Adaptation is Malcolm Smart’s shtick. He left computer programming nearly eight years ago to open a dog kennel and a store that sold items for canines. Today, facing the ravages of the recession, he is making risky changes in his business plan and his lifestyle.

To stimulate income, Smart has recently opened both a grooming center and a dog walking service. Dreaming of Plan Bs, he has even worked on a software program for dog-kennel management that he says he might market if tough times continue.

To save money, Smart, 52, is also diminishing his once-affluent personal life. Forced to lay off three of his 15 employees, he is working more evening shifts and weekends, and cutting back on time at his upstate New York home. And, looking to save some $2,000 a month on rent, he is moving from his Park Slope apartment to a 32-foot, 1975 sailboat called the Queen Elvis -- where he plans to live with just "a dog and a toothbrush."

Smart embodies the struggle many small business owners face: find innovative ways to stay in business, or go under.

“He’s somebody who is always coming up with new ideas,” said Spike Vaughan, an employee who has worked with Smart for three years. “He’s moving around a lot and picks up a thousand ideas and then dumps them the next day. And he’s onto the next thousand ideas.”

Small companies, which comprise 99 percent of U.S. firms, have seen demand for their services and products dwindle -- and Smart is no exception. Dog boarding, which normally generates Smart's strongest cash flow, has sunk 20 percent since the recession started. Now it's just breaking even.

"For several months, we've had clients tell us that they've lost their jobs," said Smart. "Some of those are now home, so they don't need dog day care anymore."

Smart is also fighting rising rent and higher costs. His outlays, he says, have soared 20-25 percent in the last year, causing him to do his own maintenance work or forgo it altogether. Smart says that the tiles in the reception area of his dog kennel need fixing, but for the moment he is letting it slide. He also switched to a more affordable DSL provider and cut out buying Fourth of July dinner for his staff.

“I have to multitask all the time; it's just the way things are,” he said.

Even before the recession was declared official, Smart started feeling the pinch throughout his businesses.

“It’s incredibly stressful,” he said. “The good thing is I don’t feel alone anymore. Everyone who has a small business is saying the same thing.”

Before the economic downturn, Smart considered offering health insurance for his staff. But as rising overhead costs threatened the businesses, he abandoned that plan and ultimately had to make other painful decisions.

“When I first started laying off staff or telling them things were hard, they didn't believe me,” he said. “Because these kids, they don't read the newspapers; they don't understand there's a world out there that's driven by banks and Wall Street. But eventually they started getting the message, not just from me.”

Before entering the canine business, Smart worked on Wall Street as a computer consultant. He made twice as much at over $100,000 a year, but he just wasn’t happy working in a cubicle.

“Haven't had a proper job since 1986, as my mum calls it,” he said.

Smart first looked into the dog-care business in 2000 while dating a veterinarian who is also the mother of his son. Two years later, he opened the Brooklyn Dog House.

“I thought, well, that's an easy way to make a lot of money,” he said. “And everybody in the business told me that's not true, and I didn't believe them. And it was absolutely true.”

Although Smart doesn’t expect a turnaround in the economy anytime soon, he’s still trying to position himself for a rebound. He believes that firms are all streamlining, and that once America's surviving businesses start to re-hire, the recession will truly be at an end.

“Hopefully at that point we'll be slim and trim and mean and able to grow quite quickly,” he said.

Smart also emphasizes the importance of staying resilient.

"Don't stay still,” he said. “Keep moving; keep trying things; just keep going. Take a few hits, fall down, get back up; do it again. Don't give up. If you give up, then it's done."