Small-business owners reported far less optimism at the end of 2008 than at any time over the past five years, according to the Wells Fargo/Gallup Small Business Index.
While the score fell from 45 in the third quarter of 2008 to 10—a marked plunge from the same time in 2007, when it stood at 99—there is one group who holds a glimmer of hope that there’s change on the horizon: women business owners.
That optimism isn’t coming from the overall state of the economy. Rather, some local women business owners are encouraged by the election of President Barack Obama and his appointment of a new chief at the Small Business Administration who is thought to be especially interested in the needs of women-owned businesses.
Billie Dragoo, owner of Indianapolis-based health care staffing company RepuCare, sees positive signs in President Obama’s recent appointments of several women to his senior staff, including three in his cabinet.
"Many of these women are familiar with and friendly toward [the National Association of Women Business Owners]," said Dragoo, who thinks that gives women a shot at meaningful change.
Change ahead at SBA
In addition to a new head of the SBA in Washington—Karen Gordon Mill, who is expected to be confirmed in the next 60 days—procurement regulations that would have greatly restricted women’s access to contracts have been postponed. The rules would effectively limit women-owned businesses to bidding for contracts in certain industries. The SBA has re-opened the comment period for the rules. The 60-day comment period ends March 13.
Dragoo says this was the hot topic at a recent national board meeting of NAWBO.
"NAWBO is urging its 10,000 members to write their legislators against the proposed changes," she said. "We think we have a really good chance of changing the proposal with the new administration."
In 2000, the federal government established a 5-percent contracting goal for women-owned small businesses, but Dragoo says it has reached only 3.4 percent.
Health care, financing woes
Women small business owners are facing the same challenges as their male counterparts when it comes to rising health care costs and tightened lending.
Lorraine Ball left her job as vice president of creative services for Carmel-based Conseco Inc. and started her own marketing services company, Roundpeg, in early 2002. Ball said the economic climate has made her change how she handles accounts payable.
"In October, [American Express] informed me they were discontinuing their line of credit product," Ball said. "The challenge is I relied on that when I prepaid for items such as printing and Web hosting for clients." Now she requests 50 percent of the charges upfront on anything purchased for clients and the balance within 10 days of delivery.
Dragoo is luckier when it comes to financing. While access to capital is an issue for many women-owned businesses that are part of NAWBO, she said her 13-year-old company is "pretty much self-funded."
That’s not to say that she isn’t concerned. "Many small businesses are relying on lines of credit to meet payroll. I’ve been in business for a long time, so we’ve been able to sustain ourselves and don’t have lines of credit. Going forward with our economy, it’s going to impact everyone’s business, including mine."
Janet Harris, who has launched three small businesses and sold two of them, has taken a different approach to funding her new venture. As CEO of Indianapolis-based Sales-Link Inc., the parent company of the PoT-tee Prize potty-training product, Harris and her business partner, Jayson Jones, are looking for angel investors to grow the company.
"Jayson and I have reworked our investment offering about five times—not because we were turned down but because we had advisers who made recommendations," she said. "We know that there are investors out there looking for an innovative product that doesn’t have market competition and feel we are uniquely positioned to secure those investors, but it’s taking longer."
Harris and her husband sold their previous business, Mission Coffee and Tea, to Philadelphia-based ARAMARK Corp. in 2008.
The biggest economic drag on Dragoo’s business is the continuing rise in health care premiums. She said her company had to swallow a 40-percent increase in health care costs in the past year.
"As a small-business owner, that kills me," Dragoo said. "It impacts my bottom line when I already have a huge amount that I pay out monthly for health care. Small businesses don’t get the tax breaks on health care cost that large corporations receive."
She’s hopeful that a proposal floated by President Obama prior to his election will come to fruition: pooling small businesses together to have better buying opportunities for health care.
"I’m for anything that helps my bottom line," she said.
Hope on the horizon?
Both women are optimistic that changes at the SBA will provide additional incentives for small businesses. According to the McLean, Va.-based Center for Women’s Business Research, as of 2008 there were 10.1 million U.S. businesses majority-owned by women. Those firms generated more than $1.9 trillion in annual revenue and employed 13 million people.
Ball would like to see more incentives given to small businesses, including creative financing packages to fund receivables.
"This is the biggest issue I am hearing about," she said. "When clients slow pay, it dominoes through [our] vendors. If someone slow-pays me, I have to borrow to pay my bills or slow-pay one of my resources."
Dragoo said Indiana, which has a budget surplus, is fortunate to be in a better economic situation than states with deficits.
"We’ve been lucky to have good procurement opportunities in the city and state over the past five years," Dragoo said. "The billion-dollar airport project made a lot of women’s business enterprises and minority business enterprises a lot of money from the work. The convention center is ongoing and the Super Bowl coming offers a lot of opportunities."
"If you look at what supports our economy, it is small businesses across the country," she said. "I think we’ll see some sweeping changes with President Obama."