Troubled Economy Puts A Strain On Small Businesses
Filed by KOSU News in US News.
August 11, 2011
There hasn’t been much to cheer about in the economy, particularly when it comes to jobs.
One key factor that will determine whether things will eventually start to look up depends on small businesses. Small firms account for about two-thirds of total new employment, and the vast majority of those jobs are domestic, which means the dollar benefits of that employment also tend to stay in the United States.
But how do small- and medium-sized businesses around the country feel about the present state of the economy?
Consumers Pinching Pennies
Rose Corona drives a 12-year-old pickup and tills her family’s land. She sells leather saddles, hay and other farm supplies at her store.
Corona says at heart she’s an optimist, but she says Big Horse Feed and Mercantile is getting hit from all sides.
“I’m just trying to maintain,” she says.
Her customers are getting squeezed by higher commodity costs and gas prices.
“Three, four years ago, you wouldn’t hear anybody say, ‘I can’t afford it.’ Now you hear it,” she says.
Customers in Temecula, Calif., where Corona lives and works, are turning to alternatives to lower their costs. That, in turn, pares her profits.
“Rather than buying a bale of hay at $20 — what happens with hay is that horses will forage through it and take what they like and leave what they don’t like, like a salad — now people are buying a pelleted feed that [the horses] can completely eat up, and it costs them less,” she says.
Her region has one of the highest foreclosure rates in the country. Also, her customer base is grappling with high unemployment. Corona herself has had to lay off seven of the 33 employees she used to have.
“I take on a lot of the things of what I used to hire people to do,” she says.
Corona lays most of the blame on the government. She says she spends two to three hours a day filling out forms to comply with environmental, occupational and tax regulations, rules that she says are only getting more onerous.
And that’s why she can’t afford to hire anytime soon, she says.
“Most specifically because I don’t know what the government’s going to do,” Corona says.
Higher Gas Pains
A lot of the same dynamics, bad housing and job markets, also plague Dunham Sports, an outdoor and sporting goods chain based outside Detroit.
“For instance, a lot of the bigger table games that we sell or the elliptical and exercise equipment — if you don’t have a house or if you just have an apartment there isn’t much room for them,” says Al Blazek, the company’s chief financial officer.
Blazek says higher gas prices means customers can’t afford to make as many trips. Or, when they do, they have less to spend at the store.
One more sign of worry: They’re using more credit than cash these days.
“And that is usually an early warning signal that people are financing their purchases today, which means that they may not have the spending ability going forward that they have in the past,” he says.
But Blazek says things are still far better than a couple of years ago. For example, bank credit is much easier to come by these days, something that’s critical to be able to stock, renovate or expand Dunham’s 170 stores.
“So we’re doing cautious expansion at this point, but as credit markets have loosened, we have also loosened our approach to spending money,” he says.
And that means the company plans to hire through the fall and into next year.
Hiring may not be in the immediate future for Gibraltar Construction. The Clearwater, Fla., real estate firm slashed its staff during the recession from more than 500 people to 25.
Kathleen Wolf used to be Gibraltar’s chief financial officer. Now she just works on contract. She says recent government layoffs worsened an already bad job market, yet she feels things are turning a corner.
“They have not turned around yet, but they’re, you know, at least holding a certain ground where they’re not going backward anymore,” Wolf says.
And that itself is a measure of victory.
At the furthest end of the spectrum, Precision Machine Works has barely been touched by the economy.
The Tacoma, Wash., aerospace supplier is basically driven by one concern: Boeing.
“It sounds a little weird to say,” says Bill Helenberg, the company’s chief financial officer. “I remember how panic-stricken the nation was, or probably the world was back in 2008, but we just didn’t see that particular panic here in our particular business.”
He says the only other effects of the economy are indirect. For example, some of the machinists he wants to hire from automakers in the Midwest are having a hard time moving because they can’t sell their houses. [Copyright 2011 National Public Radio]