(FORTUNE Small Business) – It's 9 a.m. in the spacious loft headquarters of Nina Designs, a rather bohemian Bay Area business that designs, manufactures, and distributes sterling-silver beads and other jewelry parts. The workers wander in at random, variously bell-bottomed and tie-dyed. They settle into their workstations for a long day of sorting and packaging thousands of ornate silver beads and baubles. The office chatter is colorful and light, a bit like the pastel paper dragons and butterflies that hover from the firm's skylit ceilings.

The truth is, though, that life isn't so groovy in the wholesale bead business nowadays. Back in the conference room, Nina Designs founder Nina Cooper looks worried as she pores over her company's financials. Once a niche-market dynamo known for quality products and great customer service, Nina Designs enjoyed nearly a decade of double-digit growth. Sales jumped from roughly $150,000 in 1992 to just under $2 million in 2003. But last year the company hit a wall. Revenues slipped to $1.6 million, and Cooper expects them to be flat at best this year. Meanwhile, marketing costs are skyrocketing as the firm scrambles to attract customers via print ads and trade shows. And soaring silver prices have put a squeeze on profit margins.

Cooper stares deeply into her mug of herbal tea. "We had five years of really dramatic growth," she sighs. "But it's getting tougher and tougher to stay competitive in this business."

Nina Designs' products are handcrafted by silversmiths in Indonesia, Thailand, and India, then imported to the U.S. for sale to jewelry designers and bead stores. After Cooper launched the company in 1987, the price of sterling silver lingered at a relatively stable $4.50 an ounce. But in the past two years the cost of silver has shot up to the $7 range. Wary of alienating customers, Cooper held the line on prices as long as she could. But in spring 2004, with profit margins withering, she added a 10% across-the-board "silver surcharge" to her entire catalog. The result, as Cooper had feared, has been a 7.8% drop in sales since then as jewelry designers substituted other materials for silver. "Look, with the price of silver going ballistic, I really didn't have a choice," she explains. "My demand is falling off, and I haven't identified a new product to sell."

Cooper is both financially and emotionally invested in her company's overseas silversmiths, whose labor has brought a trickle of badly needed cash into poor villages. Her original inspiration to launch Nina Designs came during a 1985 visit to Bali. Cooper fell in love with Balinese culture, particularly its intricate metal beadwork. And she saw that the island's traditional crafts were dying for lack of investment capital and international market access.

Cooper started selling silver jewelry on Berkeley's Telegraph Avenue in the early 1980s. She eventually enrolled at the University of California at Berkeley, where she majored in business and performed in an undergraduate dance company. "I have never had a corporate soul," she says. "But studying business did teach me how to talk to a banker without stuttering."

In 1992, Cooper used savings from her jewelry sales to finance a workshop in Bali. Cooper negotiated an exclusive relationship with the artisans. In exchange for their promise not to supply her competitors, she committed to purchasing enough product to keep 25 local silversmiths working full-time at a living wage. Cooper and the artisans designed an innovative line of handmade sterling-silver beads and jewelry parts.

Launching an import business with products from a developing country was a test of patience and endurance. For the first few years Cooper traveled back and forth continually to Bali, instilling quality standards and forging a strong rapport with silversmiths and factory management. "There were no phones, no faxes, no mailboxes," she recalls. "I literally had to get on a plane to Indonesia whenever I needed to deliver a message. We've come a long way since then."

But today Nina Designs' momentum is stalling. In a letter to FSB, Cooper expressed concern that her company's stagnation threatened both her social agenda and the firm's survival. "Hundreds of silversmiths rely on me for their livelihoods," Cooper wrote. "I take that responsibility very seriously. I want to protect my business from some of the forces beyond my control that have the potential to damage it." Cooper elaborated in a later phone conversation. "Tsunamis, bombs, wars--I'm vulnerable to all that stuff," she said. "I feel like I have all my eggs in one silver basket."

FSB recruited three experts to help Cooper restore her company's luster. George Cloutier is the CEO of American Management Services, a business consultancy in Palm Beach. Erich Schlumpf, a manufacturing specialist with San Francisco-based Archstone Consulting, is a former entrepreneur who launched three successful startups. And Bob Koester is a turnaround expert based in Kansas City.

Cloutier arrives first. in an earlier conversation, Cooper had expressed interest in hedging her exposure to the volatile silver market. Cloutier immediately tries to talk her out of it. "If you want to play the stock market, then take your money out of the business and play the stock market," Cloutier says. "But right now you're in the crafts business, not the commodity business. You need to take the right steps for the business you're in." Cooper looks surprised, but says nothing.

Cloutier suggests that Cooper start by addressing the weak spots on her company's balance sheet. The most glaring problem, he says, is inventory management. Nina Designs turns its inventory 1.2 times per year, a dismal performance. "These slow turns are sucking up your cash," Cloutier says. By accelerating inventory turns to between three and 3½ times a year, Cooper could both free up cash for expansion and buffer against commodity and currency price fluctuations. Cloutier estimates that would add nearly $200,000 annually to the firm's working capital.

