A battle for business: firms cut workforce and streamline operations in a harsh economy. (Business News).

Donna Lewis is another business owner struggling not to fall victim to a hostile economy. Sales at her Home Sweet Harlem Cafe in New York, which opened in July 2000, averaged about $18,000 monthly from its opening through August 2001. In September and October, the eatery averaged less than $14,400 per month. This left Lewis concerned about the future of her business.

Lewis' cafe has virtually no fat to trim in response to the lower revenues, so she asked her nine employees to voluntarily reduce their hours by about 25%. Eight out of nine accepted. As the only full-time worker now, Lewis is forced to pick up the slack, putting in long hours to keep her business afloat. "I'm working 60 to 70 hours a week," Lewis says. "But I'm going to do what I have to to make this cafe work."

Lewis is not alone. Layoffs, streamlining operations, and other cost cutting measures are the norm these days as businesses contemplate their futures. The National Federation of Independent Business (NFIB) Education Foundation revealed on October 15 that small-business optimism tumbled five points in September to 96.3 compared with August.

Even the BE 100s, the nation's largest black-owned businesses, are restructuring. David Steward, CEO of World Wide Technology Inc. (No. 1 on the BE INDUSTRIAL/SERVICE 100 list with $802 million in sales), says the key to staying afloat during difficult times is operating efficiently. Steward says his business has been investing in supply-chain management systems and Web tools designed to keep costs down. "If you're doing it in tough and challenging times, that's what you should be doing during good times," he says. World Wide Technology provides an electronic environment designed to help commercial and government customers build out and upgrade their information technology infrastructures. While Steward says there have been few layoffs at his firm, he's reducing head count through attrition.

David Stephens, president of Stephens Automotive Group (No. 45 on the 2001 BE AUTO DEALER 100 list with $62.3 million in sales), was forced to reduce headcount, letting go four of his 50 employees. "In some of those situations, we've identified people who had multiple skill sets that were able to handle a job that maybe two people were handling before," says Stephens, whose firm was BE Auto Dealer of the Year in 2001.

Auto dealerships everywhere are scrambling as margins are squeezed by deflation and 0% financing deals. Stephens is also lowering expenses by negotiating lower rates with his firm's suppliers and service providers. He says morale is still high at the luxury car dealership, despite the workforce reduction. "Our people understand that when revenues are down, expenses have to be lowered because they impact not only the company's bottom line but also bonuses, since we share profits."

When an economic turnaround will happen and what will provide the much-needed spark to rekindle business revenues is anyone's guess, but some good signs are slowly starting to appear. Retail sales for October increased by 7.1% from the previous month, according to the Commerce Department. This is the highest margin ever and means consumers are starting to spend again. But with rising unemployment levels, a full recovery is still a ways off.

"The economy is sluggish. We were driving at 100 miles per hour last year and now we're at five, but the traffic jam will clear and it'll pick up," says Bill Dunkleberg, chief economist for the NFIB. In the meantime, all the business owner can do is prepare for the worst while hoping for the best.

Alan Hughes E-mail: [e-mail]