Though many big companies have bounced back from the worst recession since the Great Depression, many small businesses—lacking the deep pockets of their larger peers—are still struggling.
The problem: People still aren't spending money. The National Federation of Independent Business said last month that its small-business optimism index fell in August for the sixth straight month, with most businesses citing sales as the biggest issue.
Meanwhile, the swelling ranks of the unemployed have yielded a few unlikely entrepreneurs who, having lost their jobs, decided to start their own companies. They have found that being the boss doesn't always yield the big bucks, and are making do with fractions of their previous incomes.
The odds of a small business succeeding have gotten slimmer over time despite a culture that lauds entrepreneurship. Just 47% of businesses launched in 2005 survived at least five years, compared with 50% 10 years earlier, according to the Ewing Marion Kauffman Foundation, a Kansas City, Mo., research group.
Despite the odds, many small businesses are finding ways to hang on—and a few say sales are improving.
Here are some of their stories:
A Journey From Cubicle To Kitchen
Randy Sequete, a former investment-bank employee, now cleans kitchen exhaust systems late at night.
Mr. Sequete was laid off from his more than $100,000-a-year job as an assistant vice president for a major bank in 2010. His wife Melissa, meanwhile, had lost her six-figure banking job in 2007 while nine months pregnant. She landed a full-time sales position at a job-search website a year later, but was eventually laid off from that as well. The couple, who had already sold their Texas home to become renters, relocated to Florida last year.
From their new home, Ms. Sequete, 38, began working again for the job site that had let her go, in a part-time $15-an-hour administrative role. Mr. Sequete, after struggling to find work, decided to buy a business.
He invested more than $100,000 of the couple's savings in a commercial kitchen-exhaust-cleaning franchise called Hoodz. Mr. Sequete learned about the business through a broker he met while attending a seminar run by an outplacement service. Ms. Sequete quit her work for the jobs site to take care of the couple's two kids and help her husband run the business.
"Now I'm earning nothing," says Mr. Sequete, 43, adding that the family only recently purchased health insurance coverage. "I haven't taken one dollar from the business yet."
His new job is a far cry from the office position he used to have. His hours are unpredictable and range from early-morning meetings to late-night cleanings. Since clients are mainly restaurants, cleanings often start after 11 p.m., and while Mr. Sequete has two employees who do most of the dirty work, he often joins them on assignments.
Mr. Sequete says he typically works Sunday through Friday, spending half his time on the road and the rest working from home.
Though the couple has less money to spend, they now live closer to relatives and are optimistic about the future. "We're making a fraction of what we used to make but we're so much happier," says Mr. Sequete. "As long as I have my friends and family around me and my health, I'm the richest man in the world."
—Sarah E. Needleman
For Spa Owner, Beauty Brought Bankruptcy
Mindy Willson Conner drives the car she meant to give her teenage son.
The spa owner intended to offer the aging Jeep Cherokee to her younger son four years ago when he turned 16—and buy a new car for herself, perhaps a Lexus.
Instead, she's still driving the 11-year-old Jeep as she struggles to revive her Seal Beach, Calif., business.
After 20 years in the business, Ms. Conner borrowed about $1.4 million in 2007 to move her Complexions Day Spa to bigger and fancier quarters. At first, the snazzier setting drew more customers for services such as facials, manicures, massages and laser hair removal.
In late 2008, as the economy wobbled, her sales began to falter, before dropping 22% in 2009 and another 4% in 2010. Customers stopped coming or came less frequently. Competition drove down prices. The spa now charges $75 to $85 an hour for massages, down from $95 before the recession. Her take-home pay plunged to about $26,000 in 2010 from $125,000 in 2007.
Ms. Conner, now 52 years old, found herself unable to meet loan payments and eventually sold her five-bedroom house two blocks from the beach to pay off part of that debt, moving to a rented three-bedroom house with her husband and younger son.
She also maxed out her credit cards to keep her business going. "I had to leverage everything to keep the doors open," she says. To escape from some of that debt, she went through personal bankruptcy early this year.
Ms. Conner still employs 42 people, down from a peak of 47. She says sales have started recovering this year and cost cutting has brought the spa back into the black.
She hopes to generate more income from a line of massage oils, lotions and other skin-care products she formulated. To ramp up that business with more marketing and distribution, she figures, she would need at least $50,000, money that she doesn't have and can't borrow because her credit rating is shot. She hopes to attract an investor willing to put money into that skin-care line.
For now, vacations and fancy restaurants are out. "I don't shop," she says.
Instead, she pursues more free pastimes such as reading or walking on the beach. "I spend more time with family and friends," she says. "It's not all bad."
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