Cooper pays for her products when they are shipped from the Far East. Cloutier suggests that she press her vendors for more generous terms, which would free up considerable cash right away. Cooper isn't convinced. She argues that her village suppliers need fast cash payments to stay in business. Moreover, her artisans take six to ten weeks to make jewelry parts and ship them to the U.S. That's an eternity in the fashion business and another good reason to keep ample stock on hand. The most recent example, she says, is a trendy item known as chandelier earrings. Because Cooper had the necessary parts in stock, she was able to catch the trend as it became hot.

Cloutier listens politely. Then he asks how Cooper prices her inventory, given how wildly silver prices fluctuate. "I take an educated stab in the dark," Cooper admits after a long pause. The revelation triggers a helpful discussion about what Cloutier calls Nina Designs' "primitive" inventory-tracking system. The firm counts its inventory by hand once a quarter or so, a slow and tedious job that drains productivity from the core business. Cloutier suggests that she invest in one of the many business software applications that support accounting and inventory management in real time. Tracking inventory on an ongoing basis will give Cooper a better handle on the actual cost of her goods. It will also increase her ability to detect new buying trends.

Cooper nods. "I can see how there are some missed opportunities," she says. Nina Designs runs its accounting on Intuit's QuickBooks, a simple and affordable solution favored by many smaller businesses. However, QuickBooks offers limited inventory support. Cooper needs a midrange accounting system with strong inventory-management capability. There are numerous market options, starting with QuickBooks Enterprise (around $2,500), a more robust version of the software that she uses now. Among competing applications with more features (and higher pricetags) are Oak Street from Industrious Software Solutions and Business One from SAP, both of which start at around $10,000, and Microsoft's Great Plains at around $40,000.

Manufacturing expert Erich Schlumpf zeroes in on Nina Designs' $86,000 annual marketing budget. That strikes Schlumpf as excessive for a company with $1.6 million in revenues. Cooper explains that with sales flattening, she has tried harder to reach customers. Most of the budget goes to trade shows and print advertising in jewelry trade magazines. Nina Designs attended 16 trade shows in the past year, more than twice as many as three years ago. But Cooper can't quantify the bottom-line impact of her marketing expenditures, which concerns Schlumpf. "You need to know which customers are driving profitability and which customers are too costly to maintain," he says.

The consultant urges Cooper to reduce print ads in favor of online marketing. Cooper has 3,000 customers who receive promotional announcements via e-mail. But she could use her website to survey customers' tastes and drive purchasing decisions, tailoring specific campaigns to high-end customers and identifying other customers as bottom feeders to whom slow-moving inventory can be sold at discount prices.

When consultant Bob Koester shows up, Cooper takes a final shot at her silver-hedging idea. "At some point, if silver prices keep going up and the dollar keeps going down, the whole business might not be viable," she argues. Koester responds that the most practical hedge would be for Cooper to get a better handle on her costs. "Your operating costs are going the wrong way," he says. "The implication in the numbers is that no matter what's happening in the market, you don't change your cost structure."

Koester suggests that Cooper develop a detailed list of controllable expenses and monitor them carefully. For example, she could reduce catalog printing costs by switching to less expensive paper. She could attend only those trade shows that have historically generated at least a 20% return on investment. She could even adjust her artisans' wages in response to fluctuations in the price of silver. Cooper rejects the latter suggestion out of hand. "I don't want to live off people's misery," she says. "I want to keep my business growing, but I will not exploit people."

Koester scribbles numbers on a notepad. He estimates that a 10% reduction in operating expenses over the next two years would add $82,000 in cash to the company's balance sheet. "Putting that kind of money in the bank with 3% interest is a hedging strategy in itself," he concludes. Cooper seems impressed. "I can always find something to trim and cut," she says.

When FSB caught up with Cooper a couple of weeks after the makeover, she told us that she had already presented her employees with a written action plan addressing inventory turnover, margin analysis, and marketing-expense management. "Some of this stuff I already knew," Cooper says. "But the makeover really motivated me to make the changes and not put them off any longer."

Cooper knocked 5% off her catalog printing costs by switching to a new paper manufacturer. To get a handle on her inventory levels and prices, she shopped around for business-management software applications. She looked at various inventory-management applications but ultimately decided to stay with Intuit by licensing QuickBooks Enterprise. And in an effort to boost e-commerce, Nina Designs may offer free shipping to customers that place website orders within 30 days after an initial phone order. "We're feeling really positive these days," Cooper says. "We're expecting a lot of good things to happen."

The makeover did not yield a bulletproof strategy for hedging the global silver market. Instead, Nina Designs found its silver bullet in the prosaic details of small-business management. Far out.