VOL. 119 | NO. 68 | Tuesday, April 19, 2005
By Andy Meek
Business Activity Slows in First Quarter
Business license filings hit by high fuel prices, slow
The Daily News
The symbol that best sums up new business activity in Metro
Memphis during first quarter 2005 is not the dollar sign its the question
According to the University of Michigans consumer sentiment
index, national consumer confidence dipped slightly in April. Gas prices also
reached record highs this month two economic forces among several that are
likely behind a decline in new business licenses filed in Shelby County.
Filing slowdown. Tom Kavanagh, chairman of the Memphis chapter of the Service Corps
of Retired Executives, or SCORE, said 2005 so far has seen less new business activity
than last year. And that sentiment is reflected in new business license
filings; the Shelby County Register of Deeds Office recorded 1,580 business
license filings between January and March, down from 1,700 during the same
period of 2004, according to The Daily News Online, www.memphisdailynews.com.
In Memphis alone, the number of business licenses filed in
first quarter 2005 was 1,176, down from 1,268 in the same period of 2004.
Theres not a real strong trend as to why that is, but
theres a slight trend to us just seeing fewer clients this year than we had
last year at this time, Kavanagh said.
SCORE, a 30-year-old group of retired business executives, counsels
prospective business owners. Kavanagh said at a
January seminar the group held, 68 people attended. In March, only 18 showed
January is usually a good time for us I think at years
end, people have more time to think about these things, and thats when they
start thinking about making some changes, Kavanagh
said. Well know more probably by the end of May.
Economic conditions. Kenny
Crenshaw, president of Herbi-Systems Inc., a Bartlett-based
weed and pest control company, partly blamed sluggish activity on rising oil,
fuel and fertilizer prices, even though he believes the economy is improving.
If those prices dont go down at some point, I dont know
at what point people will allow us to raise our prices and still buy lawn services,
Declines in the number of business license filings usually
reflect peoples attitudes about the local market, said Dr. John Gnuschke,
director of the Sparks Bureau of Business and Economic Research at the
University of Memphis. And two areas of Memphis that typically see high
business license filings Hickory Hill and the Knight Arnold/Perkins Road area
each saw declines in early 2005.
Ups and downs. Gnuschke
said there are several factors behind the declines the relatively low cost of
obtaining a business license and a traditionally high failure rate for small
businesses, for example.
For businesses within Memphis, an owner must purchase a
Memphis and Shelby County business tax license for $42. For a business in
Shelby County outside an incorporated municipality, the license costs $22.
The truth is that for every person who opens a small
business, therell probably be one that fails, and the failures dont show up
in the data, he said. And with a lot of small businesses, just because they
fail, that doesnt mean anything the same person will open up a same or
different business later. The cost of entry and exit is very low, and its easy
to get in and easy to get out, particularly in poorer neighborhoods.
Some small businesses may have been successful last
quarter, and theyre not going to start them up again. So what all of the data
really tells you is its very difficult to put a solid
interpretation on the information.
The numbers reflect at least some positive trends; many
retirees, for example, are trickling back into the work force and opening up
small ventures, said Robert Staub, chairman of the
Memphis Small Business Chamber of Commerce.
I personally think its always a good market for small
business, because the success of a small business does not always have to do
with the market it has to do with the individual, he said.
By location. Location
is also driving the numbers. Hickory Hill, for example, was among the top two
Metro Memphis ZIP codes for business license filings in the first quarter
even though a recent University of Memphis study found that the poverty rate
more than doubled in the area over the past decade, and families with children
living in poverty increased more than 200 percent.
Whereas it would seem logical that everyone would want to
do business in the suburbs, you dont find the business applicants going
there, Gnuschke said. Theres a difference between the location of the
applicant and their willingness to go to a different part of the city to try to
run their business.
Even so, Staub sees a positive
trend on the horizon for small business owners in Metro Memphis: Theyre becoming
a stronger, more educated force.
Entrepreneurial spirit. Gnuschke
sees another positive trend in the numbers.
One of the interesting things is that there appears to be
no absence of an entrepreneurial spirit, even in poorer neighborhoods, where
the chance of success is minimal, he said. But all of this does show that
theres a big gap between a willingness to start a business, getting the license
and actually succeeding.