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The Economy April 16, 2008, 3:00PM EST

Entrepreneurs Fight a Recession

(page 2 of 2)

Alberto Mena

To combat weak sales and increase traffic, he plans on discounting big-ticket fly-fishing equipment this spring. But he's still optimistic about his prospects in this college town. "The school is the only reason we're in Hanover," says Ciardelli. —Amy S. Choi

BURLINGAME: A TIGHT SPOT

The quaint, tidy sidewalks of downtown Burlingame, Calif., teem with well-heeled families out for a stroll. And, often, not much else.

Many of the business owners in this affluent suburb of San Francisco are on edge. Paul Cornajo is one of them. He owns Fina Boutique, where dresses, shoes, and bags go for $100 to $400. "People are just not shopping like they were last year," Cornajo says. In January, sales were down 40% from a year ago; February was down 20%. Cornajo has been clearing out older merchandise at fire-sale prices. "I've had a 'Sale' sign out on the sidewalk for months," he says. Late last year he went into debt to pay for new inventory, and he is now slashing expenses. He hasn't advertised since December and has started cutting the hours of his sales staff.

Other firms are suffering from tighter business spending. Charles Kavanagh, owner of Kavanagh Engineering, says he booked only two jobs in the first two months of 2008. That compares with five for the same period in 2007. "I had one contractor build a house and now he can't sell it, so he's certainly not going to start another one," says Kavanagh. And at Victoria Sedan & Limousine, revenue is down 10% from a year ago. "We are a luxury service, and that is the first thing that companies cut," says co-owner Ben Majlessi, who has a fleet of 10 cars. "If we see a drop two months in a row, then we'll tighten our belt and have to get rid of cars."

At least one business is planning to expand despite the gloom. Marlinda Wilson, owner of Marlinda's Skin & Bodycare, says that while customers have reduced the frequency of their spa treatments, she will nonetheless be open on Sundays starting in May. Wilson is betting that enough weary moms will go for a Sunday indulgence to make her effort—and the expense—worthwhile. —Louise Lee

AUSTIN: INFLATION JITTERS

Ask business owners in Austin about the economy, and they don't talk about a recession. They talk about inflation. Michael Parker, owner of downtown pub Opal Divine, used to pour his vodka tonics from a bottle of locally owned Tito's Handmade. Not anymore. With prices up on everything from beer to cheese, Parker, who employs a staff of 140 at three locations, reluctantly boosted menu prices 5% to 10% and started substituting lesser liquors in the pub's well drinks.

Donya Stockton, owner of a club called Beerland, is worried that skyrocketing property values—embodied in dozens of condominium projects going up around town—may price out the grungier dive bars and rock clubs that made downtown a destination and gave rise to Austin's official slogan ("The Live Music Capital of the World"), as well as its unofficial one ("Keep Austin Weird"). Stockton says that with her landlord unwilling to renegotiate her lease, she expects the club will be forced to move or close within the next few years.

Tom Abdenour, owner of the vegetarian Tom's Tabooley, is also apprehensive. He and other business owners worry about a repeat of the dot-com bust, when a collapse affecting the city's high-tech sector hit downtown Austin hard. "There's a lot of money pouring into this town, and a lot of young money," he says. "But what happens when it stops?"

Dan Klopp, owner of four-person custom signmaker Sign Satisfaction, thinks he knows the answer to that one. Although Klopp raised his prices about 4% this year to cover an increase in the cost of plastics, referrals from commercial developers enabled him to take on an additional employee. "The sign industry is pretty recession-proof," he says. "They buy signs from us on the way up, and they buy signs from us on the way down." —Kerry Miller

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