The Boss of You

Things are tough all over right now, but since we like to keep things focused on small businesses, I want to zoom in on a story that started with The New York Times and which is garnering responses from around the web.

It started with this article in the Times that points to some very upsetting figures about the current state of affairs for small businesses in the U.S.:

Businesses with one to 19 employees, nearly all of them family run, lost 757,000 jobs from the second quarter of 2007 through the third quarter of 2008, according to figures from the Bureau of Labor Statistics, broken down by company size. That amounts to 53 percent of all private-sector losses for a group of companies with about 20 percent of all employees.

But those statistics are nestled inside a very personal story about Scott Peterson, who is struggling to keep the 83 year-old flagpole business that he inherited from his father and grandfather afloat. It’s a deeply moving article, and it’s the small details that hit me hardest:

The stress has already taken a toll. His wife, Arelis, is now the company’s only other employee, and when asked what she made of their predicament, she started crying. Their two daughters, 8 and 11, are struggling to understand why their mother can no longer afford lunch at McDonald’s, and their father no longer sleeps through the night.

Bizbox by Slate referenced the above story:

The New York Times has an absolutely fabulous piece on the damage the current recession has done to family businesses. “It’s not ‘Oh, I don’t have a job, I have to go find a new one,’” says the owner of one in Miami. “’We’re losing a corporation that is 83 years old. We’re losing our house. We’re losing our credit. We’re losing, other than our own physical bodies, everything.’” Indeed, if nothing else, the article serves as an extremely potent reminder that the recession cannot just be measured in numbers; and indeed, that among small businesses, that is especially the case.

Not that the numbers aren’t there, too. We know from the ADP’s monthly surveys–May’s, for example–that small businesses (1-49 employees) tend to get hit hard during down times. But this article cites the Bureau of Labor Statistics’s report that small businesses, by its definition–one to nineteen employees–lost over half of all lost private-sector jobs from from 2007′s second quarter through 2008′s third, despite accounting for only 20% of total jobs. That’s shockingly disproportionate.

Still, as we say, that’s not the piece’s true value. Its true value is the reminder that these numbers overlook “the broader civic and social role that companies like H.A. Peterson and Sons have played since Paul Revere took over his father’s silversmith business in 1754.” There’s a reason, in other words, that we occasionally get sentimental over small and family-owned businesses, and it’s legitimate.

And don’t miss this post on the NY Times‘s You’re the Boss small business blog: In “Too Small to Fail?“, blogger (and Chicago entrepreneur) Jay Goltz calls out Bill Dunkelberg, the National Federation of Independent Business’s chief economist, “who was quoted as saying the market is being ‘cleansed’ of unneeded goods and services.” He continues,

I think that was an unfortunate choice of words for someone from an organization that claims its mission “is to promote and protect the right of our members to own, operate and grow their businesses.” Clearly, some businesses are no longer needed, but more go out of business because they can’t shrink their overhead to match the smaller volume the current economy is offering them — or because they are ill-equipped to deal with today’s more complex business environment.

Let’s look at the small picture. Many small companies are going out of business needlessly because they do not know what they do not know. They think their problem is that the bank won’t lend them money. The real problem might be that their pricing formulas are wrong. They think that they just need more sales. The real problem might be that they need better sales people or better training for their sales people. They think that they have too much competition. The real problem might be that they are not running an efficient business.

Goltz’s suggestion, that the government could do a great deal of good by providing training and counseling for small business owners, seems solid to me. To be honest I’m not sure how else bailout money could help businesses of this size, and training and education are always solid investments, in both good economic times & bad. And if the recession really is simply undergoing a “cleansing,” wouldn’t small business owners be much better off polishing up their business skills so that they can assess their prospects and adjust their course accordingly? Surely it must be less costly for the government to provide training subsidies than to support families via social security.

Anyone else care to weigh in on what we can do to support flailing small businesses right now?