Local business outlook: wary A survey of more than 250 Orange County owners finds fewer reporting or expecting increases in profits, in comparison to previous years. The economic slowdown, high energy prices and tight job market are cause for caution, respondents say.

February 19, 2001

By JAN NORMAN The Orange County Register

Many Orange County business owners see the economic caution light flashing yellow.

The question is whether that vision is real or painted in vanishing ink.

An Orange County Register survey this month of more than 250 business owners found that far fewer posted revenue and profit increases in 2000 than in recent years. More significantly, those expecting higher revenues and profits in the coming year fell dramatically.

Higher revenues were posted by 65 percent for 2000, compared with 79 percent for 1997 and 75 percent in 1995. For 2001, 64 percent expect higher revenues, compared with 91 percent in 1998 and 88 percent in 1996.

On the one hand, respondents to the unscientific poll point to such negative signs as stock-market losses, dot-com deaths, California's electricity crisis, higher gasoline prices and large layoffs announced by major corporations. On the other hand, Ken Jacobs of JMG Security Systems in Fountain Valley echoed the sentiments of many by saying, "The economy is still strong, and our industry has not witnessed a slowdown."

SLOW OR NO

Other business owners say the economic slowdown is real and transforming.

"The printing industry is undergoing tremendous change," said Jane Weyhr auch, owner of Deluxe Color Printers in Newport Beach. "We need to reinvent ourselves to keep up with a changing business climate and weaker economy."

While customers formerly used specialists for design or Web-page creation, they now want one company to do everything, she said. "We have become problem solvers, not just printers."

Printers who used to specialize are teaming up to expand their products and services without adding new jobs or equipment, Weyhrauch said. For example, Deluxe Printers and Newport Printing Systems, an Irvine forms printer, sell each other's products.

Others are pinched between rising costs and competition.

"For more than a year, price increases from our suppliers have raised our costs, (yet) increasing our prices to our customers can be difficult because of the competitive nature of this business," said Jerry Browser of Eagle Sanitary Supply Co. in Anaheim.

Economic slowing has a trickle-down effect, said John Robson of Technical Arts, a Placentia machine shop. "We are strongly affected by spending plans of other companies. We detect slowing by our customers due to lesser demand from their customers."

Factors that weaken some companies actually help others.

The Cardomon Group Inc. in Santa Ana provides litigation-support work, such as video taped depositions. "Our work actually gets better as the economy gets worse," said owner Doug Mondo. "People tend to fight more when times are tough and settle cases quickly when things are going strong."

Mergers-and-acquisitions specialist John Bates of Spectrum Corporate Resources in Laguna Hills agreed. "We are experiencing increased activity as the national economy has cooled ... and so far we've not seen significant shrinking of acquisition financing."

ELECTRIC SHOCK

However, one economic factor doesn't seem to be helping anyone. The price and availability of electricity and natural gas "is a wild card that will impact on residential and business costs and most likely reduce discretionary spending," Bates said.

Ed Laird, president of Coatings Resource Corp. in Huntington Beach, sees both direct and indirect impacts on his paint-manufacturing concern. He has turned off security lights outside his building and cut back other uses of electricity.

But those of his customers who are injection molders face expensive consequences if rolling blackouts hit Orange County, as they have in Northern California. "If the electri city cuts off in the middle of the process, it costs $20,000 to clean up the mess and start again," Laird said. "They're all talking about moving operations to China."

Like Laird, Ronald Stein is feeling the electric shock from his customers more than from his utility bill. His company, Principal Technical Services Inc. in Lake Forest, supplies temporary high-tech workers to other companies.

"The economy is just beginning to feel the impact of inadequate supply of power and gasoline, but the effect is great on our business of providing staff for those industries," he said.

HIRING DIFFICULTIES

While Stein's experience indicates that Orange County's historic low unemployment rate may rise, the tight job market continues to create problems for other owners. Some can't find people skilled enough to do the work; others can't find workers willing to take minimum-wage jobs.

"We find we are having to add benefits and ... offer flexible work schedules," said Thomas Myers of Myers Building Service, a Tustin maintenance firm. "The employee market is so tight you must offer something more than the competition."

Christopher Mott of Mott's Miniatures Inc., a retail shop in Buena Park, countered that it can be just as tough to keep workers in lower-skilled jobs. "Several applicants we have had were simply overqualified. The last one we hired worked one day. He didn't even have the courage to call in and quit. He just never showed up again."

Whether the effect of higher gas prices, electricity shortage or stagnant profits is real or perceived, business owners have to get over it, said Laguna Hills distributor Phil Brance. "There is already too much whining. Adapt to a changing business environment or perish." http://www.ocregister.com/business/cover00219cci1.shtml

-- Tess (webwoman@iamit.com), February 19, 2001