What happened to the truly small businesses?
• Small businesses actually create jobs.
• The USA needs to regain its manufacturing jobs.
Talking points from Washington. Unfortunately, the talk isn’t translating into discernable action.
This is going to focus on the local and personal impact of the economic recession on small business. For me, local is New England, but more specifically Connecticut, as that’s where my parents live and where their small manufacturing business is incorporated.
There seems to be a myth that a majority of small business owners are rich, or at least fall into the $250K tax bracket. I laugh (and shed a tear) every time I hear someone perpetuate that myth.
I grew up in small town America. In small town America, most businesses are local. Most businesses have less than ten employees. My hometown specifically prohibits national chains from setting up shop so they don’t drive out the locals. The closest chain grocery store is 20 minutes from my parent’s house (down a dirt road, 30 minutes if it’s washed out). The closest McDonald’s is 25 minutes away, and I don’t think I had Starbucks once while growing up. Living costs are more expensive that way, but it’s a trade-off many are willing to make.
My parent’s company is just one of the many small businesses that make my hometown viable. The company was founded in 1993, two years after I was born. My father built it from the ground up, starting with just himself and a close friend. Initially they distributed other company’s products, but eventually got into manufacturing a competing line. (Keeping the actual product information private, as it’s pretty identifying in its weirdness/niche-ness).
My mom left her job in the mid 90’s to manage the company’s finances. At that point I think they had 5 or 6 employees, including themselves. I was young, so my memories are a little vague.
In 2003, they built a million dollar warehouse/manufacturing shop, because they were expanding exponentially. That building was the realization of my father’s dream, and our entire family and friends worked incredibly hard to get it up (prefab metal). I remember, at age 11 or 12, laying rebar sheets and zip-tying radiant floor heat tubing to them with my friends. I ruined my favorite pair of sneakers. My hand prints, and my name, are in the concrete pad outside the garage doors leading to the shop.
Life was good for my parents, and consequently for me, in the late 90s and early-mid 2000s. Connecticut is not a cheap place to live, although we didn’t live anywhere near Fairfield County. I hate to admit that I was somewhat spoiled, but I was. My mom worked at most 25 hours a week, spending time carting us kids around to various activities—gymnastics, music lessons, horseback riding. It was the horses that stuck, and the business was doing well enough for me to get a horse the summer before my sixteenth birthday (2007). I didn’t have the ritzy horse life you see in the movies, but horses are expensive no matter how you cut it. My parents had new-ish cars, I got new clothes every school year, books when I wanted them, etc. Standard middle class life, maybe a little on the upper-middle side. I’m going into this detail because I think it’s really important (especially for me personally) to remember how things were before, and how things should be. I think it’s really important to remember that owning a small business can actually put food on the table and leave a little extra for fun.
At the peak of business, my parents employed 14 people, including them (and me for a time in high school). They had office employees, mechanics, machinists, delivery drivers. For a time, my uncle worked with them—it was truly a family business. Soon after the construction on their building was finished, my dad engineered a complex new product line with the help of his employees and a few contractors. It was really ambitious, a huge step up from the products they’d been manufacturing.
I think the prototypes started being built in 2007. They ate up a lot of capital, but they did well. There are three of them still out there today, functioning amazingly and getting rave reviews. Customers love them. Unfortunately, they’re expensive, and that kind of machine can last 50 years if it’s taken care of. People don’t replace them very often.
I think it was the huge amount of capital tied up in the new product line that did it. I think they just picked the wrong year to risk it.
I started college in fall 2009. Every time I visited home that semester, the fridge was empty. The pantry was empty. I was lucky to get scholarships in excess of my tuition and dorm fees, because that was pretty much the only thing keeping gas in my car. I would say food on the table, but I had a college meal plan too.
The building that was my father’s dream was sold in a short sale this spring, for $200,000 less than it’s worth. The company is down to 3 full time employees, including my parents, 1 part-timer, and a commission-based salesman. They moved into a rental warehouse/shop/office space that's the size of their previous offices. It has no ground level access, only a loading bay. That doesn’t seem like a big deal, but for their particular business, it is. It means that there’s no way they can do half of the work that was their livelihood, and no way can they start manufacturing the product my dad designed, unless they move again. Let me tell you, moving lathes and band saws and mills is no easy (or cheap) task.
My parent’s taxable income was literally $0.00 last year. They lived off of repayment of loans they’d made from their personal accounts to the business accounts. My mom’s IRA has $26 in it. Bullshit this recession is over.
This company has been my father's "baby" for my entire life. It’s been a huge part of my entire family’s lives, for nearly twenty years.
I don't think he has any idea how to make a living without it.
My parents aren’t alone in this struggle. There’s a restaurant in my home town that’s changed hands 3 times in the last 3 years. There’s a grocery market in the next town over that can barely afford to keep products on its shelves, and half the stuff on the shelves is expired.
The SBA Office of Advocacy says “Connecticut’s small businesses are vital to the state’s well-being.” Apparently, “the state’s businesses showed signs of stability and improvement in the fourth quarter of 2009 compared to the first quarter.” That’s news to me. Its third quarter 2011 and I’m not noticing any signs of stability or improvement other than the ones my parents have been forced into—namely selling their facility and lowering monthly costs.
These are things I know my parent’s company, and others like it, would benefit from:
1. Widespread (government) acceptance of the fact that a company that employs 499 people has absolutely nothing in common with a company that employs 9 people.
2. Policy decisions based on that fact.
3. A public option health care system. My mom spends a ridiculous amount of time pouring over insurance plans, trying to see if they can save money without cutting coverage for themselves or their employees. She could be making the company more profitable with that time.
4. Temporary tax credits equal to the extra social security/Medicare taxes that come out of small business owner’s pockets. (A typical employee pays half of the actual SS taxes, with the employer matching that half. For people like my parents, they pay both halves out of different pockets. In an ideally profitable world, that wouldn’t be an issue, because the pockets would be completely separate. But when a business isn’t making money, the pockets aren’t all that separate.)
6:49 PM PT: UPDATE: Thank you guys so much for the support and advice! I've passed all that's relevant on to my parents, and I truly hope some good comes of your lovely ideas. I seriously didn't think I'd get anywhere near this amount of notice on my first diary.