage their cash flow by delaying expenses when possible, hurrying payments and closely watching inventory, Morlan said.
Rod Barker, owner of the Strater Hotel, has survived several downturns in his 26 years of running the historic hotel.
"Make sure that every dollar you spend does positively affect your customers," Barker said. "Anything that does not positively affect customers, those are the things you should cut."
Barker cautioned against making knee-jerk decisions that could hurt your business.
"Every decision you make in business has so many ramifications," he said. "I guess the question is: Have you thought it out? You have to think your decisions out very carefully."
Business owners should look at why they got into business. If those reasons are no longer viable, then they should consider getting out, Barker said.
"I've seen a lot of businesses that hung on too long that should have quit while they had cash," he said.
Diversification can help. Auto dealers in Cortez saw a 46 percent drop in sales during the first three months of 2009 compared with the same period a year earlier. Car repair and service are keeping them afloat, Keck said.
Despite the downturn, new businesses continue to open. Laurie Sigillito opened Fastsigns at 1139 Main Ave. on April 13. Fastsigns provides banners to businesses and individuals.
Sigillito said she was attracted to Fastsigns because it isn't purely retail. Much of her business is selling signs to other businesses.
"The sign industry is supposedly somewhat recession-proof," she said. If businesses go out of business, she said, "they're probably posting a going-out-of-business banner."
Open for little more than two weeks, the franchise already has made its sales goals for the month, Sigillito said.