How has the recession affected small businesses?

Jessica Young Eric Yunker Rui Hui How has the recession affected small businesses?

What Are the First Things to slip in Recessions • Sales tend to go first. • The demand for any type of good usually begins to decline when there is a recession so, sales do get hurt first in these times. • The only time that sales don’t tend to get hurt is when there is a inelastic demand for the good being sold.

Next to slip are profits. • This is because you are not making any revenue on your merchandise, this is directly associated with your profit. • Therefore if your sales go down then your profit will also go down.

What is the main outcome of a failed small business in today’s economy • Smaller companies have more of a tendency to go bankrupt. • Smaller companies do not have a lot of capital assets as collateral in order to protect their company in hard times. • Because of this, these small businesses tend to go bankrupt.

Some examples of how small businesses are affected. • From a survey of 165 small businesses, only one in twenty firms said that survival through the recession was threatened. • Only 8% reported serious ramifications. • The majority said that for the most part their has been no real noticeable impacts.

Does every small business get affected by the recession. • Even though a lot of people think that every business is affected negatively by the recession that is not true. • A large percent of small businesses are actually either not seeing any affect or gaining sales and profit.

Performance Changes Table 2 Business Performance Changes Between Q1, 2008 and Q1, 2009 Value of sales value of sales Profit margins Significantly higher 10.8 6.4 Slightly higher 15.7 14.0 About the same 19.2 27.4 Slightly lower 28.0 28.9 Significantly lower 23.9 20.4 No data 2.3 2.9 N 343 343

Small Business Interviews • We decided to focus on a variety of small businesses in Ada, OH. • We interviewed each of the owners from the following • The Bear Cave • Reichert’s • Keith’s Hardware • Carol Slane Florist

The Bear cave: 3yrs • Pre recession: • Very profitable • Not to many competitors in town • Steady customers • Longer hours • Post recession: • Decrease in earnings • 5 new restaurants • More at random customers • Open less hours

Negative impact: “What Profit?” CHANGES MADE Ordering less supplies/stretching Combining/ monitoring utility bills Offering a more affordable alternatives Owner works more hours Turn off grills earlier • Purchase prices increase • menu prices to increase • Increase restaurant budget • Less business but steady employee wage

Reichert’s Sporting Goods: 58yrs • Pre-recession • Less competitors • Offering employee overtime during high peak times • Offer vast varieties of name brands • Post-recession • People traveling to larger department stores for greater discounts • Less variety of supplies • Harder to get suppliers

Negative Impact: Business differences Changes made Order less inventory Provide more off-brand supplies/apparel Cutting advertising expenses Watching labor hours Following budget closer • Less customers • No extra purchases • Fewer supply replenishes • Offer less employee hours • Less traffic in store

Carol Slane Florist: 24yrs • Pre recession: • Very profitable • Not to many competitors in town • Less stress • Post recession: • Less local orders • Seeing more competition • Change in operations

Negative Impact Store Suffering Changes made Promote quality Order less hard goods Making prices as affordable as possible More internet track Installed heater timers Re-insulated to save energy • People use more discretions with money • Loss of jobs in customers

Keith’s hardware: 37yrs • Pre-recession • No competitors • Flexible hours • Great variety • Post-recession • People purchasing more supplies • More do it yourself customers • Earnings increase

Positive Impact Business Changes Made Sign sensor No cutbacks • More people invest in their homes so increase in consumer spending • No effect on employee hours • Loyal suppliers/customers

Sales and Profits Could Be Down: • The first casualty during any recession is usually sales. Once sales are down, then it usually isn’t long before profits could follow the southward trend.

Credit Impairment and Bankruptcy Also impacted by the recession is the accounts receivable (AR)

Cuts to Quality of Goods and Services • Secondary aspects of the goods and services produced by the recession-impacted business may also suffer.

Reduced Consumer Access • As firms impacted by the recession spend less money on advertising and marketing, big advertising agencies which bill millions of dollars per year will feel the squeeze.

Thank You Any questions?

How has the recession affected small businesses?