May 1, 2011

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Rolling with the Punches

Local Businesses Fight Against a Tough Economy

Spencer Sutherland

May 1, 2011

Months ago, economists pro-nounced the Great Recession was officially over. It took awhile, but the private sector is finally showing signs of renewed life—better retail sales, increased manufacturing levels, rising consumer confidence and, finally, a bit of job creation. The darkest days of the downturn seem to be behind us. With an eye to the future, several Utah businesses take a moment to look back on how they navigated the recession and how it changed their business forever. Narrowing the Niche American Fork-based Sound Concepts has long understood the importance of finding a niche. The company specializes in creating marketing tools exclusively for the direct-selling industry, including both large corporate clients like Xango and Isagenix as well as individual distributors. In 2008, the company saw sales drop drastically as its clients kept a tighter hold on their marketing dollars. “The majority of the decline was on the individual distributor side,” says account executive Nathan Cox. “They were a lot more reactive. As soon as the [recession] alarms went up, they started to freeze their spending.” To remain profitable through the downturn, Sound Concepts was forced to streamline. The company reduced its inventory, held off on usual infrastructure and technology investments, and even slowed its own marketing efforts. Some changes, however, were easier than others. “Unfortunately, we had to do some layoffs to keep our profitability up,” Cox says. At the height of the recession, Sound Concepts reluctantly reduced its workforce by nearly 20 percent. Fortunately, with a slimmer workforce also came a narrower focus. The company worked harder to meet the growing needs of its existing corporate clients and found ways to attract new business as well. With the influx of corporate work, Sound Concepts was able to remain profitable each of the past three years. The company is now seeing a resurgence in individual distributor purchases as well. “It seems like the confidence to purchase has been increasing each month. Our average order sizes are going up and people are more willing to spend,” Cox says. “They are more willing to invest in their business.” Though the direct-selling industry looks to be on the rebound, Sound Concepts is not about to forget the lessons it learned over the past few years. “We’ve tried to run a leaner machine to make sure we don’t have that challenge again,” Cox says. The company continues to keep tighter reigns on its inventory levels, and company leaders are very thoughtful when it comes to its workforce, which has now surpassed pre-recession numbers. “When we hire new employees, we don’t just hire them because we need them at the moment; we try to have a longer-term view of how it will help us reach our objectives over time,” Cox says. “Our employees are an important investment to us. We don’t want to hire someone if there is a likelihood that we would have to let them go in a year.” Increasing ROI While most companies have experienced similar belt-tightening, Salt Lake City-based inContact is nearly bursting at the seams. The technology company’s growth—which includes the addition of hundreds of new customers and expansion into European and Asian markets—is thanks in no small part to the recession. InContact provides software to the contact center industry. What sets it apart is its use of cloud-based software technology, which replaces individual company servers and enables users to access data and software programs on hosted servers. “One of the really key benefits of the cloud is that it enables you to get almost instant access to software applications without having to pay big, multi-million dollar acquisition charges,” says Mariann McDonagh, chief marketing officer at inContact. “Instead of spending a lot of money from a capital investment perspective—buying software, buying servers, deploying them in your environment, getting people to keep them running—it enables you to buy these services in a pay-as-you-go model. It basically transfers the expense from a capital expense to an operation expense.” Over the past few years, contact centers throughout the country have faced the challenge of maintaining high levels of customer service without the luxury of investing in improved technology. “During the downturn, people were looking for ways to do more with less,” McDonagh says. “That was a challenge, given that they were restrained from the traditional hardware/software, upfront-expense types of purchase.” Through webinars, live events and white papers, inContact worked to show prospective clients the value of the new technology model. “Now we’ve kicked into a higher gear because people are becoming more familiar with the cloud concept and what it means to a business,” she says. Cloud-based technology now looks like the wave of the future. “It’s a sea change, definitely,” McDonagh says. Over the past few years, she’s watched as the cloud has been embraced throughout the mid-market, where companies tend to have less entrenched technology. Now she