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Some small firms upbeat despite rising costs

While small business owners across the country are fretting as they see inflation, gas prices and interest rates rising, many others are optimistic about the coming months.
/ Source: The Associated Press

While small business owners across the country are fretting as they see inflation, gas prices and interest rates rising, many others are optimistic about the coming months.

Some of these owners are in industries that actually benefit when costs are rising, or they own companies that are structured in ways that insulate them from some of the economy's vagaries. Many just have the upbeat attitude of the entrepreneur — they'll find a way to make things work no matter how difficult the business climate gets.

"I feel like I'll figure out some way to do better than the competition and I'll survive — and if some of the competition doesn't, I'll pick up some of their business," said Donn Flipse, CEO of Field of Flowers, a chain of three floral superstores in Davie, Coral Springs and Boca Raton, Fla.

Like many other owners whose businesses are dependent on delivery vans and trucks, Flipse is considering raising his delivery charges, and he's ordered trucks that run on diesel because they'll get better mileage than gas-powered vehicles. After 16 years in business, he's learned how to cope with change — he started his company during the first Gulf War, when oil prices were at a then-unheard of $40 a barrel.

"I remember very clearly that gas prices had shot up to $1.25 a gallon. We survived that, so I guess if gas prices are going to shoot up to $3.25, we'll find a way to survive that also," Flipse said.

At B-tween Productions, which markets books and products for preteen girls based on Beacon Street Girls characters, the company's growth has more than compensated for higher shipping and other expenses, marketing director Bobbi Carlton said.

"There are economies of scale as you grow that offset rising costs," Carlton said, noting that while at one point the company was ordering 10,000 copies of a book from printers, now it's more likely to order 50,000.

Because the company was funded by investors, and not with bank loans, it hasn't been subject to rising interest costs. And it is now licensing the Beacon Street Girls characters to other manufacturers, which allows B-tween Productions to take in revenue without having to pay the costs of producing the merchandise.

Overall optimism
A variety of surveys taken of small business owners show that overall, they are an optimistic lot even if they are nervous about higher energy prices. The National Federation of Independent Business' monthly optimism index has fluctuated between 98 and 101.5 since the beginning of the year; it was 98.5 in May. Banking company National City Corp. said midwestern small business owners were feeling optimistic in May because of expansion plans by major corporations; that helped mute their anxiety about gas prices.

And a spring survey of small and mid-sized manufacturers and distributors by the Minneapolis-based accounting and consulting firm RSM McGladrey found that 58 percent believed their companies were thriving.

Even small businesses that have seen business decline lately can retain their optimism. Robert Maffei, who owns Maffei Landscape Contractors in Mashpee, Mass., on Cape Cod, is upbeat even though the continuing drop in home building has reduced demand for his company's services. He sees downtime as a time for building relationships with customers that will pay off when business improves.

"If we're taking care of our customers, there's an opportunity in this," Maffei said, noting that by giving excellent customer service — returning phone calls promptly and doing a job well — his company can win business away from competitors.

Like Flipse, Maffei has been in business about 16 years, and remembers the depressed state Cape Cod was in when he first started. "Now, this is a much better company than when I was a kid. I'm still a little nervous, but anything like this is an opportunity."

Still other business owners are optimistic because they're in business niches that can benefit from economic uncertainty.

Franchise owners of Volvo Rents businesses are seeing demand for their construction and industrial equipment due to rising interest rates, vice president Nick Mavrick said.

Because interest rates have essentially doubled in the last two years, "they're better off renting than owning," Mavrick said of Volvo customers. He estimated that Volvo Rents' business is up 35 percent this year over last year; the company has nearly 70 franchise operations in the United States, each of which is independently owned.

Mavrick said franchise owners are contending with the same issues as other small business owners — fuel prices, rising interest rates, higher maintenance costs — but the dramatic surge in business has mitigated the damage to their profits.