Small businesses fight tosurvive in tough economy

Small business is risky business these days.

Costs are rising, profits are shrinking and the ability of the big guys to keep prices relatively lower is drawing away customers.

Things are so bad that many small enterprises, which account for about 99 percent of the country's businesses, say they are hanging by a thread that may soon snap.

“We are basically losing money every month, about $1,000 a month. It's been about two, three months now,” said Tom Weisbecker.

Weisbecker owns Isaly's in western Pennsylvania, where patrons sit on green barstools at a countertop and gobble the legendary Slammer, a sandwich stuffed with a half-pound of chipped ham and smothered in onions and cheese. Prices for many of those ingredients have skyrocketed in the past year.

“We know our customers are already feeling the pinch with the gas prices and when they go to the grocery store. We're trying to hold out, but we can't go on much longer,” said Weisbecker.

In barely a year, the cost of pork has jumped by 50 cents a pound, while beef is up 20 percent; a five-gallon jug of canola oil that used to cost $15 is at $40; a 50-pound bag of flour jumped from $7 to between $20 and $25.

And then there are fuel surcharges of between $5 and $9 that have been added to nearly all deliveries during the past six months.

In the meantime, wages haven't grown and the job market is tepid, at best. On Friday, the Labor Department said the nation's unemployment rate jumped to 5.5 percent in May – the biggest monthly rise since 1986 – as wary employers cut 49,000 jobs. Average hourly earnings for jobholders rose to $17.94 in May, up 0.3 percent from the previous month.

The feeble employment market may be making consumers less willing to spend. Also, paychecks aren't going as far as they did before food and fuel costs rose.

“In a good economy, you can make mistakes. But in a bad economy … you can't afford to make a mistake,” said Larry Lagattuta.

“I am three very bad decisions away from bankruptcy at any given time,” said Lagattuta, who has been running Enrico Biscotti Co. in Pittsburgh for 15 years.

Over Christmas, he made hundreds of shipments; 2007 was his best year ever.

The last quarter was his worst.

A National Small Business Association survey of 500 small business owners in February found that sales and profits had dropped and job growth was at the lowest point in 15 years, problems that could have a significant impact on an already shaky U.S. economy.

The survey also found that 71percent of business owners have a “negative outlook” on the economy, compared to 43percent a year ago; confidence in their business' success dropped from a high of 81percent a year ago to 70 percent now.

A separate survey done by the National Federation of Independent Business found that for the first time in 25 years, small business owners cited inflation as their single biggest concern, rising from 4 percent a year ago to 14 percent in April.

The survey of more than 1,765 businesses showed that for the first time in a decade, skyrocketing insurance costs were not the No. 1 concern.