Owners optimistic about future, despite global uncertainties Asia, South America, Clinton's job security, Y2K problem loom

Small business

January 24, 1999|By Shanon D. Murray | Shanon D. Murray,Sun Staff

Small-business owners are reasonably optimistic about their own companies despite uncertainties that could rattle the economy this year, experts say.

Among the unknowns are the impact of economic woes in Asia and South America, President Clinton's political viability and the year 2000 computer problem.

"There's not enough concern among small businesses that they won't have a pretty good year because consumers are still consuming," said Jack Faris, president of the National Federation of Independent Businesses, a Washington-based trade group representing 600,000 members.

Two areas critical to small business -- financing and hiring -- look promising.

Getting money will remain a challenge for the greenest of entrepreneurs, but for others the cash should be plentiful, experts said. Also, hiring worries may decrease slightly because big layoffs at large corporations have provided a flood of professional workers, they said.

That's good news for Maryland.

Small enterprises, those with 500 or fewer employees, make up 98 percent of all businesses in the state, creating most of the new jobs in Maryland. According to the most recent figures available from the U.S. Small Business Administration, there were 315,755 businesses in Maryland in 1997 -- up 47.5 percent over 1996.

"Historically, economic development involved chasing after big companies, but that's all changed," said Alan B. Kutz, director of the Office of Regional Response for the state Department of Business and Economic Development.

"Now the department is spending a lot of its resources on the growth of residential business," he said.

Despite the positive outlook, Y2K computer problems could prove a formidable opponent, business experts said.

"Small businesses keep hearing all those things about Y2K, and they're feeling like it's an El Nino they've never experienced," Faris said. "What we're trying to do is get small businesses as prepared as possible without having them panic," he said.

Small-business experts estimate that of the nation's 23 million small businesses, as many as 370,000 could be crippled by Y2K problems.

According to a recent Gallup Poll, 25 percent of businesses with revenues of less than $50 million hadn't taken any action.

Millennium Fix, a 19-employee Y2K fix-it company based in Lutherville, opened n August to take advantage of the opportunity.

"Companies are still asking themselves if they are going to spend the money," said Nat Kreamer, the company's chief operating officer. "The question is: What is it worth to you to stay in business?"

While the Y2K problem promises to cause some hand-wringing, there is an upside in other areas for entrepreneurs.

Those small businesses that have proved themselves worthy can look forward to increased availability in expansion capital from commercial banks, experts said.

"We haven't figured out if it's because commercial banks have tapped out other lending markets or they are finally recognizing the value of small businesses," said Joanna Smith Bers, editor of Success magazine, a small-business publication based in New York.

The high-technology sector, still the king of hot markets, will experience some belt-tightening. A few years ago, investors threw money at high-tech businesses. Now, entrepreneurs must have a strong product, a strong business plan and, most importantly, the intellectual capital to back it up, industry experts said.

"Investors are approaching these businesses with more skepticism and sobriety," Smith Bers said. "The market is more skeptical."

Kreamer said the three partners who founded Millennium Fix chose to fund the company solely through their personal credit. Because of its private financing, Millennium Fix avoided being scrutinized by lenders, "but much more is expected of high-tech companies than ever before," Kreamer said. "Tech is expensive, and it's very easy to burn through money."

Smith Bers said while retail and fast-food outlets have difficulty locating workers, it may become easier to find highly skilled workers. "Every day some large company is announcing layoffs, creating a new flow of experienced professionals," she said. Boeing Co., RJR Nabisco Holdings Corp. and Johnson & Johnson recently announced thousands of job cuts.

While a small business often can't match the salaries of big corporations, it can take advantage of their talent by hiring the displaced employees as temporary consultants, Smith Bers said.

In fact, it's a trend Millennium Fix has used to staff its marketing and sales department, Kreamer said.

"We cut [compensation] deals that are less salary and more performance-based. That way, we can have people work for us on the side while they do something else," he said. "It gives us a broader reach."

But the search for less-skilled workers for lower-paying jobs will remain frustrating, Faris said.

"They can't find enough people who can read and write and show up Monday morning," Faris said. "For small businesses to grow, there have to be more people to work."

Pub Date: 01/24/99

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