Mom and pop shops didn’t need the nasty headlines of the last two months to tell them things were bad out there.

The National Small Business Association’s annual survey of small-business owners published in August found that 67% of small-business owners are directly affected by the credit crunch–more than double the number expressing those fears a year ago. The National Federation of Independent Businesses recently reported that small-business owners’ confidence in the economy was at its lowest ebb in the 22 years the NFIB has kept such data.

Todd Smith, of Saranac Lake, N.Y., is president of Dutchtub U.S., the American arm of Dutchtub, maker of high-end, wood-fired hot tubs. While the market for $6,000 hot tubs is cooling, Smith, who waxes practically poetic when talking about his product, refuses to back off his marketing efforts.

“We have never considered economic conditions as a driver of our marketing,” he says. “We have always focused on marketing the experience that comes with our product.”

That means Smith has to find savings elsewhere–and pass at least some of them along to customers to keep them buying. How to do that?

First, Smith plans to move some of the production to the U.S–that’s right, to the U.S.–to meet growing demand in that country. (To date, most of the tubs are sold in Europe.) While Smith is still choosing a manufacturer, he anticipates the move from Amsterdam will save $1,500 per tub, or 25% of the retail price. Those savings include: $500 in reduced transportation costs, $500 in import duties and taxes and $500 in estimated exchange-rate losses.

But Smith doesn’t just plan to move manufacturing; he also aims to change the process. In the past, making tubs involved lots of hands-on labor. “We have been exploring less expensive production methods for years but have struggled to find a process that protects the integrity of the design that we are so proud of,” he says. But a new injection-molding process promises to do the trick, he thinks–and shave another $2,000 off of the cost of each tub.

That extra margin will give Smith room to make critical moves to keep his shop growing–even in a bad economy. His plans include adding more distribution partners and reducing the tub’s price to entice customers (though he won’t reveal by how much).

Photo by Dutchtub U.S..

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