Originally created 06/13/05

Small business owners are cautious in bumpy economy



NEW YORK - The economic uncertainty that has generated waves of fear and selling on Wall Street is also making small business owners think a little harder before they hire new employees or buy new equipment.

While company owners generally seem optimistic, the business environment is iffy enough that they'd rather not take many chances.

"Every day, it's difficult," said Paul Holstein, co-founder of Cableorganizer.com, a Fort Lauderdale, Fla.-based company that sells organization products, mostly to other businesses. "More people are browsing rather than buying."

Holstein, who described himself as nervous given the current economy, said, "we try to keep our inventory down to a responsible level, try to keep our cash reserves.... We're cautious before adding people."

Recent economic data including manufacturing and service sector surveys by the Institute of Supply Management have indeed pointed to a slowing of economic growth. And the government's latest job creation figure - 78,000 during May - was much lower than expected, indicating that the nation's employers are being conservative about expanding their payrolls.

But not all the measures are cause for concern. Economist William Dunkelberg of the National Federation for Independent Business, an advocacy group for small businesses, said his organization's surveys of its members show they're largely optimistic and not making drastic cutbacks.

"We're pretty much on track," Dunkelberg said. "Our people are telling us sales are OK, hiring's OK, capital spending's OK."

With sales up 13 percent this year, Garvey's Office Products in Niles, Ill., is one of the upbeat small businesses, even as it competes with big-box retailers including Staples, Office Depot and OfficeMax.

"We really haven't been affected in recent history by the economy," said marketing director Sheila Gartland

Still, Gartland said, while Garvey is doing well, it has to work harder to get some of its sales. "Because the economy is a tougher economy, you have to really be quite a value, you have to really be a good deal" to attract and keep customers, she said.

And the company, which serves other businesses, does see some of its customers struggling.

"We're dealing with a lot of small businesses as well as some larger corporations, and we can definitely see some are running into financial difficulty," Gartland said. "We try to stay ahead of them."

Donna Childs, owner of Childs Capital, a Wall Street financial services firm, sees hesitation at other businesses, and that has prompted her to put off some of her own expansion plans, including new hires.

"There's a lot of uncertainty. Corporations are reluctant to commit to capital spending," said Childs. "We're awaiting their investment decisions."

Childs described her business as flat with 2004, but said she's still hoping to take on three or four professionals later this year, adding to her current staff of 14.

Deferring expansion is one option for a small business coping with economic uncertainty. But sometimes a company has to go ahead and add staff to keep growing.

Holstein, who said he just hired another staffer, said Cableorganizer.com needs more workers to handle an increase in business from customers who'd rather place an order with a human being instead of over the Internet. Without those hires, he'll lose sales.

The company has another strategy - looking elsewhere for new business. Cableorganizer.com is expanding its business overseas, having opened a distribution center in France.

The move allows the Web-based company to fulfill orders to European customers, but it also allows Cableorganizer.com to take advantage of the euro's current strength. Moving into a foreign market can also make a business less vulnerable to the fluctuations of a local or national economy.

On The Net:

National Federation for Independent Business: http://www.nfib.com