Small Businesses Feeling the Squeeze

Mar. 25, 2008— -- When you own a manufacturing business in Troy, Mich., you get used to managing hardship. But for Diane and Steve Dearing, the latest economic downturn is especially hard.

"It's to the point where week to week, it's quite a struggle," says Diane, who started the business with her husband in 1995. "This downturn in the economy has produced a slump that doesn't seem to have any end in sight. I hope it does. But it doesn't seem to."

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The Dearings own a small company that makes display structures and stage sets for commercial clients, and it is truly a family affair. Diane is president and manages the books, Steve is chief engineer and three of their children work there as well: Ted and Dayna on the business side, Daniel on the factory floor.

They all know how slow things are.

"Year-to-date sales are very concerning," Steve says. "It's very hard to get the clients to come in and take the jobs because they're very tight. There's no money moving. It feels like there's no money moving."

Some of the family business has been lost to cheaper competitors in China, and the bottom line has been further whacked by the rising price of energy, which has driven up the cost of heating the 19,000 square feet of space they rent, the gas they put in their cars to drive to work, and the cost of raw materials they buy to make their display structures.

"Our clients can now purchase a display item for less than what we can buy the raw material to make it," Diane says.

Not only is it getting harder to collect payments from customers, Diane says that for the first time she can remember, she and Steve are falling behind on the payments they make.

"I understand that everybody is in the same pinch but cash flow is everything to a small business," she says. "It doesn't matter how good your work is, doesn't matter how wonderful your service is. If you can't collect you're sunk."

Diane just received her first phone call from a supplier, asking her to pay up on an outstanding bill.

"Now I look at the bills and they're getting late and I can't afford to pay them so we're running things out longer and we're paying later. Maybe we don't have the most beautiful financials in the world but our payment record was always good," she says, with obvious distress in her voice. "But we're starting to fall behind because the money just isn't coming in and it's just so difficult. There are no easy answers."