The recession and slow recovery have hit small retail businesses hard, especially those that compete against big- box stores and those that offer discretionary retail items.

At this point in the economic cycle, most business owners have implemented the standard cost-cutting and cash-saving steps, such as limiting employee hours, reducing inventory, stretching payments and using selected promotions.

What can a business do when the incremental steps aren't enough? It may be time to totally change your business model.

Downtown retail businesses have been fighting the suburban malls and big-box retailers for years. One successful strategy is to offer products or services that the larger stores can't or won't.

Compete on custom service and unique items, not on price. A local hardware store in our area knows the original fixtures and small appliances that were installed in the neighboring developments. Need a new garbage disposal? Which development do you live in? Here's the exact replacement.

Another option is to accept that consumers' buying habits have permanently changed. Just as mail-order expanded the footprint of businesses, the Internet has taken this dynamic to the next level. Consider closing the retail store and moving totally to an Internet-based business. This step has the major advantage of reducing your fixed expenses and expanding your sales reach. The money you save can be redirected into Web page development, customer support and expanded inventory.

Both moves have the advantage of a staged rollout - in other words, you don't have to totally abandon your present model to test the new concepts. Take the time to experiment and fine-tune your changes.

If you are a victim of momentum and are struggling to change, just remember this quote often attributed to Albert Einstein: "Insanity: Doing the same thing over and over again and expecting different results."

Ralph Hershberger is president of SCORE Southern Arizona, a nonprofit group that offers free small-business counseling and mentoring. For more information, go to, send email to or call 505-3636.