WEAK SALES AND dismal profits have driven plenty of entrepreneurs to the brink, but now some say they’re starting to see signs of life — and, in some cases, claim they're in even better shape than before.

For Jake Cohen and his parents who own two high-end bed and breakfasts, Rendezvous Bed & Breakfast in Palm Springs, Calif., and the Shore House at Lake Tahoe, Calif., sales during the latter half of 2008 were dismal. Even worse, the family had just finished a costly renovation of the Palm Springs B&B around the same time that reservations slowed to a trickle. “We went through three or four months of wondering if we would lose the business,” he says.

To stay afloat, the Cohens relied on an equity line of credit and additional loans from a private investor worth about $300,000. They renegotiated vendor contracts for more favorable terms and offered special discounts hoping to lure in guests. The moves seem to be working. At the Tahoe property, reservations during April were twice what they've been in previous years, he says. “We’ve gone from making two reservations a week to five reservations a day.”

While many business owners haven’t been as lucky (business bankruptcy filings hit a record 8,113 in April compared to 5,182 a year ago), those who have managed to squeak by may soon see some relief, says Chad Moutray, chief economist for the Small Business Administration in Washington, D.C.. In fact, many owners say they’re already seeing signs of recovery.

According to the Small Business Success Index, a survey of 1,000 small business owners put out by web site development firm Network Solutions and the University of Maryland’s Robert H. Smith School of Business, nearly half of small businesses surveyed believe the economy will improve or remain unchanged in 2009. The survey also found that 67% of firms are actually planning to invest in their businesses this year.

After hitting rock bottom in the fourth quarter of last year, Brenda Rhodes, chief executive of InTouch, an outsourced customer service call center in Los Gatos, Calif., is now hopeful about the coming year. “Literally no one was spending a dime. Credit lines were maxed out and we had no idea if anyone was going to be buying anything in 2009,” she says.

To get through it, Rhodes stayed in constant communication with her bank. “If anyone was afraid, it was the bankers,” she says. “Seeing that revenues were down, they could have pulled our credit line." Rhodes managed to keep them from doing so. She also cut prices by 25% (for a limited time) and agreed to contact 25 more people a month for clients. Those moves appeared to have paid off. “We’ve already booked more revenue this year than all the revenue combined last year,” she says.

Of course, not everyone is ready to officially ring in the end of the recession yet. The National Association of Business Economists released a survey in April showing that 93% of economists think the nation’s real gross domestic product will decline for the year. (Though, economists in the survey did acknowledge that declines were abating.) Even Moutray from the SBA thinks economic conditions will get worse before they improve. “Consumer confidence is better this year than it was in December, but it’s still relatively low,” he says. “It is kind of hard to say that we are going to be growing gang busters.”

Cohen, the B&B co-owner, agrees. Even though he expects the business to have its busiest summer ever this year, he isn’t getting rid of the discounts yet. “People will still be very price conscious for the next couple years,” he says.

—Write to Diana Ransom at dransom@smartmoney.com

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