|
|
|
Small Business Is Big Business
Under-$10-million firms
are driving the state's economy — and even big business are competing for
a piece of the pie
|
Business New Haven
4/6/1998
By: Alec Appelbaum
|
Small businesses in Connecticut are growing in the second half of the decade, fueled by speed and flexibility. But while lenders, civic groups and state agencies race each other to gain entrepreneurs' favor, an expert warns that retirement pressures could stunt the growth when the economy slows down.
Companies with $10 million or less in annual sales account for 60 to 70 percent of in-state commercial bank loans, and their share in Fleet Bank's in-state lending is 50- to 100-percent higher since 1995 than it was in 1994.
“We're seeing growth in temp agencies, especially computer specialists dealing with the Year 2000 problem, general consulting, research and high-tech,” says Debra Schaffer, Connecticut marketing manager for Fleet's Business & Entrepreneurial Services Group. “In Fairfield County, high-end residential construction is growing.”
Meanwhile, Peter Stelma of the state's Department of Economic & Community Development's (DECD) New Haven office says he is assembling bond issues for eight expanding firms that include aerospace subcontractors, food producers and biotech shops.
Where there's expansion, there's marketing. Fleet has converted 64 of 179 in-state branches, including the Long Wharf office, to Business Solutions Centers where staff can “talk simultaneously about tax planning and estate planning,” according to a spokesman.
This month, the bank rolls out a service to set up small firms' Web pages and process their online credit card orders for a monthly maintenance fee. “In two weeks, you could be marketing products,” says the spokesman “It's a way of deepening relationships with customers.”
The Greater New Haven Chamber of Commerce, having inaugurated a Small Business Division in January, also seeks deeper relationships. “Small-business people are worried about the next sale. They don't have four or five people to go to meetings and talk about the Q Bridge,” says Lorna Lamoreux, a nine-year chamber vet who runs the new division.
Patricia Kasko, who co-owns American Speedy Printing on Chapel Street and chairs the new division, predicts ”new flair to existing events such as awards dinners, Business After Hours and educational seminars,” accelerating in 1999.
The state, through DECD, sings a similar tune. State enterprise zones can offer five-year, 80-percent property tax abatements on real estate improvements and personal purchases, as well as ten-year business tax credits of up to 50 percent and grants (up to $75,000 total) covering employees who either live in the zone or qualify for federal job training.
Under a separate Urban Jobs Program, companies outside designated zones can appeal for similar credits and abatements. Stelma withholds specifics about these programs' local performance, but notes that the businesses seeking bonds often see tax credits, combined with Labor Department-sponsored training, as powerful incentives for hiring at all skill levels.
All this wooing of low-volume businesses comes at a time when small business' volume in the region's total economy is growing large. “We looked at our membership base and it was 75-percent small business,” says Lamoreux.
Banking consolidation yielded a comparable budge. When multi-state giants like Fleet and First Union bought local lenders, they inherited a “significant” proportion of small businesses. Kasko financed new printing equipment last year.
These inherited customers, once they clear credit hurdles, can make desirable customers for short-term loans and other services. “Companies are looking for expansion,” says Stelma. “Their projects run two to five years, and we're seeing average growth of 30 to 50 percent.”
Some grow with the need for speed. “Major growth in our client base has been people accustomed to using technology,” says Branford systems consultant Lillian Rojas, whose Rojas & Co. (see accompanying story) increased annual revenues 30 percent last year.
“It's exciting to us that we're moving beyond 'How do I use my computer?' to 'How can I use technology to gain strategic advantage?'” Her firm now employs six and occupies 1,800 square feet of office space. Rojas says she expects more business in health-care solutions and financial-management consulting in the next year.
Others grow when their market snowballs. Laura Freebairn-Smith founded Good Work Associates with partner Paul Spector in 1988. The consulting firm, which specializes in organizational development, has seen revenues climb 60 percent in 1996 and 1997. “We get all our work by word of mouth - instead of four people talking about [us], now we have 16 and so on,” says Freebairn-Smith. The firm added an internal management team last year; it now plans to move from Willow Street and buy a building.
As revenues grow, so do planning pressures - particularly in an economy ripe for a correction. “It's a rare startup that has a pension,” says Carl S. Feen, a New Haven financial planner and retirement-planning activist. “With the wage push coming down the road, employees will be pushing employers to implement a program.”
“I am dismayed at how difficult the feds make it to provide benefits,” says Freebairn-Smith. “We want to provide [retirement] options, which requires a cafeteria plan, which costs $5,000 a year. As a result, the business had to spend a lot on my benefits.”
Other banks, like Fleet, have reduced paperwork by waiving financial statements. Fleet's Easy Business Credit boasts a single-sheet application and 24-hour responses, which the bank achieves through personal credit checks and proprietary credit scoring.
The unsecured loans tend to go to existing customers and get scored on a two-year-old system, says a spokesman. “Customers are mostly concerned about the time and expense of the application process,” he adds.
While this approach rewards some cash-sensitive borrowers, it can burn others. Here, too, Feen advocates change.
He led a push last summer to introduce personal financial management training into Connecticut public schools. Under the bill, which Democrats State Sen. Toni Harp of New Haven and Guilford State Rep. Patricia Widlitz sponsored, Cigna underwrites and teaches courses, which local school boards can voluntarily adopt and tailor.
A former vice chairman of the federal Employees' Retirement Income Security Act board, Feen warns that wage and savings pressures will impel small-business owners in risky fields like biotech and high-tech to set up portable retirement savings programs “to attract and retain key people.” These firms tend to use stock options as incentives in their first three to five years, he notes.
“The small-business owner is not implementing a plan in his or her own right - wherever there's pressure in labor supply, there will be pressure in plans,” says Feen. “Small-business owners have to see that the alternative is a mandated program where you pay Uncle Sam.”
On that logic, and given the visible debate on Social Security, Feen says he expects a “big improvement,” including congressional legislation creating a low-paperwork plan, this year.
“Manufacturing firms generally have plans,” he says. “It's services that need to catch up.”
Small-business owners recognize this and other burdens. Kasko, whose shop now features upgraded color technology, says prosperity comes only to small businesses “which can sustain and meet customer needs.”
“It's survival of the fittest,” she says.
|
Go FirstGo PreviousGo
NextGo LastGo
to Index
|
|
