Hard Hit Small Businesses See Uncertain Future

May 23, 2011

The Record and Herald News

ALEXANDER MACINNES

Small businesses suffered a higher percentage of job losses during the recession than larger companies, and those that survived the economic downturn are still skittish about bringing on new employees, according to a small business survey.

In New Jersey, nearly 95 percent of the companies that closed between 2005 and 2008 had fewer than five employees, according to the latest data from the U.S. Census Bureau's Statistics of U.S. Businesses.

The state lost 6,738 businesses with fewer than 499 employees between 2005 and 2008, which represents a 3 percent drop in total businesses. New Jersey saw a small net gain of larger businesses — companies with 500 or more employees — during those four years, and that seems to be having an effect on how companies see the future.

The U.S. Chamber of Commerce in April released its inaugural Small Business Outlook Survey, which showed that 70 percent of the 900 respondents do not plan on hiring new workers next year, and there is little consensus on what the next two years will mean for their businesses. About 38 percent expect their business to improve and 37 percent predicted business will continue to drop, according to the survey.

"I see the bigger ones being optimistic," said Tarona L. Lee, owner of TLL Human Resource Consulting in Totowa. "With the smaller ones, I see them as very guarded. They are not as comfortable expanding or growing."

Lee consults both clients with more than 5,000 employees and companies with fewer than 100 workers, and the expectations of those smaller businesses seem more muted, she said.

Small businesses are "kind of gun-shy from the last couple of years," Lee said.

Lee believes larger companies, because they have more resources, were able to withstand losses during the recession, allowing for a quicker rebound.

According to the chamber survey, of the small businesses asked about what they might do over the next three years, 30 percent said they would likely hire new employees; 56 percent will keep the same number and 9 percent believe they will cut workers.

In New Jersey, both groups of bigger and smaller companies added employees, according to the census numbers, but larger businesses did so at a higher rate. Companies with more than 500 employees expanded their payrolls by 27,058 employees, or 1.5 percent. Businesses with fewer than 500 employees added 2,469 workers, an increase of 0.18 percent.

Size is not the only factor for possible growth and optimism, and some business experts are hard pressed to predict who will grow.

Ellen McGraw is a partner at Sharpe Kawam Carmosino & Co., a Township of Boonton accounting firm that specializes in small businesses and entrepreneurs. McGraw said this year has been difficult to analyze.

For example, one of McGraw's clients owns a jewelry store and recently moved into a bigger space last October — in what could be considered a bold move for the retailer. A marketing client has also exceeded its expectations for incoming business this year.

This was a pleasant surprise for McGraw.

"I have clients who ask me: 'What do you think?' " McGraw said. "Usually I have an overall sense, but I really don't have a sense of it and it seems like it's all over the place."

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