Mom and Pop Businesses Fight to Survive Recession
Today’s economic crisis is threatening the viability of America’s small businesses. Operations are becoming skeletal. Costs of operation skyrocket while retail prices plummet. Employees are scant or non-existent and anxiety mounts as small establishments struggle to make ends meet. Mid 2008, small businesses were concerned about decreasing sales and inflation, but by year’s end, access to credit was a major concern, as lending institutions tightened their belts to small business loans. Many have since transitioned to a “Mom and Pop” organization, as America’s backbone weakens.
“Two years ago we had 11 employees,” states Najia Moustafi, co-owner of Andiamo’s Italian Bistro in Scottsdale, Arizona. “Now it’s just me, my husband, Joe, and our two sons. We all do whatever has to be done: mop floors, wash dishes, bus tables, bartend, cook, host and wait tables. We’re not afraid to do it all! Although our costs have increased by more than 50 percent and revenues have decreased by more than that amount, it’s our loyal, returning customer base and sheer determination that have kept our restaurant alive.”
According to a study by the Raymond Institute and Massachusetts Mutual, 89% of all businesses in the United States are family-owned and operated and represent 64% of the Gross National Product. Not all family-owned and run businesses, however, are Mom and Pop. Wal-Mart is a family business run by the founder’s son; and the Ford family still owns 40 percent of the voting stock in their prestigious firm. Over 20,000 privately-held family businesses have over $1M in annual sales. Many Mom and Pop businesses are, in fact, “micro businesses”—defined as employing five or fewer employees that started with $35,000 or less and gross under $1M a year.
The Small Business Administration (SBA) reported recently in The Small Business Economy: A Report to the President, that unincorporated self-employment fell from an average of 10.4 million in 2007 to 9.6 million by the end of 2008. “During the first three quarters of 2008, the U.S. lost 1,695,000 jobs, of which 60 percent were in small businesses. Half of all Americans who work in the private sector are employed by a small firm.” Construction, an industry dominated by small firms, lost 682,000 jobs in 2008 and the fourth quarter Gross Domestic Product was down 6.3 percent on an annualized basis, even though it saw a 1.1 percent overall gain for the year.
According to the SBA report, “The National Bureau of Economic Research determined that the U.S. recession began in December of 2007, and economic conditions deteriorated as 2008 drew to a close.” Business borrowing plunged in the fourth quarter of 2008 to a level comparable to the 2001 recession. New York City’s Mom and Pop owners, like others across the nation, faced a personal crisis as bank loans disappeared and customer spending evaporated. New York City’s 220,000 small businesses are the city’s most significant tax revenue producer. The New York Daily News reported recently that to assist the ailing businesses, City Hall is supporting a proposed $700M stimulus package, as banks have slashed federally-backed small business loans by nearly 40 percent. Forty-six percent of the country’s micro business owners say that the current downturn is the worst they’ve ever seen.
The new Obama Administration sought its own stimulus package with the appearance of 2009. Obama signed the American Recovery and Reinvestment Act, which, among other things, increased funding for the SBA by $730M, a significant amount targeted to lower fees for SBA-guaranteed loans and to support economic development and entrepreneurship. In January, the Legislature passed a $3,000 tax credit for small business owners for each full-time employee they hired. Many small businesses are in need of this type of direct and immediate funding for simple daily operations.
“This country was built on small business,” states Tim Morgan, owner of Walton Thriftway in Roane County, West Virginia. “So many small towns have seen their Mom and Pop stores closed due to giants. Diversifying and continuing to change with the marketplace helps keep our doors open.” Both SmallBusinessNotes.com and AllBusiness.com encourage entrepreneurs like Morgan and the Moustafis of Andiamo’s to stay engaged in their business by revisiting their business plan, improving customer satisfaction, forming alliances within the industry, and continuing their marketing endeavors. Less expensive and more effective than past advertising methods, are internet and social media networking, as well as improved website design combined with search engine optimization (SEO). “Big corporations are losing the search engine marketing war to mom and pop,” claims Nick Stamoulis of Brick Marketing. “Individuals are the ones who are using the tools online to compete and win.”
Troy Bohlke, President of Niche Focus Group, adds, “We’re having tremendous results implementing public relations, social media and SEO for our clients. It’s cheaper than traditional marketing methods and much more effective at reaching their targeted audience. Considering that 80 percent of all consumers research a business online before they buy, this is the way for today’s businesses, big or small, to stay in the game and survive.” Niche Focus Group is a business development and marketing strategy firm in Phoenix, Arizona.
Public or private funding, analyzing business practices, focusing on customer service with a lot of patience and hard work are managing to keep many small businesses alive. Najia of Andiamo’s Italian Bistro sums it up by saying, “Liquor sales are down 20 percent and people are spending much less overall. The number of ‘to go’ boxes has tripled in the last year. We’ve reduced our prices and removed the high-ticket items from the menu completely. One month we offered free appetizers, another month we took $10 off every bill over a certain amount. Last summer we offered three-course dinners for $20 each. This is just who we are. We want to keep going for our customers, so we make changes and work really hard. The economy will improve eventually. We’re just grateful for every day that we’re still here.”
Source: Niche Focus Group
