Small businesses weather economy
- Published: April 9, 2009
By Lauren Heaton and Diane Chiddister
RECESSION IN THE VILLAGE
This is the fourth in a series of articles looking at how the unstable economy is affecting various aspects of Yellow Springs life, including businesses, nonprofits, the arts, housing and schools.
The health of the local economy is tied not only to the village’s largest employers, but also to the many smaller ones that together contribute substantially to Village coffers. With the many entrepreneurs educated at Antioch College, Yellow Springs has a rich legacy of fostering start-ups, and that small-business diversity is a critical part of the stability of the local economy, according to Village Manager Mark Cundiff.
“We have a diversified economy and quite a few midsize businesses are doing pretty well,” Cundiff said in a recent interview.
While the current recession affects almost all of these midsize businesses in some ways, most of the companies, which employ from five to 35 workers, are currently stable, according to interviews with eight employers. While all the employers are eyeing the turbulent economy with caution, so far, the majority have not had to lay off employees, they said.
Several midsize businesses that are either enjoying growth or holding their own are in the relatively recession-proof fields of education and health care, or are suppliers of essential services. Local businesses in the fields of publishing, graphic design and manufacturing are experiencing more uneven effects from the recession and some downsizing has occurred, according to recent interviews.
What many of these smaller firms have in common is that they could locate anywhere but they choose to locate in Yellow Springs, according to Cundiff, who said that he believes Village economic development efforts would be wise to focus on these small and midsize businesses.
Some decline in tax revenues
Overall in the first three months of 2009, there has been a small decline in Village income tax revenues, according to data from the Regional Income Tax Agency, or RITA. Tax revenues from the top 25 village employers for January, February and March were $199,907 this year, compared to $208,838 in 2008, a decrease of $8,930, according to the RITA data. Income tax makes up a significant portion of the Village’s general fund, according to Village Finance Director Sharon Potter.
Most of that decrease is linked to reduced income tax withholding from Antioch University, which closed Antioch College in June, and The Antioch Company, which reduced its employees by half last year. In the first quarter 2009, Antioch University paid $8,369 less than 2008, from $44,417 to $36,048, and The Antioch Company during that period paid $16,131 less than last year, from $24,652 to $8,520, according to RITA.
However, one should be cautious comparing monthly income tax receipts from one year to the next since differences may be due to the timing of payments rather than business changes, RITA CFO Christie Price said in a recent interview, stating that overall yearly comparisons were more accurate.
In 2008 overall, Village income tax distributions from the top 25 employers showed a $49,300 increase compared to 2007, with losses from Antioch University and The Antioch Company balanced by increases from YSI Incorporated, some midsize businesses and several individuals.
After the largest five contributors of income tax to the Village in 2009 — which are YSI, Antioch University, the Yellow Springs schools, Greene County Board of Education and Friends Health Care — businesses on the top 25 list of income tax distributions in 2009 and 2008 include Vernay Laboratories, the Village of Yellow Springs, Electroshield, Inc., E-Health Data Solutions, MVECA, G Communication Design (Bing Design), the Winds Café, Wright State Physicians, Ertel Publishing, Weaver Supermarkets (Tom’s), Anthrotech and Village Automotive. Several unidentified individuals are also on the list.
Health, education steady
Three local businesses that report steady work are in the fields of health care and education, and another stable firm has the federal government as its main client.
E-Health Data Solutions, which helps long-term care providers such as nursing homes track their quality of care, is largely owned by a partnership of Yellow Springs resident Roi Qualls, Jeannette Petten of Columbus and John Sheridan of Cleveland. Though the business is headquartered in Cleveland, 10 of its 15 employees live and work in Yellow Springs, Qualls said in an interview on Friday.
E-Health has seen steady growth in the number of customers served and an overall revenue increase since the business started in 2001, according to Qualls. Growth has continued over the past several years at a rate of approximately 10 to 15 percent, including a growth spurt in 2007, when the company hired four new developers and then added two more this year, he said. And so far through the first quarter of this year, the business is on budget, Qualls said.
“We’ll see if that holds up,” he said. “We do know that jobs have shrunk in every section except healthcare and the government, so I’m thinking that’s good news.”
But being in Yellow Springs is sometimes a hardship that Qualls continually has to justify to the business’ other principals, he said. The rent is high, the office space is limited, and the Village has yet to move on creating an enterprise zone that would provide tax abatements as a business incentive. But he wants to keep the office in town because he values the quality of life in Yellow Springs, especially for families, Qualls said.
“We’re exactly the type of business the community wants, but I feel like I’m always having to argue to stay here,” Qualls said.
Another health-care related business that reports steady income is Wright State Physicians, according to COO Jocelyn Picconi in an interview this week. The business, which is associated with Wright State University, employs between 15 to 20 workers, including physicians, nurses and support staff.
The recession is affecting some hospitals and smaller medical partnerships because people who lose their job-related health insurance are less likely to seek medical care, Picconi said. However, Wright State Physicians is a training facility that accepts all federal insurance, including Medicaid and Medicare, and more people are now eligible for federal health insurance.
