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BUSINESS BLOCKS

A recent business survey by the Las Vegas Review-Journal and Las Vegas Business Press found that businesses face a broad range of potential stumbling blocks in 2008.

The single-biggest concern was competition, with 27.8 percent of respondents citing an increasing number of players in their sector as a major hurdle in 2008. Regulatory burdens came in at No. 2, with 20.4 percent citing bureaucratic red tape as their top consideration in the coming year. About 16 percent of respondents listed taxes as their primary concern, while 9.3 percent pointed to general economic conditions as a key obstacle in the next 12 months. The remainder listed a range of potential pitfalls, including rising energy costs, finding qualified employees, retaining the best workers and boosting sales.

Competition is a big issue at First Asian Bank.

The 8-month-old bank, which caters to the Asian community from branches on Jones Boulevard and Spring Mountain Road, is preparing for an onslaught of new community banks in the local market.

William Chu, president and chief executive officer of First Asian Bank, said four to five applications to open local banks are awaiting approval from regulatory agencies.

And Shred-It Las Vegas, a document-destruction business, must also grapple with rivals for new business.

When Shred-It opened nearly nine years ago, it was the first company of its kind in Las Vegas, said Bob Linden, president of the company’s local franchise. Today, Shred-It has nearly 10 competitors, many of whom push bargain-basement prices.

At American Pacific Corp., a maker of specialty chemicals for use in rockets, car airbags and fire extinguishers, executives are paying special attention to regulatory burdens in 2008.

John Gibson, American Pacific’s chairman and chief executive officer, has heard rumblings of increased federal remediation requirements on perchlorate, a rocket-fuel component the company makes.

American Pacific is also feeling the effects of new regulations on international arms trafficking. The U.S. State Department put the rules in place for companies that do business overseas selling components for satellites and other technologies. Companies must submit the products they’re exporting to a federal review designed to keep proprietary technologies out of hostile hands. The reviews can take 30 days to 60 days; now, suppliers from other countries are advertising their competing products as “ITAR-free,” and thus more quickly available.

Gibson said the rules make sense for makers of completed satellites. Their usefulness is questionable, though, for manufacturers of individual satellite parts that are easy to buy from other countries.

Finally, American Pacific officials must keep abreast of tight rules and regulations at the company’s California plant.

“Our people and our organization are very conscious of regulations, and conscious about following them exactly,” Gibson said.

American Pacific is also among the businesses noting that energy costs will take a toll on the bottom line in 2008.

Energy expenses consume roughly 10 percent of American Pacific’s budget, and power bills in Utah alone, where the company has a factory, are poised to jump as much as 20 percent in the next year.

Shred-It is also feeling the pain of rising energy prices. The company is still smarting from big gains in fuel expenses from 2005 to 2006, when the cost of gasoline rose 59 percent per truck. Potential price increases in 2008 are “an unknown,” Linden said.

General economic conditions are yielding uncertainties for local businesses, too.

The Federal Reserve on Tuesday slashed 0.75 percentage points from its interest rate on overnight loans between banks, dropping the rate from 4.25 percent to 3.5 percent.

And every time the Federal Reserve cuts interest rates, First Asian Bank feels the pinch. That’s because it’s caught between depositors, who locked in returns when they opened their accounts, and borrowers, who pay less interest on their loans with each rate cut, Chu said. The bank is locked into paying 4 percent on some deposits, for example, even as it now collects just 3.5 percent from some of its loans.

“Our margin gets squeezed,” Chu said.

The Federal Reserve may reduce rates yet again when it meets Wednesday, and executives at First Asian Bank are bracing for a potential string of cuts through 2008. The cuts could make 2008 a “hugely challenging year,” Chu said. The bank has already pushed its target for reaching profitability from late 2008 to mid-2009 at the earliest.

Also waiting out an unclear market is Perry Ursem, a business-development executive in construction.

Ursem works in commercial construction, which has thus far dodged the massive layoffs dogging the residential sector. But the “ominous threat” of recession, combined with a housing-related drop-off in demand for office and retail space, could make for a rough year.

“With the housing slump, you have the loss of jobs, you have revenue not being spent and you have impacts both direct and indirect,” Ursem said. “How will that trickle down to fewer services being needed, and in turn, lower demand for commercial developments? We haven’t seen it trickle down yet, but we’re watching the situation.”

Each business has its own solutions for surviving — and even thriving — in 2008.

First Asian Bank will weather the storm partly because it’s small. It has 300 depositors, and its small portfolio is easier to manage, Chu said. Also, the bank has diversified its assets, avoiding heavy concentrations in trouble spots such as real estate or land loans. It should also benefit from its niche focus on the Asian community.

“We just have to keep doing what we know best, which is to keep serving our customers,” Chu said. “Then, profits will come.”

Shred-It is also emphasizing customer service. Where other businesses focus on slashing prices, Shred-It keys in on customers’ security concerns. Linden even assented to FBI fingerprint checks of his employees for one client.

“We’re happy to comply with whatever meets their needs,” he said. “We’re there to complement their security protocol. A low-price guarantee is not always what businesses are looking for first.”

Shred-It has already streamlined service routes to minimize gasoline costs, Linden said. And the company will soon deploy new routing software that will allow for more-efficient communications with customers and more-effective billing processes. One measure Linden plans to avoid: fuel surcharges.

“We don’t like to nickel-and-dime our customers,” he said. “It’s just not the way we do business.”

Passing along increased business costs to customers isn’t typically an option at American Pacific, either, because the company is locked into long-term contracts.

Perhaps the single-biggest cure for what’s ailing local companies is time.

The economy is stumbling today, but future prospects are bright, Ursem said. For businesses who can ride out the tough times, better days are on the horizon. Developers are building more than $30 billion in new projects on and around the Strip, and that means business in the Las Vegas Valley will pick up eventually.

Said Ursem: “These are facilities that will have international appeal, and the impact those businesses create will create exponential growth in the need for new infrastructure and new developments. While we’re in a slump, there’s a light at the end of the tunnel.”

By the numbers

What is the biggest problem your business will face in the next year or two?

Taxes Regulatory burdens Competition Economic climate Other

16.6% 20.4% 27.8% 9.3% 25.9%

Source: Review-Journal business survey

This is the fourth in a five-part series based on the Review-Journal and Las Vegas Business Press’ survey of local businesspeople. Here is what’s ahead:

LAST SUNDAY: Business executives discuss their expectations for the economy in 2008.

LAST MONDAY: We’ll look at local companies’ plans for hiring, pay increases and benefits.

SUNDAY: New state taxes remain a hot-button topic. Business leaders will line up on all sides of the issue.

TODAY: Survey respondents discuss the biggest obstacles to their operations in 2008

IN THIS WEEK’S BUSINESS PRESS: The love-hate relationship between professionals and their high-tech gadgets has users praising productivity boosts and cursing round-the-clock disruptions.

Poll results: Asked of Review-Journal/Las Vegas Business Press readers in an online survey. The

Review-Journal and Las Vegas Business Press sent this business survey to more than 2,000 local businesses in December. The questionnaire was distributed to subscribers of the newspaper’s Push e-mail service, as well as members of local trade groups, including the North Las Vegas Chamber of Commerce.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or (702) 380-4512.

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