The steep decline of small business revenues are especially worrisome for the American economy, but small business owners remain optimistic with caution.
While Wall Street becomes one of the biggest headlines amid the dismal economy, Main Street, which ended last year with a lengthy list of troubles, is snubbed in the media nationwide.
Yet it is small businesses on “Main Street” that really drive the U.S. economy. As the recession deepens, it is those businesses — which traditionally have led the country out of recessions — that are feeling the pain and getting hit hard as big companies.
While large corporations have laid off mass numbers of employees over the past decade, small businesses — which politicians tout as the engine of U.S. economic growth — have generated 60% to 80% of the total new jobs annually.
Defined by the government as with 500 employees or fewer, small businesses represent 99% of all employer firms, according to the Small Business Administration. Compared with just under 19 million who work at large companies, they employ 50 million people and are the biggest source of non-government employment.
Small Business Revenues Drops
According to the Wells Fargo/Gallup Small Business Index, nearly half of the small business owners say their revenues decreased throughout 2008.
Elpida Kosmidis, owner of Super One Hour Cleaners said in an interview at her store that her revenue was down 50% by the end of 2008 compared to one year ago.
“All slow,” Kosmidis, who has operated the store for 26 years in Brighton, Mass. “It’s very tough… People don’t have money. Customers that used to come every week now come every month.”
According to a study by the National Association for the Self-Employed, 43% of self-employed individuals and micro-business owners said this is the worst economic downturn they have experienced.
The National Federation of Independent Business said the number of businesses reporting declining earnings trends outnumbered those with profits by 42 percentage points, the worst reading in its 35-year history of the survey. More than 25% of small business owners said they fear the recession threatens their survival. And one-third of the business owners said the recession has significantly affected their businesses.
Small Business Owners are Cautiously Optimistic
A survey by Microsoft Office Live Small Business and Elance Inc. found that 37% of small business owners worry about 2009, but that 60% said they believe it will be better than 2008. But despite the undercurrent of tenacious optimism, small-business owners remain cautious about the amount of time it will take for the country to recover from the tumultuous economy.
According to the Discover Small Business Watch, a monthly index of the nation’s 22 million businesses with five or fewer employees, only 23% anticipate that the recovery will take less than a year. Forty-two percent of owners think that economic recovery will take between 12 and 24 months, while 27% believe that it will take longer than two years