Many small businesses are salivating over the next several weeks. This is the time of year that often tips retailers from showing a loss to profitability. That’s one of the connotations for the term “Black Friday” — the time when many firms finally go into the black, or plus column, for the year.
It helps that consumers are showing no signs of slowing down, despite widespread pessimism about the country’s direction and heavy debts carried by millions of Americans, with ongoing credit card balances recently topping $1 trillion for the first time. Despite these and other obstacles, the National Retail Federation forecasts a respectable 3 to 4% increase in spending this holiday season.
Many small businesses, especially in retail, do rely heavily on holiday sales. Nearly three in five small retailers surveyed by digital marketing platform Constant Contact consider holiday shoppers to be “extremely important” to their overall success. Most shoppers, in turn, are receptive to trying new venues during the holidays — 84% of consumers surveyed said they’re likely to purchase something from a business they never dealt with previously.
Still, for the 455,000 businesses around metro Phoenix, the overwhelming majority of them small, it can be treacherous to rely on holiday sales as the catalyst needed to go over the hump.
“Treat holiday revenue as something exceptional,” said Phoenix business consultant Gordon Parkman. “Don’t count on the holidays for your survival, for keeping your doors open.”
Granted, not all small businesses rely on a late-year sales boost. In fact, only about 8% of those Phoenix-area businesses tallied by the U.S. Small Business Administration are in retail. The rest make products and supply services in other areas of the economy, including lodging, health care, technical services, manufacturing, automotive, construction and real estate.
Wide range of small businesses
But for retailers, it is an important time of year. Dwayne Allen is hoping for a modest sales rise in coming weeks. He’s the founder of Big Marble Organics, which offers a line of soft drinks in four Jamaican-inspired flavors — Organic Proper Lemon, Organic Ginger Beer, Organic Proper Hibiscus and Extra Dry Tonic Water.
Allen started making ginger beer at The Breadfruit and Rum Bar, a bar he formerly owned in downtown Phoenix. He feels the key to his new business is catering to the rising interest in organic foods and beverages made with sustainability in mind.
“Our secret is good, clean ingredients,” he said. Big Marble Organics makes the only U.S. Department of Agriculture-certified organic ginger beer in the country, Allen added.
Big Marble Organics mostly sells to bars and restaurants, though the beverages also can be found at AJ’s Fine Foods, Whole Foods, Total Wine & More and Fry’s Food Stores. The company with five employees produces about 20,000 cases a year, each containing two dozen 12-ounce bottles at a facility near downtown.
Julie Maris, owner of Quarter Past Dress in Scottsdale, also said she’s hoping for a strong finish to 2023 for her two-year-old boutique clothing store. Her business specializes in vintage dresses and other items with styles harkening back to the 1940s, 1950s and 1960s.
“Our customers are usually looking for something different,” she said.
Maris said her mostly female clientele makes purchases throughout the year for parties, family gatherings and other events. Holiday festivities could add to that, she said.
Employees are the ‘face’ of businesses
Mike Freeland operates in an entirely different industry. He’s the owner of Turf Monsters, a company that installs artificial grass as well as other landscaping features including custom grills, fireplaces, trees, plants and pavers. The company primarily serves residential customers.
Freeland said his business has been helped by increased interest in artificial grass. This reflects water conservation and expense concerns as well as homeowner desires for less maintenance, as artificial lawns don’t need to be watered, mowed or re-seeded.
The company, which operates a showroom in north Phoenix, has been in business for six years. Freeland cites employees as perhaps the key part of its success.
“We have a good group of guys, a good core of people,” he said. Finding help was a challenge during the COVID-19 pandemic, but Freeland said that’s less of a concern now.
Building a solid team is something that Parkman, president of Achieve Results Consulting, strongly advocates for businesses of any size.
“Employees, especially in the retail world, are the face of your business, so you want to make sure they can adequately represent your business to customers,” he said.
That message also applies to a company’s marketing efforts including its website and any social media presence on sites such as Facebook.
“You want to project a professional image that reflects the business,” he said. If you can’t build your own website or monitor the firm’s social media interactions, “Get someone who knows how to do it for you,” Parkman said.
According to Constant Contact, popular marketing tactics for small retailers this time of year include personalized emails and texts to customers, social-media advertising and discounts on merchandise.
Keeping your eye on the ball
Parkman’s other general tips for small businesses include developing a good understanding of your market, identifying your customers and evaluating the competition with an eye toward pinpointing the aspects that “differentiate you from everyone else.”
Many of those suggestions are seconded by Bill Blades, a business consultant in Mesa.
“Instead of trying to be all things for everyone, you need to think and act on a key strength and make it the core of your marketing and sales efforts,” Blades said. “Going scattershot equals taking your eye off of the ball, allowing the big guys to capture market share at your expense.”
Blades suggests that businesses build respect and develop a favorable reputation in just one or a few market segments. Focusing also should make it easier to target your advertising expenditures and trade-show investments while training and educating your sales force to specialize, he added.
“In other words, think and act like the experts in a specific field,” Blades said.
Importance of financing, other factors
Of all the tips he offers, Parkman said businesses of any size need to have good financial controls in place, including budgets and other tools that allow the owner to monitor where the company spends money. The main mistake that he sees businesses make is not carefully tracking spending against the cash flow they’re bringing in.
“Keep good records, and know where you are so that you don’t wind up in a bind,” he suggests.
Jose Yañez, a senior business consultant for Chase in Phoenix, also underscores the importance of financial monitoring and cash flow.
“It’s challenging when someone comes to us and needs access to capital (but when) we review their financials, they’re completely upside down,” he said. “It’s always easy to get money when you don’t need it; it’s very hard to get it when you’re already struggling.”
In addition, Yañez suggests assembling a team of advisers that might include an attorney, a certified public accountant and a banker. This too is best done when you aren’t struggling.
Tony Medlock, owner of PJ’s Flowers & Events in Phoenix, offers yet another, simple key to success. Medlock has been in business for 27 years, and he attributes a lot of his staying power simply to trying to be cordial and helpful.
“Phoenix is still a small town in many ways,” with a lot of newcomers coming here from other places, he said. Many people thus are looking for personal connections, even with businesses, that they might not be getting elsewhere.
His advice is straightforward: “Treat others the way you want to be treated,” Medlock said.
Holiday season could set records
Holiday retail sales are expected to set a new record in terms of dollars spent, with the percentage increase in line with past years. Many people have been worried about a recession, but a broad economic downturn is nowhere on the horizon right now.
The National Retail Federation projects spending from Nov. 1 through Dec. 31 will total between $957 billion and $967 billion, which would represent a 3 to 4% rise compared to 2022. That would be in line with long-term sales increases that have averaged 3.6% annually. The estimates exclude car sales, gasoline purchases and restaurant spending.
Despite a lot of gloom among the public, and notwithstanding hefty debt levels for millions of Americans, most consumers are in a decent financial position, or at least think they are.
“Overall household finances remain in good shape and will continue to support the consumer’s ability to spend,” said Matthew Shay, president and CEO of the National Retail Federation.
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