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Firms Shift Focus to Survive

Working Hard at Adapting Firms Shift Focus to Survive By JEFF WEISS Contributing Reporter As technology rapidly changes the face of business, companies are forced to often adjust on the fly. With little time to regroup, businesses must make bold decisions to reorganize, expand their scope, or even shift the company’s focus entirely. This can be difficult for some family owned businesses which often can be steeped in tradition handed down over the years. But in addition to technology, governmental pressures and society itself can also affect a business’ success. As several Valley-area family owned companies have found out, it takes foresight and determination to succeed in an evolving environment and some of these firms have adapted to changing conditions quite well. When Phil Carter, owner of Tarzana-based Red Barn Feed and Saddlery, bought his store in 1984, the shop only did a fraction of the business it does now. Formerly based in Reseda and previously known as Reseda Feed and Seed, Carter’s business was founded more than 50 years ago to supply the many horse owners then living in the San Fernando Valley. As urban growth changed the Valley from a sleepy pastoral outpost into a heavily populated metropolis, Carter realized his store would have to change to meet the ever evolving needs of the city. Expanding his business to include all pet owners, Carter watched business soar, with revenues rising from $300,000 in 1984 to $4.5 million in 2002. “When we bought the place it had always had a couple pet products since it opened in 1955 but it mainly serviced the needs of horse owners,” Carter said. “But it was very obvious when I bought it that we’d have to expand the product line to keep up with the changing needs of the Valley. Now we have just about any kind of product of food for any animal. It’s grown in terms of volume and customer base. We started out with six people and we have 20 people now. For a small store it has become pretty big.” Analyzing the situation, Carter understood that in order for his business to survive, it would have to adapt. Twenty years after his experiment to expand the focus of his store, Carter has no regrets. “It’s been a lot of fun. It’s a fun product and 99 percent of the customers are good people because they like to take care of animals. We really are an extra stop for them to come to because you can get feed at supermarkets as well. It’s a fairly committed customer base and they’re special people,” Carter said. Changing a business Where Carter merely needed to expand the services he offered to increase business, David Feldman, CEO of Canoga Park-based Pipedream Products Inc., decided to switch the focus of his company entirely. Founded in 1973 by Feldman’s brother Bob and his father Gene, Pipedream Products initially distributed smoking accessories such as cigarettes, pipes, lighters, rolling papers, etc. But in 1989, with anti-smoking sentiment starting to build, the Feldmans realized that the time might be right to switch Pipedream’s focus. “The business was bringing in $3 million a year in revenue, but with all the anti-smoking sentiment we thought that we should change gears,” David Feldman said. “We got into gifts and gags and lotions and we started to look at crossover customers from head shops and tobacco shops to adult stores. We began selling romantic lotions. Some of our cross-over companies carried the lotions and they started to want adult novelty toys. So we started to distribute gag and novelty presents and eventually adult toys.” The decision paid off as Pipedream’s sales in 2004 are expected to exceed $30 million. “We’ve gotten a broader market to sell to. There have been bigger profit margins to work with,” Feldman said. “I’m definitely glad we changed because it opened up the world to us. We now distribute directly to other companies. Sex is just more acceptable than smoking; a lot more people have sex than smoke.” Ernest Doud Jr., managing partner of DoudHausnerVistar, a strategic family business advising firm, advises businesses to constantly assess the company and the market in order to know the right time to shift focus. “A discipline that any business would be well advised to follow is the discipline of strategic planning. The reality is that a very small percentage of middle market businesses engage in any kind of formal strategic planning, very few have yet articulated a vision,” Doud said. “It becomes difficult for companies to adjust to changing market conditions if they aren’t systematically and routinely looking at the issues inside and external to the business that may impact them. If you look around at what’s happening you won’t have to get lucky to succeed. You want to look at external conditions, competitors, customer base, technology, regulatory environment, and customer demographics, to see what kind of opportunities and barriers it creates. You have to ask, are we equipped to deal with this? You need to make the changes accordingly.” Interesting alternative In the case of Northridge’s L.A. Surplus Inc., the decision to shift gears not only led to increased business but made president and owner Steven Price feel more fulfilled. “We started out in the adhesive tape and shipping supplies business. My father had introduced me to a guy in Chicago who was in the tape manufacturing business, so I spoke to him and decided to go into that field,” Price said. With the tape business only marginally profitable and generally lacking in excitement for Price, the entrepreneur began to examine other possibilities. “Somewhere along the line, I learned how the closeout business works. When I was taught how liquidators work and how to buy and sell distressed merchandise, a light bulb went off. I realized that I wanted to be in the wheeling and dealing business. That’s when I started the new business and eventually dropped the tape business which was only marginally successful in the first place. The new business has been a much bigger success.” The business has grown steadily through the years from $250,000 a year to $5 million a year in sales. Along with the business’ fortune, Price prefers the distressed merchandise game over the tape world. “I’ve been a lot happier with this new business. I’m more interested in this business because I constantly get to deal with different things, different companies and different customers. It’s fast paced and interesting to work at.”

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