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Sweet marketing music

Tanner Montague came to town from Seattle having never owned his own music venue before. He’s a musician himself, so he has a pretty good sense of good music, but he also wandered into a crowded music scene filled with concert venues large and small.But the owner of Green Room thinks he found a void in the market. It’s lacking, he says, in places serving between 200 and 500 people, a sweet spot he thinks could be a draw for both some national acts not quite big enough yet for arena gigs and local acts looking for a launching pad.“I felt that size would do well in the city to offer more options,” he says. “My goal was to A, bring another option for national acts but then, B, have a great spot for local bands to start.”Right or wrong, something seems to be working, he says. He’s got a full calendar of concerts booked out several months. How did he, as a newcomer to the market in an industry filled with competition, get the attention of the local concertgoer?

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by Michael Swanson
11/01/2003

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Economy

Business owners’
actions are key to
economic outlook

The federal government and the Federal Reserve have made some big gambles in the past year by betting that low interest rates and tax incentives will push the economy – and the small-business mindset – back into a pro-growth mode.

Indeed, small businesses – chiefly, because they represent 98 percent of all firms in the United States and employ half of the workforce – hold the cards to U.S. economic recovery. The government is hoping for a royal flush, but will their gambles pay off?

Businesses of all sizes remain skeptical. They are primarily focused on flexibility and solvency rather than rehiring and expanding. Businesses are in a “show-me” mode. When sales and margins increase so much that they feel stressed about not having more employees and equipment, then they will act.

According to a June 2003 survey by Wells Fargo’s economics department, Minnesota businesses remain pessimistic about future hiring plans. Out of about 1,000 businesses surveyed, 90 percent reported no hiring plans for 2003; in spite of this, one-third of these businesses expected greater demand for their goods and services.

Despite the overall reluctance to act, certain regions and sectors are showing signs that they are willing to play the hand they’ve recently been dealt. My team at Wells Fargo often says that different businesses perform differently at different times. For instance, there are a lot of enthusiastic homebuilders right now, in Minnesota and across the United States.

On another front, Gamer Packaging of Minneapolis, a 15-year-old family business run by President Run Gamer and his son, Ken, vice president, has been able to expand during challenging times, in part due to diversification. The packaging distributor now sells everything from bottles to lids to pails to the food and beverage industries. Ken Gamer said that his company saw and seized an opportunity when many companies begin switching from glass food containers to plastic. Gamer Packaging recently expanded to 20 employees.

On the other hand, the manufacturing industry faces low-cost global competition that is hard to contend with. The hourly wage for manufacturing in Minnesota last year was $13.26. In China, that same wage was 64 cents. While Minnesota’s manufacturers are doing better, on average, than others nationwide (due in part to improved profits in agriculture), it is challenging to compete on an international playing field.

To invest or not?

This year’s tax cut package may make investments in equipment and technology more attractive because small businesses can now expense as much as $100,000 of new equipment each year, a sizable $75,000 increase from the previous limit. Further, businesses can now receive a 50 percent bonus write-off for new equipment in its first year.

While these incentives are noteworthy and may spur some business owners to invest, small-business owners should recognize that if they expense all of their equipment this year, it can result in higher taxes next year. (The only way to offset this issue is to continually buy new equipment, which isn’t realistic.) Business owners should consult with their accountant to discuss their particular equipment needs and tax implications.

While the new tax package provides interesting incentives, it is still a gamble – time will tell if it is enough to push businesses to action.

In addition to increased global competition, small businesses face two additional hurdles: the service and hospitality industry is still suffering from reduced travel; and state and local governments continue to cut back on local services and programs that have bolstered businesses in the past.

Regardless, business investment is required to stimulate payroll growth. Will more businesses start to recognize a need for more personal computers? Additional warehouse space? Construction equipment? If the answer is a resounding “yes,” then we can prepare for stronger economic growth in the last quarter of 2003 and throughout 2004.

Many business owners are acting, such as the owners of Che Bella, a bridal boutique in St. Louis Park’s Excelsior and Grand development. They were ready to add to their wholesale bridal accessories business with a retail shop when the opportunity presented itself last April. While the economy was “definitely a concern, we were confident that the new development was a good fit for our store. And regardless of the economy, people are always getting married,” says Jenn Bresee, co-owner of Che Bella along with Jennifer Meyer Redman. The store, offering unique bridal accessories and gifts, has seven employees.

Any business that isn’t prepared to take advantage of a stronger economy could be left behind and actually lose market share. Businesses of all sizes should have contingency plans for hiring to take advantage of economic upturns.

A winning hand?

These are interesting times for economists and business owners. In this year alone, we have faced stock market struggles, SARS, wars in Iraq and Afghanistan, corporate shenanigans and continued economic uncertainty.

More recent economic news has been bullish. In the last few months, when we’ve predicted a 0.3 percent increase in sales, we see 0.5 percent, for example. Nevertheless, economists are cautious about predicting a recovery because we’ve been burned in the past. In the end, it is business owners who will determine whether the recent moves taken by the federal government and the Federal Reserve lead to better economic times.