Small businesses aren't buying the hype.

A couple of very interesting articles about small business, which I've printed below, which combined with the Bulletin's article this morning (Index Reflects Region Still Reeling) ought to give anyone thinking about opening a business in Bend second thoughts.

Thing is, people don't open business based on economic conditions. They open businesses because they want to. Because it's their dream. Because they think they'll do better than everyone else.

How their businesses actually perform, on the other hand, has everything to to do with economic conditions. Which is why there can be such a disconnect between new businesses opening, and how existing businesses are actually performing.

Strange to say, I think we're still benefiting from the froth of the bubble. How long can froth exist without underlying strength? For a very long time indeed. Years. Because plans are made early, and people are reluctant to give up on their plans even when conditions change. Because having started a business, very few people throw in the towel without a fight. Because there is always hope things will turn around.

So the froth, the idea that Bend is a great place to live, that downtown is busy -- that can keep things churning and churning, and spin off yet more dream stores, and on and on.

But eventually, gravity will set in. Eventually coyote will notice there's no ground under his feet. Eventually the steady grind of stagnant or even falling sales will drain the willpower out even the most optimistic owner.

I've been through this before. I seen product lines drop in half, overnight, and yet watched an increase in competition. Made no sense, but the froth created these stores -- and reality eventually pulled them down.

I had to finally recognize that business was never going to return to previous levels. Instead of beating the dead camel trying to get to the next oasis, I'd abandon the poor critter and jump on a donkey instead.

In other words, I adjusted. And I accepted limitations. I accepted that it might take a good long time, and a whole lot of work and effort and stick-to-it-ness to get back to square one. And even more work and effort and hopefully hard won experience to go beyond that.

Read the two articles below, and realize that not only is Bend not better than that, but Bend is going to take much much longer to recover. Read the Bulletin article: "We feel into a very deep hole, and it's going to take a long time to pull out of that."

True enough. But exactly how are we going to do that?

1.) We need a solid replacement, or foundation, for future business.

2.) Even if we find that solid replacement, (by no means certain), it will take a very long time to develop; to fill the hole. (Personally, I think Central Oregon is stuck with tourism and retirement; minimum wage job generators....and I've positioned my store with that in mind.)

Believe me, I'm glad that so many people are willing to open new businesses downtown. It's good for my business. I hope I'm wrong, and they all have a long and prosperous future.

But I do sort of want to have a moment with them. Sit them down. Hand them a coffee to drink, look them in the eye and say, "Um. You realize business is slow right now, right?"

Just that.

Because I really wonder if they have fully thought it through.

November 2009

Economic Confidence Plunges; Low Expectations for the Holidays

November 2009

November Highlights:

• The mood of small business owners generally has soured in November for three straight years, as economic confidence dropped from October to November in 2007 and 2008. The November 2008 index of 67.5 is the low point for the Watch since it started in August 2006.
• 52 percent of owners say they have experienced cash flow issues in the past 90 days, up from 44 percent in October. Forty-one percent of owners say they have not experienced cash flow issues, which is the lowest response in this category since the Watch began. The remaining 6 percent said they weren't sure.
• 53 percent of small business owners see conditions getting worse in the next six months, up from 43 percent in October; while 19 percent report that conditions are improving, a sharp decline from 29 percent in October; 23 percent see conditions as the same, and 5 percent weren't sure.
• 62 percent of small business owners rate the economy as poor, an increase from 55 percent in October; 30 percent rate it as fair, and 8 percent say it is good or excellent.
• 53 percent of small business owners think the overall economy is getting worse, up from 44 percent in October but still significantly lower than the 69 percent of owners who felt that way in February 2009, the last time the Watch index was this low. For November; 28 percent say the economy is getting better, down from 35 percent in October; 16 percent see it staying the same, and 3 percent are not sure.

Only 11 percent of Small Businesses Expecting Increased Sales This Year

• Small business owners have a glum outlook on the holiday season: Only 11 percent expect to see more business this year over last, while 46 percent of them are expecting less business than last year, an increase over the 40 percent who said the same in November 2008; 39 percent anticipate 2009 sales will be about the same as last year, and 4 percent weren't sure.
• For many small business owners, the holiday season is not necessarily their busiest time. A majority of owners, 56 percent, say that the holiday season falls somewhere in between being their busiest and the slowest time of year, 29 percent say this is their slowest time, and 13 percent say it is the busiest.

Discount Department Stores Still Most Popular for Holiday Shopping

• This month the Watch also polled 3,000 consumers on issues important to small businesses. When asked to choose from a list of places where they expect to do most of their holiday shopping, they chose discount department stores, 30 percent; department stores, 18 percent; warehouse and club stores, 7 percent; small retail and specialty stores, 7 percent; electronics retailers, 5 percent; some other type of store, 9 percent; not sure, 23 percent. These shopping-preference percentages were little changed from what they were in 2008.
• When it comes to the Internet, 57 percent of consumers said that they will do at least some of their shopping online this year.

Squeeze on Credit

• 24 percent of small business owners say that they extend credit to customers, and 73 percent of those that extend credit say that they have customers who have delayed or asked to delay a payment in the last three months. This is largely unchanged from December 2008 when 25 percent said they were extending credit, and 72 percent said that they had customers who delayed or asked to delay a payment.
  

Helping Out the Little Guy

• What would you do if that convenient corner market or neighborhood hardware store near you suddenly closed? Did you ever consciously make a point to use a small business in the hope that your patronage would help keep it open? If so, you're in good company – 68 percent of consumers say that they have made purchases at a small business in an effort to keep it from closing.

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November 2009

NFIB Jobs Statement

Contact: Melissa Sharp 202-314-2068

Expect Coal in Small Business Stockings

WASHINGTON, December 3, 2009 — William C. Dunkelberg, chief economist for the National Federation of Independent Business, the nation’s leading small business organization, issued the following statement on November job numbers based on NFIB’s monthly economic survey that will be released on Tuesday, December 8. The survey was conducted through November 30 and reflects 825 small business owner respondents:

“It now looks unlikely that job creation will cross the ‘0’ line by the end of the year. Small business owners in November reported a decline in average employment per firm of 0.58 workers (seasonally adjusted) during the prior three months, about the same as October’s loss of .52 jobs but down from a loss of 1.26 workers per firm in May. Nine percent of the owners increased employment by an average of 2.3 workers per firm, but 21 percent reduced employment an average of 4.2 workers per firm (seasonally adjusted).

“The job generating machine is still in reverse as November’s report represents the 22nd consecutive month with more small business owners reporting employment declines than employment increases. Sales are not picking up, so survival requires continuous attention to costs – and labor costs loom large.

“Eight percent (seasonally adjusted) of owners reported unfilled job openings, unchanged since August. Over the next three months, 17 percent plan to reduce employment (up one point), and 7 percent plan to create new jobs (down two points), yielding a seasonally adjusted net negative 3 percent of owners planning to create new jobs, two points worse than October. Still more firms are planning to cut jobs than planning to add.

“The largest impediment to new hiring is weak sales. Since January 2008, more owners have reported lower sales (quarter over quarter) in every month, mostly by double digit margins. In November, 15 percent reported gains in sales, but 43 percent reported sales were still declining.

“The consumer is the key to job creation, when businesses have more customers, they will hire more workers. Workers must generate enough sales to pay their salaries, or the firm loses money. Owners won’t pay $30,000 to get a tax credit of, say, $3,000. But little has been done to stimulate the consumer and little is likely to be done, including mitigating the huge uncertainty consumers and owners face from the legislative ‘tax and tax’ agenda.”