“The economy hasn’t touched us yet,” Picconi said. “We don’t project doing anything differently this year than we did last. Health care is necessary.”
The education-related firm of MVECA, the Miami Valley Educational Computer Association, is also largely holding steady, although there are concerns about a possible reduction of one worker, according to MVECA Executive Director Dean Reineke last week. The business, an information and technology center for schools, employs 12 full-time and two part-time workers at its site in the Morgan Building on East Enon Road.
The company, which is 85 percent funded by 24 member schools and 15 percent by the state, had a loss of 5 percent of revenues last year due mainly to state funding cuts. According to Reineke, the business could suffer more as, in uncertain economic times, schools tend to cut technology first.
`To make up for the revenue loss, MVECA is now considering raising its fees to member schools, Reineke said, rather than making significant cuts to staff.
“Staffing wise, we’re okay. We’re keeping our fingers crossed,” he said.
Another local firm that reports stable business is Anthrotech, and that stability is linked to the federal government providing from 70 to 80 percent of its business, according to Anthrotech President Bruce Bradtmiller last week. Begun by Ed Churchhill in the 1950s in the Antioch College science building, the business provides the government and commercial businesses with information on body size, which is then used for protective gear, clothing and uniforms, Bradtmiller said.
Anthrotech employs four full-time and six part-time workers, and has no plans to change its level of employment, Bradtmiller said.
“We’re not affected noticeably so far,” he said.
Nationwide, the publishing and graphic design fields have suffered from the recession and in Yellow Springs, one publishing business is largely holding steady, while another is feeling the loss of some business.
Ertel Publishing, in its 21st year in Yellow Springs, is an example of a business that could locate anywhere. He and his employees realized about eight years ago that they could be anywhere in the country, according to owner Patrick Ertel, but they chose to stay in the village.
“We like the atmosphere in town, the liveliness, all the things going on,” Ertel said. “The energy in town adds to the energy in the office.”
His firm is not immune to the troubles faced by the industry as a whole, according to Ertel, who said the company’s revenue was down about 20 percent in the past year. His company publishes two magazines of its own, Antique Power and Antique Truck, and custom publishes four other magazines. In a soft economy, businesses often pull back from advertising, which is what has brought the publishing industry as a whole down about 50 percent in the past year, he said.
“We’re battling that effect,” he said.
However, the readers of his own magazines are a loyal bunch, and “things have been pretty good” with those publications, he said, while the four custom publishing clients have been the ones most affected by declining ad sales.
But the company does not plan to reduce its staff of 10 full-time and one part-time graphic designers and support staff, Ertel said. Rather, the company is cutting back in other ways, such as curtailing traveling, and is using the money saved to promote the company. So far, the strategy is successful, he said.
And although he and his staff appreciate the energy of Yellow Springs, the Village should do more to support small businesses, Ertel believes, stating that he was disillusioned several years back when Village government offered tax abatements to The Antioch Company, but offered no such advantages to small business.
Bing Design, the marketing and graphic design firm that Nick Gaskins purchased in 2000 from Bob Bingenheimer, had until last year seen steady growth in both revenue and staffing. Serving, among others, local clients Tera Data (an NCR subsidiary), Antioch McGregor and Wittenberg, the business started with five employees in 2000, and in 2007 hit a high of 14 employees, partly due to a large account the business had attracted.
But in 2008 the business lost one employee when the big project ended. And toward the end of that year, a decline in demand from design clients forced Bing Design to lay off three more employees this year, Gaskins said, referring to the adjustment as “right sizing.”
“The end of 2008 decline was connected with the economy with clients who were being cautious,” he said.
So far this year, Bing Design’s first quarter reflected about a 30 percent drop in sales compared to last year’s first quarter, Gaskins said. But the beginning of the second quarter looks more promising, as clients may be seeing the need to “loosen up their budgets” and renew some design services, he said.
Being in Yellow Springs has helped the business, Gaskins believes, because clients like to come to the village for a business get-away.
Essential services steady
Tom Gray of Tom’s Market has felt the effects of a troubled economy in his store mainly in what people buy, he said last week. While overall sales have remained flat compared to last year, he sees villagers turn away from “frilly” items such as imported food and focus more on basics. Still, even though organic products tend to be more expensive, villagers are sticking with their organic and healthy food, he said.
While sales have been flat, some food prices have risen and the store must now pay a fuel charge for deliveries from suppliers, so that the overall profits are down somewhat, Gray said.
Tom’s Market employs 34 full- and part-time workers, Gray said, and he hopes, despite the recession, to not make staffing changes
But with a store so small, “it’s a juggling act,” Gray said, to keep in the black during tough economic times, and he tries hard to respond to his customers’ requests.
Also in the top 25 of Village income tax withholding distribution in 2008, Village Automotive has found its business changed somewhat in substance but not in overall amount, according to owner Todd Fritchie last week.
Consequently, Fritchie said, he has no plans to reduce the number of full-time mechanics he employs, which will stay at five.
While he has noticed that villagers are cutting back on auto maintenance in these tough economic times, they still fix broken cars, and they tend to keep fixing their cars rather than trade them in for new ones.
“It’s kind of an even tradeoff for me,” Fritchie said.