Jul 20, 2008

Oil prices, slow economy hurting entrepreneursBy Don NelsonOnlineAthens.com

Sharon Roberts spent several sleepless nights this past spring wondering whether or not to close Buffalo’s Southwest Cafe, the business she and her husband, Rick, have operated since 2004.

“We stayed up at night thinking about how do we close the doors,” Roberts said. “We were at the point of considering it.”

A family loan, some budget tightening and a new marketing plan helped them to remain in business, however. Now the Robertses feel like they have overcome the crisis and are optimistic about business this fall, Roberts said.

“It was a wake-up call, and it was very scary,” Roberts said. “We did crazy things like borrow on our credit cards to make payroll – those things people do to sneak through – but the survival thing is not necessarily good business practice.”

The Robertses felt lucky to find a solution to the pressures that bore down on them, because running a small business even in a good economic climate is fraught with challenges, many difficult to overcome. Nearly a third of new businesses fold within two years of starting, and more than 60 percent fail within four years, according to statistics from the U.S. Small Business Administration.

The current rocky economy is making those challenges even tougher as customers of small businesses get slammed by escalating costs. Consumer prices rose 1.1 percent in June, the second highest monthly increase in 26 years, according to data from the U.S. Department of Labor, and inflation rose to an annual rate of 5 percent in June, the largest year-over-year hike in 17 years.

Consumers paid 6.6 percent more for energy and 10.1 percent more for gasoline in June.

Prices of gas at the pump hit a level almost 33 percent higher than a year ago. Those day-to-day costs coupled with ever soaring food prices, puts a hit on consumer pocketbooks and in turn on small businesses. Retail sales rose by only 0.1 percent, short of economists’ predictions for June.

The Boot Rack, which sells women’s and men’s boots, shoes, work clothing and Western wear out of space in Willowood Square on Athens’ eastside has felt the pinch this year.

“It’s like someone has just turned the faucet off,” said store manager Morgan Echols, whose mother Michele McAvoy owns the business. “June and July are usually slow, but (the slowdown) started back in March and April.”

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