Small Business Owners: Engines of the American Economy
The small business population has been a key focus in this year’s presidential election — and with good reason. About half of private sector employees in the U.S. work for a small business, according to the Census Bureau. And with a scant few weeks left until the election, voters are still parsing the candidates' proposals; for small business owners, relevant issues cover everything from tax rates and health care to international trade, regulations and immigration law. We spoke to a sampling of small business owners across the country to get their views on a variety of issues, including how the recession has affected their business, how they feel about the health care act and which candidate they might be leaning toward. And while their opinions on the candidates might differ, they appear united in their view that, despite the hardships involved amid an uncertain economy, owning a business can ultimately be very rewarding.
CHAM CHUN TO of BIG WONG
"Will we be able to handle the additional cost of health insurance for the employees? If we can, we’ll keep doing business; if not, we’ll have to stop."
Age:
65
Occupation: Owner of Big Wong | Manhattan, New York
Industry: Restaurant (Cantonese fast food)
In business for: 36 years
Employees: 30
How did you get the initial funding to finance your business?
That was in 1978. [We] needed $200,000 to open this restaurants; we had 20 partners. We each put in $10,000, and we recouped our investment in about two years. The economy was better back then.
How’s the business doing now?
9/11 changed everything. Less customers…the neighborhood just got quiet, nightlife in Chinatown disappeared. It gets quiet at 8 at night. All the clothing manufacturers in the area are gone — their factory workers used to come in for lunch, now we don’t have them. Rent went up; the demographic of the neighborhood changed, less people coming in from downtown. [We] have not recovered since then. We are doing about half of the tourist business since the euro crisis.
Fortunately, the recession didn’t hit us that hard. We are an old shop and [serve] old customers. Some customers brought their kids in to eat; then their kids get married and have kids, and then they bring in the grandkids to eat.
On the Affordable Care Act:
Our employees are self-insured now. Things are going to change in 2014. It’s going to be hard to maintain. It’s another expense, and it’s going to be no easy feat for us. The government can’t handle it, decided to pass the responsibility down. How are we going to handle that? We will lose money, especially when the economy is no good. We haven’t been able to increase the prices on our menu. We used to be able to increase a quarter on our prices every half a year or so. We’ll lose customers if we do that now.
How are things looking for the coming years:
My goal is to maintain this business. It’s been going downhill since the Clinton years — those times were good for us. Day-to-day…we’ll see when 2014 comes around; we’ll see how the reform works out. Will we be able to handle the additional cost of health insurance for the employees? If we can, we’ll keep doing business; if not, we’ll have to stop.
JEFF POPP of MILE HIGH MOUNTAINEERING
"I think that starting a business in a recession can actually be a good thing, because it forces you to have a little bit slower growth and focus on what’s important."
Age:
26
Occupation: Owner of Mile High Mountaineering | Denver, Colorado
Industry: Manufacturing (Sporting goods)
In business for: 3 years
Employees: 5
Has the recession had an impact on your business?
It’s interesting for us because we didn’t know what it was like before the recession. We were a business that started in 2009, which was kind of the height of it, so we’ve only known the recession. It’s sort of a double-edged sword. If we would have started this at a time when the economy was doing better we probably would have grown faster, but I think that can also be bad. I think that starting a business in a recession can actually be a good thing, because it forces you to have a little bit slower growth and focus on what’s important and build the business with a strong foundation and the right way.
I also think recessions are kind of like farming. They clear out all of the old stuff that was kind of stagnant and not innovating and not doing very good, and that allows newer businesses to grow and set their roots.
How have you been doing these last few years?
We’re doing well. We’re keeping it lean and small, but it really is doing well. We’ve grown by, I think, 400% from our first year, so it’s definitely picking up. Right now we’re at a critical point because we’re not real small anymore, we’ve picked up a lot of retailers, we have international distribution. So it’s hitting that point where we have to start growing a little more, but I want to do it within reason. I don’t want it to go out of control.
How is the market changing?
We do want to support brick-and-mortar retail, but at the same time the reality is that brick and mortar is suffering. As much as we all would love for that to stay around, it’s just not. We can’t control what the consumer wants to do, and everything is moving online. So our effort is focused on really stepping away from print advertising and going online.
What’s holding you back in terms of regulation?
The biggest issue that absolutely drives me crazy and makes me want to pull my hair out is how high tariffs and duties are to import backpacks. And I understand that they want to protect American industry, but the fact is there is no American industry for stitched goods anymore. There’s just not, so I really don’t know who they’re protecting. And we’re getting charged — by the time shipping, duties and taxes are included — 24% of each product, is about what it costs. And that’s ridiculously high.
