Tuesday, April 19, 2005, Vol. 119, No. 68

By Andy Meek

Business Activity Slows in First Quarter

Business license filings hit by high fuel prices, slow spending


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 mark.

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 up.

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, he said.

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.