is seeing the largest of enterprises moving that direction as well. “The ROI is too significant to be ignored.” Meeting the Client’s Needs There have also been low-tech recession success stories. Magician and corporate entertainer Paul Brewer says he is experiencing some of the best years of his nearly 30-year career, even in the face of smaller budgets and increased institutional worry. “Naturally, I thought that when things got so tight, the first thing to be cut would be the company party or the kid’s birthday,” Brewer says. “Actually, the opposite happened. I think people got so down that they needed to laugh. They needed to have a little splurge.” His business has boomed through the tough times, growing from an average of 350 to 400 shows per year up to nearly 600 last year. Brewer says that during the first year of the recession, he did see a noticeable shift from corporate to family events, as businesses put a freeze on entertainment spending. That didn’t mean Brewer’s sleight of hand was no longer necessary. “This last December, we saw a little change [with our corporate clients],” Brewer says. “They were saying [to their employees] ‘you’re not getting your raise, but we brought in this clown to tell jokes about it.’” Long ago, he learned that the real magic isn’t really about the tricks you do. “The magic is going into a company party and giving the company what they need,” he says. “It’s just like any business. Instead of saying, ‘Here I am,’ you say, ‘How can I fill your needs?’” Though the audiences may be different, a successful performance at a corporate celebration is not that much different than an 8-year-old’s birthday. Rather than focusing the attention on himself, Brewer tends to let things go wrong and allow the child to make things right. “[The child] looks like a hero in front of his friends and parents and has a super memorable birthday. The parents see how happy their child is, and the other kids want you at their party, too. “In any business, success breeds success,” Brewer adds. “And then word-of-mouth takes care of the rest.” Following a Dream When CEOs say they have a vision for their company, it’s meant to be taken figuratively. Etsuo Miyoshi, however, quite literally saw the future of his company in a dream. As a polio survivor and frequent traveler, the Japanese glove company CEO suffered from incessant pain in his legs. It was in his sleep that he first envisioned a piece of luggage with a curved handle that would be able to support his weight. He turned his attention from gloves to luggage and the Walkin’ Bag company was born. Miyoshi’s design evolved beyond the curved “lean-on” handle. He also added fully swiveling wheels to allow the luggage to walk alongside the traveler, instead of being dragged behind. When he added a foldout chair to the bag, he created a traveler’s dream come true. After 20 years on the Japanese market, Walkin’ Bag made its U.S. debut in 2004. A few years later, the company decided to expand beyond its U.S. headquarters in New York and open a new operation in Layton—right before the economy took a nosedive. “The recession was something that no one really wanted to face,” says Sid Magill, Walkin’ Bag national sales director. “But even though the economy was tough, we still put on a happy face and a positive attitude and felt like we could go out and conquer the world.” In addition to watching the number of retailers in the luggage industry shrink, Walkin’ Bag had to face the challenge of introducing a new, high-end product that took a bit of explaining. “Our product is built with the consumer in mind and built to improve quality of life,” Magill says. “Our biggest challenge was getting people to understand what our product was about.” Luckily, even if consumers don’t immediately understand the ergonomical benefits of the design, they are curious about the novel foldout chair. “When I open that seat, it draws people’s attention and they want to learn more about it,” Magill says. “There are also a lot of retailers that look at that seat and say, ‘That may bring people into my store.’ We’ve found a lot of retailers that are willing to give it a shot.” While the continued increase in travel restrictions and security checks has led to extra headaches for travelers, it has created another selling point for Walkin’ Bag. Travelers now have something to lean on, or even sit on, while they’re waiting in those long lines. The company has also accounted for the tighter limits on checked and carry-on baggage, with product dimensions that fit under most airline seats, including smaller commuter jets. “That’s a huge benefit,” Magill says. “People don’t really like to give up their stuff because they never know what the baggage handlers are going to do with it—especially if you have a laptop in there that you’re trying to protect.” With its success during the recession—the company has managed growth between 130 and160 percent each year—Magill feels it is well-positioned for the future. “We look forward to the economy rebounding,” he says. “With all of the creativity we’ve shown and different channels that we’ve gone into, things can only get bigger.”
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