If they lightened up on duties, that would help us a lot. But we haven’t even found a manufacturer that would be capable of making our packs because they’re pretty complex and technical. Any American-made backpacks you find are going to be really simple, usually school-oriented type stuff. And if we did it here they’d be four times the cost. So even with the high duties and tariffs, it’s still way cheaper for us to offshore.
The talent is all over there now. That’s the thing. People always think that offshore goods are always cheaply made and stuff but no, those factories are on it. They do everything in one house; they’re very talented sewers, they know what they’re doing. No one here knows how to sew anymore.
JOHN PRUITT of THE FRAMEWORKS
"When you're maybe losing your job or trying to make ends meet, you don't think about custom-framing a picture. You think about mayonnaise and bread."
Age: 72
Occupation: Owner of The Frameworks | Carrollton, Texas
Industry: Arts & Crafts (Custom framing)
In business for: 36 years
Employees: 2
How did the business start?
John Pruitt has been a small business owner in North Texas for roughly half his life, but like a lot of Americans who strike out on their own, he first had a brush with the corporate side. Also like a lot of Americans, by the end of his run with the big companies, he'd had enough.
The year of the nation's bicentennial, the company he was working for had gone out of business, and he decided it was time for something else. "I looked around and said, I'm tired of moving," he says. "I had a family, a wife and four children, and we were tired of moving. With the big companies I moved every couple of years. That got to be terrible for the family, so we settled down here. I went and investigated different businesses I could get into or buy and settled upon this."
This, his store north of Dallas, is a custom-framing business that he owns with his wife Marianne, and it's now more than three and a half decades old. In 1976, Pruitt didn't know the framing business when he got going, so he had to learn quickly. "We joined the first year our professional association, the Professional Picture Framers Association. [T]hat year the convention was in New Orleans, and we went and learned about some of the things we should be doing."
How did the recession affect the business?
"We probably fell at least 20% to 30% in sales the first year. Our industry, the picture framing industry, has really shrunk. Several years ago I was president of our international association. We had like 4,400 members. I think we're down to 1,000 or less now. A lot of ma and pa outfits are getting to the retirement age like we are, and so why continue the fight when you have other things that you want to do with the rest of your life?
"And the economy just hit really hit. Independent framers, like we are, are a custom business, and when you're maybe losing your job or trying to make ends meet, you don't think about custom-framing a picture. You think about mayonnaise and bread. We individually were affected quite negatively, and the industry as a whole has been affected very negatively."
Have you seen a rebound since the recession began?
"The biggest increase of our increase was the commercial side. Companies are spending a lot more than they have the last year or two, which accrues to our benefit." (Commercial customers in the Dallas-Fort Worth area make up about 60% to 70% of his business, with individual customers accounting for the rest.) Despite the fact that he's seen the industry overall get smaller, he's starting to hear some more upbeat comments from other framers as well. "So that's a hopeful sign."
What are you forecasting for the business?
"I've given up forecasting -- decades ago. One month it's great, the next month's a dud. And you get two months up, another month down. For the first time last year, our December, Christmastime sales were down from the prior year. Christmas is always big, but it just fell flat last year, and I think talking to other people it's the same way. You'd think Christmas was a big time, but again people are worried about the jobs and the economy."
In terms of the November election, the party that wins the White House and controls Congress, what would create a better climate for small businesses and entrepreneurs?
I think if Romney wins, we're going to have an explosion of business in this country. A lot of huge companies have huge stockpiles of cash, a lot of it overseas. There's a lot of pent-up demand." [Here, for example, is one article of many out there that aims to get at how much corporate cash is involved: Idle Corporate Cash Piles Up.]
Is there one policy the federal government should implement to help the business environment, or should it be less involved?
"I think more than anything else, I'm going to repeat what 90 million people are saying, get rid of Obamacare, or at least most of it. I'm not so much in favor of what Romney or any change could do -- I would like them to stop some things. If, by chance, the Republicans get the White House and both houses of Congress, then I think a lot of headway could be made.
"Short of that … I would hope that the leaders, especially the more mature leaders, would get together and work on some things that could get passed. I think the tax laws have got to be refined and reduced. I think the loopholes have got to be largely eliminated, especially on the bigger companies and the richer individuals, and I think both parties could agree to that. Start chewing at it. Nothing's going to happen overnight."
MATT SINGER of OPEN AIR MODERN
"Both parties are the same in terms of maintaining a certain status quo."
