The economy is really bad and several of my competitors have gone out of business in the past year. How can I strengthen my small business to prevent it from closing?

— B. Harris, Oro Valley

Tucsonans were grateful to put 2010 behind them and look ahead with renewed hope. The prior year was full of foreclosures, vacancies, financial struggles, rising unemployment and a rising cost of living. Small businesses were significantly impacted. Many with a negative cash flow shut their doors. It seems the real estate industry suffered the most in the local economy, but truly, the impact of customers’ empty pockets rippled through nearly every industry.

It is disheartening to see any business close. There are many reasons a business fails, even in good economic times. Inadequate capital and failure to evolve with the changing times are most often the culprits. Many business owners are unwilling or unable to read the trends, warranting a change in direction or strategy, and they perish.

An example of this is the “mom and pop” gas station. When Texaco withdrew from the Arizona market, many unbranded gas stations and convenience stores became available for new proprietors. The emergence of big box stations was the first sign of change. Next came the emergence of the “superstations.” Both these new competitors enjoy strong purchasing power and offer discounted prices that the smaller stations can’t compete against, forcing them out of business.

How can a business owner avoid a similar situation? Conserve working capital. “Cash is king” and is achieved by paying down debt in good times to reserve for the hard times. Review your business plan often and reevaluate whether it is adequate for the current economic times and your particular situation. If your business does not operate by a business plan, develop one. Do your own research and know your market environment. Look for changes in technology, the economy and the competition. Be prepared to take action and adapt to the current market climate.

A successful business must have sharp foresight into the marketplace and the resources to sustain itself in hard times. Working capital may be available through equity investors or lenders who look for a conservative financial track record and a well thought-out business plan.

Ms. Nowak is a senior vice president and commercial loan officer at Commerce Bank of Arizona. She can be reached at or by phone at 321-0398.

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