By SHERYL JEAN / The Dallas Morning News
Skin care guru Renee Rouleau recruited stay-at-home moms on Twitter to fill key jobs in her growing business.
Maria Lott, co-owner of Dallas-based Recycle Revolution, turned three salespeople into independent contractors to cut costs.
Cooper Smith dropped group health care coverage for four employees of his Dallas public relations firm and replaced it with a monthly medical stipend, a change that cut costs for him and his staff.
Those are a few of the ways the nearly 2-year-old recession has forced Dallas-area small businesses to become more innovative in how they run their companies.
Seven local small-business owners shared their views on the economy and a host of other issues at a recent roundtable discussion hosted by The Dallas Morning News. These entrepreneurs’ experiences provide a behind-the-scenes glimpse into how small businesses adapt to an ever-changing economic landscape.
Small businesses create more than half of all new U.S. jobs each year, but they’ve faced growing challenges with employment, cash flow and access to credit during the recession. The nation has an estimated 27 million small businesses, including about 400,000 in the Dallas-Fort Worth area.
President Barack Obama considers small business a crucial part of the nation’s economic recovery. Yet many small-business owners are critical of government efforts to help.
The fastest-growing expense for employers of all sizes is health care. In the last decade, average job-sponsored annual premiums jumped 131 percent from $5,791 to $13,375 for a family of four, according to a Kaiser Family Foundation survey released last month.
Many small businesses can’t afford to offer coverage to employees, and workers can’t afford to buy their own policies. In 2007, a quarter of employees at small businesses had employer-based coverage vs. about three-quarters of workers at larger companies, according to a report by the National Coalition on Health Care.
Cooper Smith Agency employees voted this year to give up group health coverage, which had been increasing 15 percent to 20 percent a year, for a company-provided medical stipend, Smith said. Here’s a strange twist: Smith, who was diagnosed with psoriatic arthritis a year ago, can’t find coverage now because of the pre-existing condition.
“I just keep bouncing from one short-term policy to another,” he said. “I don’t know what I’m going to do. It saved the company money and it saved my employees money, but it’s come back to bite the owner.”
HumCap, an Addison-based human resources outsourcing firm, offers its 19 employees two options – a traditional preferred provider organization plan and a high-deductible health plan with a health savings account. The health savings account lets employees use a debit card to pay for medical expenses from the tax-free account until they meet their deductible and insurance coverage starts. Employees can transfer these accounts between employers.
No one is enrolled in the PPO, which costs more, said president Tad McIntosh. The premium savings enables HumCap to deposit about $100 a month in each employee’s health savings account, he said.
This summer, Recycle Revolution also gave up its group PPO plan to lower costs for the company and employees.
Two workers switched to a lower-premium, higher-deductible plan, and a third employee, who is no longer covered, is still considering his options, Lott said. That change, combined with no longer paying insurance for its former salespeople, helped Recycle Revolution cut its health care payments in half.
It’s paying at least $100 a month less per person, she said.
Health care bills
Three congressional bills designed to overhaul the nation’s health care system would mandate that employers offer health care coverage to employees. Two bills would exempt businesses with 25 or fewer employees or annual payrolls of less than $400,000.
Some of the small-business owners agree change is needed, but they’re skeptical of the proposals until they see more details.
“What are they really offering us?” Lott said. “Can the government give us examples, details of real people so we can understand what they’re really proposing for us? We don’t have details.”
Many small-business owners have downsized during the recession. Smith cut his salary and hasn’t filled three jobs lost to attrition.
Others found ways to beef up staffing without significantly raising their costs.
Josh Gertzen is looking to hire students from the University of Texas at Dallas to develop a marketing plan and financial forecasts. His Plano-based TileStack, a do-it-yourself Web site for iPhone applications, has three employees.
This summer, four University of Dallas MBA students conducted a financial analysis and operational, bookkeeping and inventory control reviews of Rouleau’s two skin care spas and her skin care product line.
Her cost: treating the students to dinner. She estimates that it would have cost more than $15,000 to hire a consultant.
Rouleau, who has 13 employees, also mined a new contract employment source: stay-at-home moms who talk about beauty on Twitter. She hired a Wisconsin woman as her personal assistant and a Pennsylvania mom to manage her social networks. She hasn’t met either of them.
In late August, Richard W. Fisher, Federal Reserve Bank of Dallas president, said the recession was over. Yet, economic indicators remain mixed, and two reports released last month show that small-business optimism faded.
The local business owners disagree about whether the recession is over for them. But they agree that their small size enables them to be more nimble than larger companies.
Three business owners – Rouleau, Clarence Bowman and Bob Frederick – expect record revenue this year.
Bowman, an Oak Cliff independent salesman for Pre-Paid Legal Services, said the economy has boosted demand for services such as loan renegotiation. A mix of commercial and residential clients for Frederick’s Euless-based cooling and heating service provides balance, he said.
Other businesses still face challenges in a soft economy.
Gertzen said it’s more difficult to attract private investors to his start-up. Not too long ago, start-up companies with no revenue or profit could secure millions of dollars in venture capital. Today “the funding amounts are definitely less, and how profitable you are matters a great deal,” he said.
Still, entrepreneurs remain optimistic that their businesses will get better as the economy improves.
“We’re out of the woods,” Smith said. “I think things are getting better.”