Small business development groups shift focus from startup to survival.

BY ANNIE JOHNSON | BRBJ

(540) 981-3229 l annie.johnson@bizjournal.com

As the effects of a poor economy continue to ripple across the state, small business development groups have been forced to find new ways to lend a helping hand.

In Lynchburg, the Region 2000 Small Business Development Center launched a program aimed at what co-director Niro Rasanayagam believes are two of the hardest hit sectors of the small business community.

"We have really been reaching out to the main street communities -- targeting merchants in the retail and the restaurant sectors in how to survive a down economy," she said.

Much of their effort has focused on how business owners can reorganize their plans and figure out what customers are doing with what little discretionary spending they might have.

While 2009 data are not yet available, Rasanayagam estimated that the Lynchburg organization spent at least 10 percent more time educating businesses last year, time that is usually equally split between owners and clients looking to start something new.

"What we're dealing with customers and clients right now is a re-examination of your business concept -- your reason for being," added Casey Willson, who heads up the development center arm of the Small Business Administration at the University of Maryland. "And then a real examination of the basics, from your operational perspective and cost control to your customer focus and relationships."

Willson said small business owners who are struggling should focus on three areas: landlords, lenders and vendors. Those areas typically represent the greatest costs to business owners.

For example, many clients are behind on their rent, or simply can't pay it, Willson said.

He recommends they be upfront with their landlords and attempt to work out new arrangements -- perhaps by agreeing to pay off the back rent at the end of the lease. Business owners also should remember that landlords could be having a tough time filling vacant property.

"Nobody's anxious to go dark right now because there are not a lot of businesses lining up to take that space," Willson said.

As for lending, the credit crunch has made it more difficult to get loans and to pay back money that's already owed -- a fact that has come as a shock to some established entrepreneurs.

Business owners who started out four or five years ago didn't have to focus on cash management -- they were able to get easy access to what they needed, said Wayne Flippen, director of the Roanoke Regional Small Business Development Center.

Now they've hit tough times, he said, and their cash flow has dried up and their credit has been reduced. All the center can do is help them sell their business or figure out how to run it at a different level, he said.

The Roanoke center still offers a business basics class. But it has also shifted its focus toward advertising and marketing, Flippen said, specifically in the areas of Internet sales and social media.

Marc Willson, brother of Casey Willson, works for the SBA's development center at George Mason University and travels throughout Virginia to help small businesses remain "relevant to a changing economy."

Already this year, he has visited Danville, Gretna, Franklin and Charlottesville, among other cities.

He said that even though the small business community is suffering, he has seen his fair share of successful business owners who know their value in a given market.

He tells his clients that they're not going to compete with Walmart.

His advice: Don't compete differentiate.

Another bright spot for small firms is the recent passage of an appropriations bill that included $125 million in federal stimulus money for Small Business Administration loan programs. The SBA estimated that the additional funding could support $4.5 billion in small business lending.

"This Administration and Congress recognize that these key programs were successful in helping jump-start the economic recovery for America's small businesses," SBA Administrator Karen Mills said in a December news release. "The increased guarantee and reduced fees on SBA loans helped put more than $16.5 billion in the hands of small business owners and brought more than 1,200 lenders back to SBA loan programs."

In his State of the Union address in late January, President Obama urged Congress to pass a package of bills to help small businesses. One would take $30 billion of unused funds from the Troubled Asset Relief Program to help community banks make loans; another would give small businesses a tax credit for hiring workers.