Small biz: Lots of gloom and doom, little data

Mike Stuckey Senior news editor • Profile • E-mail

If pessimism among small business owners is any indicator, the U.S. economy has not merely derailed. It has hurtled over a cliff and lies in smoking ruins at the bottom of a deep ravine.

"Every day is a struggle and if we were not strong people, I see how people can just give up," said Sheri Wolfe, who had to close her struggling business in smalltown Missouri over the summer.

Wolfe's words underscore sentiments expressed by business owners in a host of recent surveys as well as e-mail and interviews with msnbc.com. But solid evidence that small businesses are hurting on a wide scale, especially as a result of the credit crunch, is harder to come by.

“Confidence about the economy for small business is low,” said Bill Rys, tax counsel with the National Federation of Independent Business. In fact, as measured by a monthly survey of federation members that goes back 22 years, “If it’s not at an all-time low, it’s near an all-time low.”

The NFIB survey from September is echoed by other recent polls. Concerns about the economy have reached “an all-time high,” according to the American Express OPEN Small Business Monitor, a semi-annual survey of business owners in its seventh year. Pessimism also “is at an all-time high” in fifth annual PNC Economic Outlook survey. And respondents to the National Small Business Association’s Midyear Economic Report are “extremely anxious” about the U.S. economy, with nearly 80 percent expecting it to flat-line or enter a recession over the next 12 months.

Small is big
Small business is important to the economy because small business is American business. The Small Business Administration’s Office of Advocacy notes that “small firms,” defined as employing fewer than 500 employees (and most employ less than a tenth that many), make up 99.9 percent of the 27.2 million businesses across the nation. They provide about half of all private-sector jobs, generate up to 80 percent of new jobs each year and create more than half of non-farm gross domestic product.

The SBA and the business associations lack the ability to give a real-time picture in empirical terms about how small businesses are faring nationwide. “We can tell you generalized survival rates of business, but it won’t be relevant” to what is happening right now, said SBA spokesman John McDowell. That information does not appear until months or years after it was collected.

While studies show that, over time and across different industries, 66 percent of new businesses survive at least two years, 44 percent last at least four years and 31 percent are still around seven years later, “we have no way of knowing about the current situation,” McDowell said.

So trade associations, companies like American Express and journalists are left to surveys and anecdotes to fill in the blanks. In responding to such inquiries, the concerns of business owners often focus on weaker sales, higher costs and taxes.

Big variations
These days, given the meltdown in financial markets and the wrangling on Capitol Hill over how to fix it, the credit crunch is getting more attention. But there are wild differences in the various polls and anecdotal accounts from business owners.

For instance, 67 percent of businesses surveyed by the National Small Business Association in August said they had been “impacted by the credit crunch,” more than double the 33 percent of a year earlier. But in the PNC survey, taken about the same time, just 25 percent said they were finding it harder to obtain credit, up from 18 percent in the spring.

And NFIB’s September survey found that “no evidence of serious credit problems has appeared on Main Street. Regular borrowing activity was reported by 34 percent of the owners, unchanged and typical of readings for the past 15 years.” Also, “Only 2 percent of the owners cited the cost and availability of credit as their No. 1 business problem (down 1 point), far from the record 37 percent reached in 1982.”

The American Express study, conducted by a credit provider that is currently tightening its lending practices, does not address the crunch.

Scores of business owners who e-mailed msnbc.com offered widely differing accounts of the impact of the financial crisis on their operations.

Wolfe shut the doors of her soy-candle gift shop in tiny Hillsboro, Mo., because “we could no longer get credit to survive this economy.” In business for three years with four part-time employees and sales of about $100,000 a year, Wolfe, 42, was braced for the “drought” that has always hit her shop in the summer. This year, however, with gas prices soaring above $4 a gallon and flooding from the nearby Mississippi River wreaking economic havoc across the region, it was too much.

“We always have enough money to get us through” the summer, she said in an interview, “but we really had to start hitting the savings earlier because of the flooding and stuff. … We had a line of credit with our local bank, but we started using it more and more, and we couldn’t get more credit. Then we started living off the credit cards, and then nothing was working.”

Wolfe, now selling real estate, and her husband, a graphic artist, are working to pay off $40,000 in debt from the failed venture.

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