Small businesses face soft economy, increasing costs

lmorris@macon.comJanuary 11, 2014 

SmallBiz

Bartender Pete Treiber walks a plate into the kitchen Wednesday during lunch at Twang Southern Tastes & Sounds in Payne City.

JASON VORHEES — jvorhees@macon.com Buy Photo

Small-business owner Shane Gott­wals realizes he’s fortunate to be growing his business, but it could be because he has been willing to take risks during a rocky economy.

Small businesses form the backbone of the job market, but most are looking at a soft economy, increasing costs and labor issues. But the new health care law appears to be the top issue for small businesses and their workers in 2014.

Gottwals owns Warner Robins-based Gottwals Books, which has grown to six stores since it was founded in 2007, including stores in Byron, Macon, Perry and Warner Robins in the midstate as well as additional franchise locations. The company sells used books it gets as trade-ins.

The book store’s growth doesn’t come without concerns, Gott­wals said.

“I think overall it seems like the cost of everything is going up, besides heath care, so when trying to maintain a solid employee base ... you have to be more and more competitive when it comes to compensation,” he said.

“My costs, not only as a business owner, are going up. But the costs for my employees just to live are going up. ... We have seen an increase (in revenue) in our business year over year -- we always have -- but to keep the staff you have and to keep your level of quality service where it’s been is challenging.”

The new federal Affordable Healthcare Act requires everyone, with some exceptions, to be insured either through their jobs or privately. Under the law, businesses with fewer than 50 employees are not required to offer insurance to employees, but those that do offer insurance may be eligible for a tax credit and must comply with the new regulations.

Gottwals has about 10 employees and does not provide health insurance.

“Now that our employees are required to have (insurance), for us to keep these people, it will cost us anyway,” Gottwals said.

Bert Maxwell Furniture Co. in downtown Macon has five employees and provides insurance for them, said Bert Maxwell III, the company’s president.

Maxwell said he doesn’t plan to make any changes now and will rely on his insurance company to make sure he complies with the new law.

Brad Spiegel, owner of Quality Computer Systems Inc. in Macon, said he has always offered health insurance to his employees, and up until two years ago paid 100 percent of the premium. The company has 12 employees. Spiegel recently learned his employee insurance may go up about 40 percent this year.

“It’s easy to say as a small business (insurance) is not required of you, but if you do the ethically right thing, it’s going to cost you more than if you did the ethically wrong thing,” he said. “It’s shocking. I don’t understand why I can’t provide what I did before. ... Some other things will have to happen if it does go up 40 percent.”

Lending issues could hamper growth

Another top issue facing small businesses in 2014 is access to capital, said Josh Walton, area director of the University of Georgia Small Business Development Center in Macon.

“Those businesses that are looking to grow are finding it hard because of the tightening of bank regulations, ... not to say (funding) is not out there, but it’s just harder for these businesses to get money,” Walton said.

At the end of the third quarter of 2013, the Federal Deposit Insurance Corp. had recorded $284 billion in small business loans for the year to date, which was up 2 percent from 2012.

“Congress has got banks tied in a knot on new requirements,” Maxwell said. “New regulations are really slowing down recovery.”

Improvements in the housing market obviously would help Maxwell’s furniture business and other businesses directly tied to real estate.

“What we need is a recovery,” Maxwell said. “All of us are suffering from a lack of volume.”

Gottwals said when he is working with a franchisee on financing, “the banks are ready to loan, but you just have to be so qualified and you have to be able to collateralize a lot of it. ... It seems like the purse strings are opening.”

Gottwals Books has never taken out a bank loan, he said.

“We’ve been able to fund each new project with the proceeds from the existing stores,” he said.

Spiegel said funding has not been a problem for him either.

As with many small businesses, marketing decisions continue to be challenging.

“These folks have limited marketing bucks,” Walton said. “They are looking at social media and websites because it’s so affordable. ... We go to our mobile device to look for anything anymore. The smartphone has changed the retail industry.”

Tori Jennings, co-owner of Twang Southern Tastes & Sounds in Payne City, said the business uses all traditional forms of marketing but that “social media is very important to our business and should be utilized by all businesses. ... We utilize social media, primarily Facebook, on a daily basis to immediately communicate things going on in our business to our fans and followers.”

The business, which employs about 25 workers, opened in June 2013.

Maxwell said his business mostly markets through traditional media, but it has a company website managed by a website designer.

Walton said another issue for some small businesses is finding and retaining qualified employees, but it’s not a new dilemma.

“There are plenty of people out there, but finding the ones who are qualified and have the work ethic ... to do what they need to do is a challenge,” he said. “We hear that a lot.”

According to monthly reports by the National Federation of Independent Business, owners had positions in 2013 they couldn’t fill.

Gottwals and Quality Computers are expecting to add positions this year.

Gottwals is looking at hiring its first chief financial officer, and Quality Computers needs two computer technicians.

Of all the issues facing small businesses, the new health care act “is making growth so anemic,” Gottwals said.

“It makes people say they want to keep things like they are ... instead of taking a risk and invest in new buildings or new employees,” he said. “It’s just going to be so long before it’s ironed out, I wonder what the recourse is on the economy as a whole with people kind of holding back too much. I think folks are just scared by it.”

To contact writer Linda S. Morris, call 744-4223.

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