Dale Bruder, Tucson Business Coach

The Story

Loss of a major account is a big problem for a small business. Ramona Baird owns Tucson Embroidery & Design. An important customer accounting for a significant portion of sales took business elsewhere. She is reorganizing business resources and searching for new streams of revenues.

Ramona Baird grew up in Wisconsin. She joined the Army after high school and specialized in military intelligence. Her last post was Fort Huachuca, and when her enlistment ended she moved to Tucson.

She studied fashion design at Pima Community College, earning an associate's degree. Fashion was a lifelong interest because her grandmother was a dressmaker.

To be at home with her children, Baird started a home-based custom-dressmaking business. When the kids were older, she felt the need for change and went back to Pima College, this time learning the paralegal profession. She worked for a law firm, but when hours got too long she left and returned to dressmaking.

In 1995, Baird re-entered the work force. She worked for Pima Uniform and managed the Rural/Metro Fire Department account. At the same time, she moonlighted in the embroidery business, doing stitching on caps, shirts, uniforms and blankets. By the end of 1997, her business was big enough to quit the day job.

In 1998, Tucson Embroidery & Design was born. In 2000, she moved the business into commercial space near the current location.

In April 2002, the company started losing business, possibly due to general economic conditions. In May, a large uniform account took its business to a lower-cost competitor.

"This is a discretionary- spending kind of business," Baird says. The year ended with a 35 percent drop in revenues, and the business is now operating at the break-even point. Baird stopped drawing a salary.

This year, big changes are in the works. She is trading in her expensive, four-head embroidery machine because volumes no longer justify the investment. In exchange, she gets two compact embroidery machines with state-of-the-art software and becomes a distributor of the machines. She will earn additional money by training home-based embroiderers.

The company is diversifying revenue streams to include embroidery, screen printing, alterations, bridal wear, laser engraving on glass and stone, sewing lessons and sales of embroidery machines. "I'm optimistic I can weather the tough times," she says.

The Advice

"Baird built her business on the expectation that a large institutional contract would continue and more would follow," says Dale Bruder. She bought the best digital technology and multihead embroidery machines. When the company lost the big contract, revenues fell.

Tucson Embroidery & Design is challenged by competition on two fronts. One- and two-person home-based shops can compete on price because they don't incur overhead costs such as rent. Larger shops also compete on price, taking advantage of established market share to achieve economies of scale. Specializing doesn't answer the challenge because the market expects pricing based on large- scale production.

Retreating and regrouping may be the best strategy, Bruder says. Baird is reducing expenses by trading in the unnecessary machinery. To regroup, she needs to invent a new business model.

She should contact the Arizona Council for Economic Conversion. It has programs to help entrepreneurs with business plans and finances. With its assistance, Baird should do an extensive market study, then use it as a steppingstone to a new business plan.

The council also administers Project FUEL (Finance Utilizing Economic Literacy), a program for small businesses that may be unable to get loans from traditional lenders. Project FUEL lends up to $35,000.

Baird can learn from the past and become a better businesswoman by applying her experiences and new self-knowledge to the statistics and profiles found in the market research, he says. The marketing study will define customers who could be served in the future, and her potential customers can be found by matching these market segments with her talents.

There are untapped needs for the skills of Baird and Tucson Embroidery. She is returning to production of custom wedding dresses. She is passionate about the techniques and disciplines of the sewing arts and would enjoy passing knowledge to others through formal instruction. She will soon be teaching classes at a nearby fabric store.

Her business still can serve existing commercial embroidery customers. Some work can be done on smaller machines. She should keep relationships with large customers and sub-contract work to big shops when it must be performed on larger commercial machines.