By WADE DANIELS

Staff Reporter

There’s never any shortage of year-ahead forecasts concerning Fortune 500 companies, but what about the smaller guy?

To get a better sense of the outlook for small companies, the Business Journal interviewed several business owners or partners about their expectations for 1998. They are Kathleen Lewek, owner and senior consultant with the bank consulting firm Lewek & Associates in Culver City; Brad Ward, president and chief executive of Ward Systems Group in Glendale, a firm that designs and builds manufacturing facility environments; Del Gibbs, owner of Entrepreneur’s Bookstore, a mail-order bookseller in La Verne; Hank Donatoni, chief winemaker and owner of Donatoni Winery in Inglewood; Joe McClure, president of Montrose Travel in Montrose; and G. Bradford Jones, general partner with Brentwood Venture Capital in Brentwood.

Question: The economic picture for 1998 appears a bit mixed. What is your outlook for the year?

Lewek: It’s going to be a terrific year. I’m an independent bank consultant and with the industry going through so many changes, I’m optimistic that the banks will realize that utilizing outside resources like myself is a cost-effective way to identify and implement needed changes.

Gibbs: I’m pessimistic for my business. Usually when the economy is bad, people come to us for answers about how they can start new businesses. But when the economy is better, people don’t seem to need us as much.

McClure: We foresee another strong year in business and leisure travel. Companies are still making good profits and will continue to travel throughout 1998. Leisure travel still has a lot of pent-up demand from people who didn’t travel in the early 1990s, and now people want to spend their money on high-quality vacations with shorter durations. Even with the economic problems in the Pacific Rim countries, we expect a lot of business people traveling there because there’s still a lot of money to be made over there.

Jones: I’m not sure why people say the economy looks mixed. Economists always say it’s mixed in order to hedge their bets, but unemployment just hit a new low, for example, and things seem to be going pretty well.

Question: As a small business person, what are the biggest challenges you face?

Ward: Access to growth capital. The requirements of manufacturers are much more complex than they ever have been. Customers are more demanding, production cycles are shorter and unfortunately in Southern California the access to growth capital to support this new manufacturing paradigm still lags behind our needs.

Donatoni: The biggest problem is overcoming fixed expenses like renting property. A few years ago there was a lot of industrial space for rent in my area, which is near the eastern end of the LAX runways, but now there’s not and prices are going up. I’m hoping to move the winery out to the countryside closer to where the grapes are grown in Paso Robles or that general area.

McClure: Airlines have cut our commissions by about 35 percent over the past two years. That means we’ve got to be more creative than the next guy in order to be profitable and stay in business.

Jones: Our biggest challenge is probably dealing with competition. Our business has a lot of competition because there is a lot of money out there looking for projects. So we have to make sure that the investments we make or the companies that we choose to invest in are the right ones, and we have to do this under some pressure. With the amount of competition we face, we sometimes don’t have as much time as we’d like to fully evaluate a company, because a competitor might beat us to the company if we take too long.

Question: In what ways do you see competition in your area of business increasing or decreasing in 1998?

Lewek: There has been a lot of merger and start-up activity in the banking industry, and all this means more potential business for me. However, there has also been a lot of expansion going on in big and small consulting firms. For example, many of the big CPA firms have been expanding their financial consultant groups, and typically they have a real advantage over a firm like mine when a bank needs some consulting services.

Ward: It’s been many years since people have invested significantly in the improvement of manufacturing facilities. As this demand is translated into purchasing power in the coming year, I would imagine we would have more competitors emerge. More firms that are doing solely industrial engineering will turn to implementing their own recommendations, which is what we’ve been doing for many years.

Gibbs: Our main competitor is the company we buy 95 percent of our manuals from Entrepreneur magazine. They are raising their prices to subdistributors like me as of Jan. 1 by a substantial amount.

Donatoni: There’s been an abundance of small wineries opening all over the state, and competition in the premium wine market will continue to increase. Small wineries have appeared in places where they never were before all over the state, especially in the last five years.

McClure: In my opinion, 30 percent of all travel agencies will go bankrupt, merge or be acquired in the next 12 months this is mainly due to the airlines’ recent cut of commissions by 20 percent. The airlines took a lot of money from us overnight.

Question: Do you think your views are being heard by City Hall and by L.A.’s business leadership?

Lewek: City Hall is not anything I give a whole lot of thought to, other than how it impacts my clients, who are typically independent banks. The only dealing I have with City Hall is when I renew my business license.

Ward: I think L.A.’s business leadership has a very full plate of concerns and is being pulled in different directions by all types of businesses. The manufacturing community has to become more united in its voice so that its concerns are easier to understand and the speed at which we need results is more clear to the leadership.

Donatoni: By and large, I think City Hall has ignored the small business, but that may be changing now because people are really starting to see that it is the small business person who will carry the economy.

Jones: Yes, I think so. We don’t have a lot of requests at the city level. But I do think Mayor Riordan is doing a great job of trying to create a good environment for small business. I have never felt the City Council was ever very effective in helping business. Most of them concern themselves with petty issues that affect a small number of people.

Question: Is L.A. an easy or difficult place for a small business?

Lewek: L.A. is very conducive to small business because it is such a diverse city, so there are lots of potential clients. At the same time, that makes it more challenging because it means competition. There has to be something special about your business to make people want to use you.

Ward: It’s still difficult to be a small business in Southern California as opposed to other areas of the country. We have the advantage of access to a good workforce, but workforce training lags. If a manufacturer here is to be competitive with those of other areas, he’s got to employ a higher level of technology in his business and that requires a more skilled workforce than is currently available. Plus, there are costs of doing business here that are higher than the costs in many outlying areas.

Donatoni: There are so many independent cities in and around L.A. that dealing with all their bureaucracies can be time consuming. I try to bypass all these problems by doing most of my sales out of state.

Question: Has the climate for small businesses changed in the past few years?

Ward: Yes it has. There has been more responsiveness within local government to the concerns of small business, not nearly as much as needed, but progress has been made.

Jones: It’s changed for the better because the economy is better and more money is available for small businesses nowadays in the form of venture capital and from banks and lenders.

Question: Do you expect to add or take away products or services in 1998?

Lewek: I would expect there to be changes in the consulting services I offer, based on market need.

Ward: We’re going to being doing a lot more of the things we already do. We have 13 full-time people and a bunch of part-time people, and I would expect to add another 20 to 30 percent to the full-time.

Gibbs: I’m finally on the Internet selling my products and we’ll see how that goes.

Donatoni: No. In 1998, we will produce about the same amount of wine as usual about 1,500 cases a year.

McClure: We will add products including a new honeymoon division and an incentive travel division, which will market travel packages to companies to give out as rewards to their employees.

Question: How well-cushioned are you in the event of a cataclysmic event, be it economic or natural?

Lewek: Very well. When I worked for banks, I always positioned myself to where if I quit and had no place to go, I could go without working for a year and still be OK. You must be somewhat financially secure so that you can control your own destiny.

Ward: Relatively speaking, probably poorly cushioned. That cushion generally relates to the magnitude of working capital on hand, and most small manufacturers have a shortage of working capital.