Small-business profits hit hardest in 35 years

July 14th, 2009, 6:00 am · 1 Comment · posted by Jan Norman, small-business columnist

This recession has slammed small-business profits harder than any other period in the past 35 years, reports the National Federation of Independent Business.

The Washington D.C. advocacy group surveys small-business owners across the country every month.

In July, six out of 10 owners said their profits have dropped in the past three months while one in 10 said earnings are up, according to survey results released this morning. That is the widest disparity between losers and winners in the 35 years that NFIB has conducted economic surveys.

The primary causes: weak sales and cost cutting in an effort to bring back lost customers (click on image for a larger view):

Source: NFIB

Sales trends have not been favorable, with record numbers of owners reporting lower sales than in prior periods, NFIB reports.

“Sales trends have been consistently negative since July of 2007, clearly signaling the slowdown in the economy,” said NFIB Chief Economist William Dunkelberg.

Other findings of the July survey:

Small businesses have sharply cut back inventories, which reflects less customer spending
17% of firms plan to increase capital spending, historically very low, NFIB said
The average business cut staff by 1.07 jobs in June

“A major cost-cutting activity has been focused on one of the largest costs: labor. Over the past six months, owners have reduced employment at a record pace,” NFIB said.

That finding agrees with the ADP Small Business Employment Report, which says businesses with fewer than 50 employees have cut more than 1.33 million jobs in the past six months (larger companies cut 2.2 million).

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