For Small Business, the Big Decision Is HiringBy
Hiring dominates the conversation these days at the weekly meeting Jay Steinfeld holds in his office with his senior team at Blinds.com. Despite an anemic economy, business at the 110-employee Houston e-tailer is brisk. Revenues are expected to hit $80 million by yearend, up 63 percent from 2009, helped in part by the recent acquisition of a rival's assets. Steinfeld, 56, who says his company sells more window blinds online than Home Depot and Lowes combined, has added 35 new employees since the start of the year. Nevertheless, he finds himself agonizing "almost every day" over whether to hire 10 additional staffers for the company's in-house call center.
Blinds.com's caution is shared by small employers across the country. Though recent surveys show an uptick in confidence among small business owners, that hasn't translated into an upswing in hiring. The national jobless rate remains lodged above 9 percent, and only about 500,000 private-sector jobs have been created in the first five months of the year. The slow pace of the recovery hasn't stopped President Barack Obama from continuing to trumpet the notion that small businesses such as Blinds.com are going to "be the engine of job growth." Over the past week, Obama has stepped up pressure on Congress to pass legislation he's been pushing for months meant to spark hiring by small employers. On June 15, the House approved the Small Business Jobs Tax Relief Act, which would provide tax breaks for small businesses to encourage them to create jobs. Separate legislation being considered in the House would create a $30 billion fund to increase community bank lending to small businesses.
On a June morning in Steinfeld's office, government initiatives weren't top of mind. Steinfeld says his business is profitable and has "plenty of cash," so he can afford to take on new staff. Yet he's worried about the state of the housing market, crucial for any home furnishings retailer. "Even if it does turn around," he says, "it's going to take a while to build those houses. And everyone we've spoken to in the industry does not believe it's going to come back to where it used to be—maybe ever."
That makes it hard for Steinfeld to figure out how many new call-center employees, who earn between $30,000 and $70,000, to hire. To help him decide, the Blinds.com chief brought in a consultant to work with Chief Financial Officer Marilynne Franks and Chief Operating Officer Steve Riddell. "In a small business like ours, managing payroll costs is crucial," says Riddell. Steinfeld interjects: "And that which we have the most control of. Morale would be horrible if we hired, then turned around and terminated. Then we're back to where a lot of other companies are."
While selling blinds online might not sound like a complicated business, the trick to making it work is finding and training call-center reps who can explain the intricacies of thousands of varieties of blinds to customers—and fix problems when something goes wrong. Adding to the complexity: In addition to selling blinds under its own name, Blinds.com also handles online sales of window coverings for Sears.com and 11 other retailers and sites. "We've never looked at outsourcing the 70-person call center, even though it would have provided significant cost savings," says Chief Marketing Officer Daniel Cotlar. "This isn't selling CDs."
Steinfeld is taking into consideration some of the Obama Administration's incentives to hire. "One of the things that's really helped us is the accelerated depreciation for taxes in Section 179 [of the tax code]," he says. The Hiring Incentives to Restore Employment Act's tax credit for hiring unemployed workers, which took effect in March, will pay off, too. CFO Franks figures the company will be eligible for tax credits for 8 or 10 of the 35 employees it has brought in since the beginning of the year. "We've got to make sure what we do is measured," he says. "We'll take chances here and there, but we're not going to bet the farm." As Bloomberg Businessweek went to press, Steinfeld had not yet made a decision.
The bottom line: For small companies, the decision to hire is particularly difficult right now. Government incentives help, though only a little.