Terror attacks affect small businesses
By Pat Curry • Bankrate.com

The terror attack on America slammed small businesses, especially those that relied on shipping and tourism, and also produced a few short-term business booms.

But now that the transportation system is getting back in gear, owners are bracing for the economic aftershocks, which will rely on how tightly consumers clutch their pocketbooks and confine their movements after the tragedy.

First-week impact
In the first days after the event, businesses that relied on America's grounded air transportation system took the brunt.

Take, for instance Augusta Seafood Inc., a family-owned business in Augusta, Maine, that specializes in shipping live Maine lobsters across the United States.

"We ship Federal Express Overnight with guaranteed next-day delivery," says co-owner Bob Benedict. "That guarantee has been lifted. We're doing no shipping whatsoever. It's definitely had an impact on us. It's a good 20 percent of our business."

FedEx has done a good job, Benedict says, of giving him daily status reports. The giant shipping firm suspended air shipments from Sept. 11-15 and reinstated its domestic delivery guarantee on Monday, Sept. 17.

"We'll keep our fingers crossed," Benedict says, "that we get back to something near normal."

They're facing the same kind of uncertainty at Norfolk Wholesale Floral in Norfolk, Va. General manager Jason Cook says 80 percent of the fresh-cut flowers the business uses are from out of state, and trucking companies are altering their schedules as word arrives of South American planes that are allowed to land in Miami.

"They're jumping back and forth, not knowing what to do," he says.

Flower deliveries cut
With deliveries uncertain, Cook can't guarantee his customers will get their flowers

"With weddings, it's a little hard to deal with the bride and the mother of the bride in a normal week," he says. "When you tell them you might not have their flowers, they're a little upset but they understand. We just tell them, 'Maybe you'll have to find something else to decorate with.' "

Two clients canceled orders for wedding flowers, one because the bridal party couldn't fly in, the other because the groom was put on standby for military duty.

On the other hand, Norfolk Wholesale Floral has done a booming business in red, white and blue floral arrangements, ribbons and flags.

"Everyone has become patriotic' it's wonderful to see that," he says. "We've sold out of flags five times over, and now we can't find anymore."

A few winners
The grounding of the aviation industry has produced a few other opportunities. A spokesman for the American Trucking Association says that the temporary ban on air cargo shipments "increases the cargo pie for small truckers," and the Postal Service contracted with thousands of trucking companies to carry mail that had previously been shipped by air.

Another company that has seen a surge in business this week is Pre-Employ.com, a California-based employee-background screening firm. With news reports about airport security firms paying hefty fines for not doing criminal background checks on their staff, Pre-Employ has seen a 100 percent increase in requests for information.

"Overall, people across the nation want to know who they're working with and who they're hiring," Pre-Employ.com President Robert Mather says.

Business income insurance won't kick in
They also want to know if their insurance will cover the income they've lost this week. Chances are, the answer is no. Bill Wilson, director of the Independent Insurance Agents of America virtual university, says the association has gotten calls asking if their business income policies would kick in.

The only businesses that qualify, Wilson says, are in lower Manhattan, where the government has sealed access, barring employers, employees and customers alike.

The travel industry took an immediate hit from untold thousands canceled reservations.

Cathy Keefe, spokeswoman for the Travel Industry Association of America, says it's "difficult to tell right now" what the full extent of the tragedy will be on the travel industry, but the association is confident it will recover.

"Americans view travel as almost a birthright; it's ingrained within us," she says, "and we're incredibly resilient. We're not going to give up. I think it's steeled our resolve even more ... I think we'll see a big surge in travel within America. There's an overwhelming surge in patriotism. They're going to say, 'I'm going to travel within my country and I'm not afraid to travel.'"

Ed Silver, co-founder of hotel discounter Lodging.com said his company spent Tuesday helping travelers grounded by the ban on air travel.

"They ended up in cities they didn't know anything about," Silver says. "They called from the airport saying, 'Help me out. I don't know where I am.'"

Since then, Silver says the Boca Raton, Fla.-based company has seen a dramatic increase in cancellations.

"Our cancellations are almost outpacing the bookings," he says. "There's just a lot of uncertainty."

To help current customers and to convince new customers to make reservations, Silver says they're waiving cancellation fees and accepting bookings without them as well.

If there is another industry that didn't need a national disaster right now, it's Internet companies. Already struggling to stay afloat, some small dot-coms have been reeling because projects have been canceled, banner ads have been pulled or client payments were delayed in the mail.

Cash-flow woes
"We've received word from a number of clients that they cannot make their payments right now because of incoming payments not arriving," says Sharon Tucci, president of Sling Shot Media, a Nevada-based e-mail service bureau with about 42 staffers. "Two people I know who run dot-coms had to tell their staff that this week's pay will not be on schedule. Another one is dealing with a problematic landlord because her rent was already late when this started and she has had no money come in this week.

"The reality is that there are a lot of dot-coms right now that are paying out their right hand what they get in their left hand," she says. "A one-week or even two-week situation where cash flow is slowed is recoverable for most. I think overall in about 30 days time, we'll start to see an improvement in the general economy. But some companies won't make it that might have otherwise."

-- Posted: Sept. 17, 2001