Small-business staffs shrinking across state

For an object lesson in how the credit crunch ripples through the economy, consider Mad Dog Heavy Equipment.

The Las Vegas company, which provides earth movers and other machines for land grading and paving, did brisk business in the commercial, industrial and public sectors until about six months ago. That's when bank funding for new projects began to dry up, said Amy Firmani, the company's president. Sales at Mad Dog have since fallen 60 percent, and the company's roster has plummeted from 40 workers to 10.

A new national survey shows that small-business staffs across Nevada shrank through the first three quarters of 2008, though work forces didn't contract on average nearly as much as Mad Dog's employee base waned.

The SurePayroll Small Business Scorecard, which evaluates hiring and wage data from more than 17,000 smaller companies nationwide, revealed that Nevada businesses with fewer than 100 workers decreased their labor forces by 0.4 percent in September. From Jan. 1 through Sept. 30, small-business staffs dropped 2.6 percent, to an average of 4.82 people.

Nevada lags the nation, which saw employee counts at small businesses grow 2.7 percent from January to September.

Nevada posted the second-worst job-growth performance among SurePayroll's 16 benchmark states. Only Utah, where small businesses have cut forces back 2.8 percent in 2008, fared more poorly. California's smaller companies expanded 0.1 percent, while Arizona's small businesses shed 1.2 percent of their workers.

Blame the state's hiring malaise on its distinction as one of the top foreclosure markets in the country, said Michael Alter, president of SurePayroll. Home foreclosures have pushed down housing values by more than 30 percent in the last year, stifling consumer spending and borrowing.

Even as they pared work forces, Nevada's small-business owners goosed paychecks. Salaries increased 0.9 percent from August to September, to an average of $33,425. Paychecks fell 1.1 percent nationwide in the third quarter, to $32,182 on average.

Investing in payroll, either through raises for existing workers or hiring new employees, can make for a wise strategy in a slumping economy, Alter said.

"If you have the ability to hire, it's a truly great time to upgrade your team," he said. "If you have any poor or mediocre performers, now is the time to trade up. You can find great people for less money than you're paying your mediocre people."

Karen Gordon understands the importance of snapping up quality workers in a tough economy.

Sales fell 5 percent or so at Gordon's event-organizing company, Activity Planners, in the last year. Faltering revenue hasn't kept her from hiring, though. Gordon's office staff grew in the summer from seven workers to nine after she added a full-time operations manager and a part-time receptionist to handle early-morning customer service with East Coast clients. The operations manager came aboard after a six-month internship at Activity Planners, though Gordon wasn't looking for new full-timers.

"We liked her and didn't want to let her go," Gordon said. "Really good people are hard to find. There's no such thing as 9 to 5 in our business, especially in a town that's 24-7. She saw what would be required of her and was willing and able to step up to the plate. Regardless of how business is, there's no reason not to surround yourself with really good people."

Gordon also managed small pay raises for her staff, though the bumps weren't as substantial as they'd have been in flusher times.

With sales off so much, Firmani had to freeze pay increases at Mad Dog. Times are tough and worsening: She filed liens against three jobs in the last two weeks, including a timeshare project and a doctor's practice that was building a new office. Mad Dog stays afloat because its executives jettisoned all their debt long ago, Firmani said. The company is awaiting word on two pending projects; if they come through, Mad Dog could see some relief.

Still, Firmani worries that the economy hasn't reached its nadir. SurePayroll's survey shows most small-business owners agree.

Just 44 percent of respondents said in September that they felt optimistic about the small businesses' prospects in coming months. That's down from 79.8 percent in August, and it's the first time the survey's optimism levels ever dropped below 50 percent. Alter said it's ominous news for a sector that provided the national economy's only noticeable growth in recent months.

"If optimism doesn't shift back into positive territory, small businesses are going to start to react, and we are going to see a worsening of the economy," Alter said.

It could take a while for Mad Dog to return to its prebust employment levels. Improvements in construction would trail general economic recovery by about six months, Firmani said. She's hoping a new president "will create a sense of new times," with a resulting pickup in broad economic activity sometime after January.

Gordon, who's been in business locally for 31 years, expects to see some economic renewal in Southern Nevada in mid-2009, after new hotel-casino projects including Wynn Encore, the M Resort, Fontainebleau and CityCenter begin opening.

"I think business is going to be challenging for a while yet, but I certainly think we're going to come out of this," Gordon said. "I'm very optimistic about it. Las Vegas will come back strong, as it always has."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.