Small Thinks Big

May 2, 2002
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With so many conflicting reports regarding the recession, it's hard to figure who's right.

Investors say the market indicates that recovery is right around the corner. Many noted economists, including Upjohn Institute's GeorgeErickcek, believe the full recovery won't happen until early 2003.

But just about everyone believes it will be business — and not consumers — that will be the driving force behind a turnaround.

So what do business owners think? A November survey from the Grand Rapids Business Journal, Plante & Moran and Grand Valley State University showed surprising confidence among 100 CEOs of mid-sized businesses that the recession would end in the first quarter of this year.

Now, their brothers in small business are echoing the same beliefs.

The quarterly Small Business Barometer Survey, sponsored by the Small Business Association of Michigan (SBAM) with support from the Center for Urban Studies of Wayne State University, interviewed 200 small business owners and managers from across Michigan during November.

Sixty-four percent of those surveyed think it is either "very" or "somewhat" likely that the recession will be limited in duration and end by spring. Twenty-one percent said it was "not very" likely the recession would end by spring and 15 percent said it was "not at all" likely to end by that time.

The Business Journal survey revealed that 55 percent of those mid-sized businesses surveyed thought the turnaround would come in the first quarter, with another 37 percent believing the second quarter would be the time for optimism.

The SBAM survey found that the most optimistic small business owners were also the ones who experienced the least disruptions in their day-to-day business operations following the events of Sept. 11. Overall, 35 percent of small business owners reported sales decreases between September and November 2001, but 26 percent had sales increases.

The survey also found that despite the events of Sept. 11 and the ongoing war against terrorism, small business owners' expectations for 2002 were virtually the same as they were in August 2001. The only noticeable changes were slight declines in expectations for growth in number of employees and in profitability.

Hiring ground to a virtual halt last fall, however, with only 4 percent hiring new employees.

  • Always the optimist, SBAM President and CEO GaryWoodbury says the hiring freeze/layoffs may have a silver lining.

"It's unfortunate when anyone loses their job, but if there is any upside it is that some of these workers are going to start their own small businesses," he said. "That was Michigan's experience in the last recession of the early '90s — many laid-off workers took their savings, severance pay and loans and started a number of successful small business operations."

Fifty-two percent of Michigan's employees worked for small businesses in 1998, according to the latest available statistics from the U.S. Small Business Administration's Office of Advocacy. In 2000, nearly 24,000 new employer firms were started in the state.

"It may not seem like this is a great time to try and start a new small business, but there are a lot of very positive economic fundamentals: low interest rates, low inflation and a state government that has done much to make Michigan more friendly to entrepreneurs," Woodbury said. "Furthermore, our members tell us they expect the economy will really pick up steam beginning in this spring."

Woodbury's optimism — and that of small business owners across the state — is exactly why Michigan's economy will rebound strongly.

  • The Hot Cross Puns Award for January goes to Congressman VernEhlers. When asked by the Business Journal last week to make predictions about 2002, he grinned and said, "I learned early in life it's better to be a prophet than a loss."

Okay. Okay! Stop the groaning, already.

He went on to say, "Actually this prophecy business works pretty well. The more predictions you make, the better the chances that several of them will be right. And then you just refer to those predictions and everybody forgets about the ones that were wrong."

He didn't say whether it worked the same way with voting in Congress.

  • As the grueling recovery effort goes on at New York City's World Trade Center, West Michigan is making its presence felt.

A team of three Grand Rapids Police Department officers and a psychologist from Cornerstone Mental Health Services were scheduled to arrive in New York yesterday. They are one of seven teams of three police officers and one mental health professional who are helping rescue personnel cope with stress during the ongoing excavation.

GRPD's DianeWatrous, Sgt. EdMosley and Sgt. DeanMickelson and Cornerstone's PaulLaBerteaux are scheduled to stay in New York until Saturday. The volunteers are trained and experienced in critical incident stress management.

A second team is scheduled to be deployed Feb. 4-9. It is made up of two Kent County Sheriff's Department officers, Lt. JimVanBendegom and Sgt. JackHertel, and East Grand Rapids police officer, KyleBrieschaft, and DennisPotter, a social worker from Touchstone innovare, a local mental health agency.

Potter said the teams will be working with individual officers and with small groups to help them better understand the effects of critical incident stress and to learn ways they can help themselves and their colleagues to better deal with the enormous stress of the Sept. 11 tragedy and its aftermath.

  • Last but not least, not everybody got crushed under the weight of a sliding stock market. Some investors saw strong gains amid the stock market's decline.

Short sellers, who profit from falling stock prices, saw their returns surge 14 percent during 2001. The Dow Jones Industrial Average ended the year down 7 percent. The Standard & Poor's 500 fell 13 percent — the largest annual percentage loss since 1974. Short sellers' returns had been up more than 30 percent at the end of the third quarter — before the stock markets staged a robust recovery.

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