Age:
43
Occupation: Owner of Open Air Modern | Brooklyn, New York
Industry: Retail (Furniture and books)
In business for: 3 years
Employees: 2
How did you get the initial funding to finance your business?
I was not in a position to rely on any savings that I had accumulated for the business, and I didn’t qualify for the conventional lending systems. So I wrote a business plan and presented it to a handful of investors. That’s how I raised money to get into a lease, buy inventory and renovate.
How’s the business doing now?
Unfortunately, in this economy, I am not able to take on more help. I wish I could, and we are getting to the point where I think we can. I pretty much have to consider and do everything. I delegate, but I don’t have a partner…that’s sometimes overwhelming but the rewards are terrific — not necessarily financially at this moment, but in that you made a decision and it proved successful. It leads you to some growth or a new relationship with the customers or suppliers, you are the one that has created that — and that’s very satisfying.
How are things looking for the coming years?
I am very optimistic. When this model works, it’s great, and I feel like a million dollars, especially when there's no money out there. People are working more; people are insecure about the future. There’s no credit out there, [and] people can’t borrow money, but it’s New York. New Yorkers make higher wages, typically, than in other parts of the country, and just like me, my customers are resourceful.
Your view on the presidential election:
Both parties are the same in terms of maintaining a certain status quo. Obama bailed the banks out; he maintained the finance world. His administration did not want to see that go up in smoke. I didn’t necessarily think that would have been a bad thing if he had not done that. They want to maintain the status quo. I think Romney has the same kind of cronies as Obama. I feel like I would never vote for Romney and I support Obama, in spite of what I just said.
SARAH McNALLY of McNALLY JACKSON BOOKS
"Our industry has been under attack by the DOJ, which is supporting Amazon in a way that heightens the long-term risks of monopoly."
Age:
37
Occupation: Owner of McNally Jackson Books | Manhattan, New York
Industry: Retail/Publishing (books)
In business for: 8 years
Employees: 41
How did you get the initial funding to finance your venture?
I took out a loan from a investment fund related to my grandfather, which is now repaid. I couldn't have done it otherwise — bankers met with me only for long enough to look at me like I was a lunatic.
Has the recession had an impact on your business?
We had a year of flat sales, the only year we haven't seen double digit growth. Our industry has been under attack by the DOJ, which is supporting Amazon in a way that heightens the long-term risks of monopoly.
Can you talk a little bit about print on demand and how that has affected the business overall?
It is a small, but profitable part of our business. We currently have three full-timers working on the machine — it is a very labor intensive department — I've essentially opened a publishing production department. Like all parts of my business, it is hard to know what its real contribution is. I don't measure the various departments only in terms of revenue, but in terms of their quality, contribution to the store, contribution to New York, and contribution to the literary community. This is a profitable department, but its intangible contributions may be even more valuable.
How are things looking for the coming year?
Same old formula plus same old obsessive attention to detail. I'm expecting 15% growth. For years I thought I'd open another bookstore, and I've just decided not to. There are no economies of scale, except for me and the bookkeeper. It would require me rushing around the city. I plan to open a small gift and stationery and home goods shop in the neighborhood next year, that would be easy for me, just a slight expansion of what I'm already doing.
Looking ahead to the presidential election, which candidate do you think will help the economy more?
The answer seems so obvious to me that it is hard for me not to assume this is a trick question.
If there is one policy/action the federal government can implement to promote a better climate for small business owners, what would that be?
Bring down health care costs. We spend a damn fortune. We offer health care to all employees over 24 hours a week, and their families, common law partners, etc.
HEATHER DWIGHT of CALLUNA EVENTS
"We didn’t see a decline in how many events we were getting hired for, we were mostly seeing a decline in how much people were willing to spend."
Age:
36
Occupation: Owner of Calluna Events | Boulder, Colorado
Industry: Event planning
In business for: 9 years
Employees: 2 (contractors)
How has the recession impacted the event planning business?
With the recession, I found that more people started going in-house with their events, so over the last six to seven years we’ve been focusing more on weddings than on corporate events. We didn’t see a decline in how many events we were getting hired for, we were mostly seeing a decline in how much people were willing to spend. For weddings, people are still getting married for sure — we only saw one of our clients actually postpone her wedding because of the economy — but we did see a lot more clients looking at budgets and sticking to the bottom line. You know, “what am I getting?” and “what is the value of this?” or “what’s the price per head for this versus that?” There was a feeling before of, “oh, that sounds great, let’s do it.” Whereas now it’s more focused on the bottom line.
