Entrepreneurs Fight a Recession

To find out how small businesses are faring in a faltering economy, we went to the source

Ray Vella/BW

Browse Issues

Browse the BusinessWeek Archive

Related Items

• Newton, Iowa: Through a Wringer

Alberto Mena

Story Tools

• post a comment
• e-mail this story
• print this story
• order a reprint
• digg this
• save to del.icio.us

• View Slide Show

We're bombarded with statistics about the weakening economy. Payrolls are shrinking, but mass layoffs are rare. Consumer confidence is at its lowest point since 1973. Gross domestic product grew 0.6% in the last quarter of 2007, but without a boost from foreign trade, it probably would have declined about 0.3%. But these numbers don't necessarily tell us what's happening to small businesses. For that, we turned to the real experts, entrepreneurs across the country. We found sales slipping in some towns, but in others it's all just worry—at least so far.

BISBEE: WOOING TOURISTS

The year 2007 was a tough one for Bisbee, Ariz. The faded mining town, trying to reinvent itself as a tourist destination, features railcar tours of deserted mines and reconstructed saloons in its 130-year-old hotels. While visitors to Bisbee numbered 58,000 in 2007—about a 16% increase over 2006—tourism began to taper off in the fourth quarter, which is usually the busy season.

Bisbee sits about 90 minutes away from any major highway, and rising gas prices mean would-be tourists are increasingly reluctant to make the trip, says Robert Carreira, director of the Center for Economic Research at nearby Cochise College. In December, Bisbee's retail sales were down about 5% compared with the same period a year earlier, according to a monthly economic report from Cochise. Restaurant and bar sales were down almost 19%, and lodging receipts declined 1.1%.

Small businesses are feeling the pinch. Joanne Berry, owner of Bisbee Fine Art and Framing, says her sales in 2007 plunged about 21%, to $30,000. Two years ago, she says, the typical tourist might spend $150 at her store. Now it's more like $30. Pattie Carlson, owner of the Letson Loft Hotel, worries that after a good year in 2006, the prime tourism months will be soft. Already, receipts for December and January were down 10% from a year ago. "We were expecting 2007 to be better," she says."I think everyone is being cautious. —Jeremy Quittner

HANOVER: HEDGING BETS

While other small towns in the Upper Valley of New Hampshire and Vermont are suffering post-industrial rural poverty, in Hanover you can easily pay $550,000 for a single-family house and cough up $3 for a soy chai latte. Students and their visiting families buzz around Main Street, grabbing a warm drink at the bustling Dirt Cowboy Café before meeting friends at the Hanover Inn.

Any downturn in the economy hasn't touched the town, thanks in part to Dartmouth College and the regional hospital. "We don't see the booms in the economy, but we also ride out the tough times pretty well," says Gregg Fairbrothers, an adjunct professor at the Tuck School of Business.

Still, business owners are getting ready for a slowdown. John Olszewski, founder of 53 Technology, launched his company in Hanover in 2000 after being priced out of Boston. The $300,000, two-person software shop builds Web applications for schools and is hoping for a modest 5% growth rate in the coming year. "You don't hear a lot of doom and gloom, but people are just starting to wake up to the fact that things are not looking good," says Olszewski, a former dot-commer. "We're keeping our overhead down and trying to diversify as much as possible."

Dirt Cowboy owner Thomas Guerra says he is fortunate to have "a great cross-section of customers, from businesspeople in the morning to students later in the day," but he's still hedging his bets. He's buying more supplies wholesale and offering handmade chocolates to get more customers in the door. So far, it's working: Revenues for the $900,000, 15-employee café are up 8% over last year.

Tom Ciardelli, owner of Hanover Outdoors, a fly-fishing and outdoor-adventure gear store, expects sales to be down 10% this spring compared with last year. Although a stellar ski season buoyed business this winter, autumn sales were down 15% for his $475,000, two-person operation. He relies on Dartmouth parents, who spend while visiting their kids. "People were still shopping, but they were buying less expensive items," he says.