Report: SMBs Weathering Poor Economy

As small business owners look to the new year, a report from SurePayroll suggests Main Street is doing better than many may have thought. Survival, however, will come at a price.

A December survey by online payroll service SurePayroll, based in Glenview, Ill., suggests small to medium-size businesses (SMBs) are managing to stay alive, despite crumbling financial markets and a government bailout aimed not at midmarket companies but large corporations.

The survey found that nearly four out of 10 small business owners have not seen their business negatively impacted by the down economy, and an additional 4 percent indicated that business has actually improved. Nearly nine out of 10 respondents who said their businesses were negatively impacted by the economy cited declining revenues as the main effect. In that group, however, seven out of 10 cited a "small drop in revenues" while only three out of 10 indicated a "significant drop in revenues."
"Main Street is doing better than most people think," SurePayroll President Michael Alter said. "While it's true that many small businesses are struggling, there is still a healthy contingent of small business owners who are holding their own in this difficult economy, and many who are managing to grow their businesses even in these tough times."
Interestingly, the survey also suggests SMB owners are generally not in favor of government bailouts. For instance, of those surveyed, 67 percent of respondents said they do not believe the government should bail out the automotive industry in Detroit.
On average, small businesses are in fact hiring in this down economy. SurePayroll's Small Business Scorecard, a set of economic indicators that tracks small business hiring trends, reported that in November, small businesses across the country managed to increase their staff levels by 0.26 percent. Year-to-date, small business hiring is up 3.3 percent nationwide.
Alter said the reason is that small businesses tend to run "lean and mean" relative to their large company counterparts. "There isn't usually much fat to cut, and new hires are added only when business levels justify the expense," he said.
Something's Gotta Give

While most of the survey results are an encouraging year-end report for small business owners, the survey found many SMBs are cutting costs to keep from running in the red. More than half of survey respondents indicated that they would cut back expenses in 2009, with sales and marketing and human resources being mentioned as the top areas for cuts.
SMBs are also expected to reduce or delay IT spending, according to a December report by research firm IDC. The survey found 38 percent of small firms and 42 percent of medium-sized businesses are expected to hold off or cut back on their IT budgets. SMBs that do make IT investments are more likely to invest in technologies that provide an immediate ROI, the report noted.