MOUNT VERNON — With the official announcement that the country is officially in a recession, small businesses are apprehensive of future turnout by consumers. Small businesses have always been a driving force during time of economic turmoil, and, although not all small businesses survive, many continue in the race.
“Obviously, there are businesses that have gone out of business and businesses that are suffering,” said Gene Jackson, chairman of board of the Mount Vernon/Knox County Chamber of Commerce. “Our membership has stayed reasonably steady. The last count we had 382 members, so I think we might be down three members from last year, but overall, we lose some and gain some, too.”
As consumers budget their income more closely, competition grows between corporate business and small locally owned businesses.
“Small businesses struggle to compete with the big box stores — Wal-Mart, Kmart and places like that — but at the same time, the economy is bad and [if] you are in a business that performs based on discretionary spending or luxury items, people have cut back on discretionary spending,” explained Jackson.
Although gas prices have decreased, food prices as well as other living expenses have increased, making spending cautionary for consumers. As the recession tightens its hold , many buyers are using discretion when it comes to luxury buying.
“Any business that depends heavily on discretionary spending is going to be at risk,” said Jackson.
The recession is a concern for small businesses, he said, but as some businesses have closed, he has also seen an equal amount open up.
“We have seen businesses close, but we have also seen businesses open up every month, especially small businesses — home businesses, contractors, or people who just are wanting to get in business for themselves,” he said.
“There is not a lot of loss, but no gain, either,” he said, noting the rise of small businesses has been flat across the board.
“Our members, who are more closely tied or directly tied in with the economy — in particular the retail sector — are heading into the holiday season and are probably feeling the economic downturn the most,” said Kyle Jackson, assistant director for the National Federation of Independent Businesses of Ohio.
“And our members who are indirectly tied to the economy — manufacturing and service — what I hear predominately is at least for right now their orders are maintaining status quo, just to keep their employees busy and not have to lay people off,” he said. “But the fear is that heading into next year, orders are starting to slow down and they don’t have as much of a back log, so they are facing potential layoffs and slow downs, and tougher economic times in the future.
“I think right now people are anxious,” he continued, adding that there is a real uncertainty as to how larger businesses will affect the smaller local dealers. “If GM were to fail, how will that affect small business and how will that effect Ohio? A lot of the suppliers for General Motors and Ford are small businesses that make windshields and side mirrors, and the foam that goes inside of the car.
“But what we do know [is] the good thing about small businesses is that in times of recession they create about 80 percent of new jobs, and clearly as we look at how we are going to get past this economic downturn, small businesses are going to be the business sector that employs all the people and gets us out of this economic downturn,” he added.
The survival of small businesses is very industry specific, explained Kyle.
“People are always going to need things, which is going to mean a need for services, depending upon what line of business you are in. The need is either greater or it’s not as great, depending upon discretionary spending,” he said.
Planning ahead is a major key to surviving the economic uncertainty.
“Certainly the businesses who have planned ahead and have greater cash flow are probably in a better position to survive a long-term economic downturn. The businesses who are struggling now who are in need of cash flow and capital are going to have a harder time,” said Kyle.
There are a couple of reasons why small businesses which are struggling now will have a hard time in the future. One reason is business is going to continue to be down with the slowing economy; the second reason is because banks and the loan institutes are going to be more cautious in lending money to small businesses.
“It’s going to be a hard time for everyone, but we know from previous recessions that small businesses will be the driving force to creating a lot of new jobs,” he said, adding that from what he has seen, as many people who are laid off will go out and start small businesses of their own, or else get hired by a small business.