Are things turning around?
We have a handful of clients lined up for next year, and I definitely feel that budgets are a little bit higher now and people feel a little bit more free to spend what they want to. But there’s still that fear, that mentality of, “I should be monitoring the budget more closely.” So there’s a little bit of that, but I think people are opening up and focusing more on just having a nice wedding without worrying quite as much about the cost.
Do you think small business is the answer for getting people back to work?
In terms of opening your own business, I think that it works for some people. It’s not the right fit for everybody, but I feel like small business owners, if you’re hard working and you’re not risk averse, it can work. We live in a country where starting your own small business is really possible, and I think that here in Boulder especially there are so many people that are starting their own things. I think in, maybe, other parts of the country it may not be as possible — it just isn’t what you do or there isn’t as much support there. But everyone comes to Boulder and says “why are the coffee shops so full at 2 o’clock in the afternoon? Shouldn’t people be at work?” And it’s because so many people here have their own businesses, and it’s created this great community of small business owners. So when you decide to go out and do something on your own, there are people around to help and a supportive community around you.
On the role of community:
I’m not only working for my clients, but I’m paying for people to set up my website, and attorneys, and caterers, and other contractors. As a small business owner I’m looking all over the community for those other services and employing those people too.
GARY MAROULIS of JEN'S PLACE BAKERY & CAFE
"I'm trying to be optimistic. I want to be optimistic. I think that the election's going to answer a lot of questions for us."
Age: 42
Occupation: Owner of Jen's Place Bakery & Cafe | Farmers Branch, Texas
Industry: Restaurant (Mixed style/dine-in, carryout and catering)
In business for: 17 years
Employees: 20
How did the business get started?
In 1995, Jennifer Maroulis' father had a vacancy in half of a roughly 5,000 sq. ft. building located a few miles north of downtown Dallas. Jennifer, then a recent college graduate who had studied hotel and restaurant management at the University of Houston, got together with her mother, and they decided the appropriate move was to fill the space with a restaurant. More than a decade and a half later, Jen's Place Bakery & Cafe is still going.
"It was just really to see what would happen," Jennifer's husband Gary Maroulis says. "Could this take off? And from day one it was just unbelievable, beyond expectations." In the early years of Jen's, he was elsewhere, working for a large, private restaurant company based in Texas. But in 1998, the second half of the building became available, and that meant decision time, both for him and the business. "We had called a family meeting, and I decided to quit my job and come work with Jennifer," he says. With twice the room they had, they expanded the kitchen, set up a committed area for to-go orders and added more dining space -- the restaurant now seats 200 people, and "we max it out very often."
Are there any plans for expansion?
"There were a lot of things that came together at the right time and the right place here. If that same scenario came up, then possibly we would (expand), but we're not actively looking for anything at this time."
How did the recession affect your business?
From 1998 to 2008, business increased steadily and more than doubled, Maroulis estimates, with much of the decade-long growth driven by the catering side. Then of course came the downturn. "We went down about 25% in sales from 2008 to 2009." That said, Jen's Place was coming off a strong year, so the decline has to be put in perspective. "2008 was just spectacular in sales, so luckily we had room to have that drop."
Did your staffing level change?
"We lost 15% of our staff at that time through normal reductions, and anyone who quit, they weren't replaced. Some of those were tipped employees who did deliveries who weren't receiving the tips that they once received, so they needed to find something else."
Looking ahead to the November election, which party or candidate do you believe will help the overall economic recovery more? Which will help small business owners and entrepreneurs more?
"I think that in general both parties have in the past failed us. But I do think that Gov. Romney has a little bit more of a pro-business platform. I think that he understands businesses very well and understands what it would take to help me and what not to do, as well, to harm me."
What's one policy the government could implement to help small business owners and entrepreneurs, even if that's nothing or staying out of the way?
"I think it's getting out of the way. I think that we've had so much speculation of change, and we don't know what the rules are now. We don't know what the rules are going to be next year. We don't know what the rules are going to be two years from now. It's almost like, in some ways, just tell us the rules and we'll follow them."
Could you start the business today in the current economy and business climate?
"I would be hesitant to start this business in 2012. It would be a different animal right now with the current way that things are."
How is the business doing now, and what's your outlook for the coming year?
"I'm trying to be optimistic. I want to be optimistic. I think that the election's going to answer a lot of questions for us on which direction to head, regardless of which candidate gets put in. I don't have a choice as to whether I can do something differently. I've got to abide by the rules."
