December 4, 2011

Small businesses see signs of improvement

These days, it’s good to be Goliath.

These days, it’s good to be Goliath.

The nation’s smallest businesses were hammered in the recession of 2009 and aren’t seeing much of the record profits of the nation’s larger businesses.

Sole proprietorships and partnerships, the one- and two-man businesses that make up the bulk of the business sector, experienced a punishing 8 percent drop in income in 2009 locally, and just a weak 2.3 percent rebound in 2010.

That was enough to top income growth of the nearly 300,000 Wichita-area wage-earners, which rose just 1.1 percent in 2010, according to the federal Bureau of Economic Analysis.

But 2011 appears to be improving, after months of gloom. Slightly more small-business owners said they were likely to hire than lay off in the next three months, the highest reading since September 2008, according to survey figures released Friday by the National Federation of Independent Business.

“The employment indicators delivered a significant positive signal, still at weak levels but a meaningful movement forward,” William Dunkelberg, the NFIB’s chief economist, said in a statement. “A bit more job creation should emerge.”

For many small proprietors, life is still pretty dicey.

Lisa Rundstrom is an artist who makes most of her income as an art instructor at Wichita State University. For years she produced her own steel and bronze sculptures and repaired sculptures for clients under the name of Rhizome Productions.

“I’ve definitely seen a drop-off and not just in my own business,” she said. “I have friends, one in cutting hair and the other tattooing, who have had shops and they’ve all been hit very hard.”

She landed a position with the university’s student gallery in Old Town to supplement her income. With the teaching, she now works more than full-time. But she’s beginning to get calls on her artwork again.

“I do see it picking up a little,” she said. “It feels not quite as tense. It gets pretty desperate, sometimes.”

Bigger is better

Big companies are largely behind the much-publicized surge in profits.

The nation’s corporations are setting profit records every quarter, growing 10.6 over the last four quarters. The year 2010 was fabulous, with 32 percent profit growth over 2009. Corporate profits are now at their largest percentage of national income ever.

Even though the U.S. economy has plodded on at a snail’s pace since coming out of recession, corporations have piled up profits through cost cutting and sales in faster-growing developing markets, experts say. The bigger the company, the more staff there is to cut and the more likely it can outsource or sell in developing markets.

Corporate profits aren’t measured on a local or state level.

Big business has gotten plenty of criticism in the past two years as profits have soared while employment has stagnated.

Michael Shatz, elected by members of Occupy Wichita to the press team, said his group understands that there is a difference between big and small business. He said he would like for local workers’ wages to rise 2 or 3 percent as local small businesses’ profits have risen, but he understands they are under stress, too.

“As far as the local businesses, for them to compete they can’t just pass out wages,” he said. “Their income isn’t that much to begin with.”

That stress is something that Joel Elsea balances every day.

He and partner Heather Petty formed Elsea and Petty Association Management six years ago to manage homeowners associations’ unpleasant chores. That often means unpopular tasks such as telling people to paint their house or move their horse trailer.

“They get pretty upset about that,” Elsea said. “We try to take precautions. I’ve had people threaten to shoot me.”

As the mortgage crisis and recession has taken its toll on homeowners, it has also taken its toll on the business.

Elsea said 2010 was their best year from a revenue standpoint, but it was killing them. The economy makes the work harder. There are more vacant homes to watch, more financially stressed homeowners behind on dues and more languishing home repairs.

They have become more selective about who they take on as a client in an effort to make the job more manageable – and profitable.

“As the work gets harder, our rates really need to come up, but it’s hard in this economy,” he said.

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