Small businesses still struggling, study indicates

'Mom-and-pop' operations need customers, not big investments, expert says.

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Posted: Sunday, May 5, 2013 12:00 am

Kevin Butt, of KB Cleaning Services in Powder Springs, Ga., knows the challenges of starting a small business and keeping it afloat.

His carpet- and home-cleaning service requires long hours, solid customer service and staffers who are willing to work when he needs them -- even if the work is not full-time.

"You are going to be on call," Butt said of his 15 workers. "I can't afford to let my guys work the whole full week."

Butt is not alone, according to Intuit's latest report on very small businesses, those with 20 or fewer workers.

Intuit's monthly small-business employment and revenue report showed traditional "mom and pop" businesses continued to struggle between March and April as the economy improved. They added just 20,000 new jobs nationally, according to the study, an annualized growth rate of less than 1 percent.

Data on more than 150,000 businesses also show many companies in the very small category are cutting workers' hours and paying them less, according to Susan Woodward, an economist who worked with Intuit to create the report.

"Their biggest problem is lack of customers," Woodward said. "They don't need to make big investments to grow. They need customers."

Intuit said entrepreneurs who rely on contracts in retail, real estate, health care and other industries saw a decline in revenue last month, but those in construction experienced a 17 percent increase due to the stronger homebuilding market.

Woodward said construction represents 20 percent of small-business activity, and many small businesses will continue to struggle until the sector completely recovers.

Hourly employees worked an average of 104.9 hours in April, down 0.8 percent from the revised figure of 105.7 hours in March, the report said. The hours worked have been falling since mid-2011 and are below their 2009 level, Woodward said.

Average monthly pay for small-business employees fell to $2,676 in April, down 0.4 percent from the March revised figure of $2,685 per month. That's about $32,100 per year, which is part-time work for almost two-thirds of small-business employees in Intuit's data, Woodward said.

There is a bright spot for small businesses, according to another report. BizBuySell.com, which keeps track of small businesses that are up for sale, said sales rose 56 percent in the first quarter of this year compared with the same period a year ago. As the economy improves, putting businesses in better shape, they become more attractive to prospective buyers.

BizBuySell.com's Insight Report said there were 1,897 closed transactions in the quarter, compared with 1,218 in the same three-month period a year ago. It was the highest number of businesses sold quarterly since the second quarter of 2008.

The data come from transactions reported by brokers nationwide. The median sale price of a business sold was $180,000, the highest level since 2009.

Butt said he's keeping busy and is focused on growing KB Cleaning in metro Atlanta.

"I've got to be smart in running my business," Butt said. "My business is growing, and I see potential for the future, but it's not easy. I'm taking my time."

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