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Startups retrench in slowdown

America's economic boom began showing signs of strain about the time John Anthony Balla and his two partners were forming Urbanpipe.

But rather than scrapping their startup plans, the trio devised survival strategies for a coming recession. Urbanpipe opened last November. Today, the Tampa telecommunications company is preparing to staff an office in Baltimore and reports it is on track to meet 2002 revenue projections.

"It did give us pause. It gave our investors pause," Balla says of starting business on the cusp of a downturn. But "you need to acknowledge a bad economy and operate accordingly."

By now, few doubt the United States has tumbled into recession. October's national unemployment rate was 5.4 percent, its highest level since 1996. The Federal Reserve has cut short-term interest rates 10 times since Jan. 1 in hopes of igniting spending. Manufacturing orders in September were at their lowest levels since March 1997. And the Dow Jones industrials are trading in the 9,500 range, well below their 52-week high of 10,350.05.

Tough times, but not necessarily a death warrant for small, young companies in the Tampa Bay area. Some businesses are closing or consolidating, but others are growing and meeting projections by adjusting to the economic realities.

That's what Matt Schissler, president and chief executive of RainMakers International, did. RainMakers, a Tampa sales staffing company, opened May 3. Initially, Schissler envisioned placing seasoned, high-priced sales professionals in contract positions.

"But the market said no," he says. So Schissler retooled his business plan. Today, he places junior-level salespeople in both contract and permanent positions. He also places those salesmen and women at his clients' offices rather than at RainMakers' site. That decision cut overhead (RainMakers doesn't need as much office space as it would have if salespeople were working onsite) and the company's internal costs.

Since May, RainMakers has served 14 clients and placed 20 people, Schissler says. It projects revenues of $250,000 this year and of $2.1-million in 2002.

"Entrepreneurs have to allow the marketplace to dictate back to them how their business is going to be structured," Schissler says. "Focus on capturing customers and revenue first."

Such market sensitivity is key for a new company's success, particularly in a downturn, says Irene Hurst, director of the Small Business Development Center at the University of South Florida. Companies today face a market full of hiring and spending freezes, meaning they must pay extra attention to their customers' buying patterns and attitudes.

"If you want to start a business at this point, you want to make sure you can minimize costs and go for the long term," Hurst says. "Go in and make sure you can survive for the next 24, 36 months."

Cost cutting is at the heart of Urbanpipe's recession-survival plan. The company, which installs fiber-optic networks in downtown business districts, was the brainchild of New York investment company Dolphin Communications Partners. Dolphin came up with the idea, then gave Balla and his executive team an undisclosed amount of seed capital in November 2000.

The money was designed to last through March, Balla says. But after recognizing recession was inevitable, the Urbanpipe team looked at ways to trim costs. Among them: flying Southwest Airlines instead of more luxurious _ and expensive _ carriers; booking flights on the Internet; scouring the market for below-retail deals, such as used furniture; leasing an executive suite rather than individual offices for each Urbanpipe partner; and putting off hiring. In fact, Urbanpipe hired its fourth employee just last month and has only now begun to staff an office in Baltimore, the first city targeted for its network.

The result: The seed money Urbanpipe received from Dolphin lasted through September, six months longer than anticipated.

"It's fairly simple," Balla says. "It's a matter of being smart with your money."

Yet "smart" doesn't mean cheap. Scrimping doesn't work for everything, Balla says. Urbanpipe, for instance, bought its network equipment from top manufacturer Cisco Systems.

"We don't want customers to think we're a scary little startup that could go belly-up any day," he says. But "we understood the economies of the industry and what was happening."

There's no denying the pressure that an economic downturn puts on any company, especially a young one. Those who deny it, Balla says, "are either smoking crack or are very naive and going to go out of business."

But there is an upside. "There's always room for a good idea and a good product," says Liana O'Drobinak, president of Acclaris LLC in Tampa. The company, a business service provider specializing in back-office transaction processing, opened in March.

Many local entrepreneurs are weathering the downturn by sticking to what they know best.

Tony Linguanti Jr. and Jim Bassil formed Taylor White, a St. Petersburg executive recruiting company, in May. The company specializes in recruiting accounting and financial professionals and will not stray from that niche.

"That's our background," says Bassil, who has worked for national accounting and headhunting companies. "We don't do (information technology)."

Chief among Taylor White's business strategies are emphasizing client service and, perhaps most important, developing referral networks. "Now's the time you've got to work harder," Bassil says. "You can't sit back and wait."

It's a strategy echoed by Schissler of Rainmakers. He's making cold calls, networking and lining up speaking engagements."Anything you can do to make yourself more visible, do it," he says.

"Economies in recession are times when entrepreneurs can make their mark," Schissler adds, "and drive the economy."