Study: Phoenix small businesses see a growing economy

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(Madeline Pado/DD)

According to a survey conducted by Chase Bank and the Greater Phoenix Chamber of Commerce, small businesses in Phoenix are growing at a higher rate compared to the rest of the nation. (Madeline Pado/DD)

Short Leash Hot Dogs owners Brad and Kat Moore will open their first permanent restaurant in downtown Phoenix July 23. The husband-and-wife duo started the food truck in 2010 serving the Valley with unique gourmet hot dogs. The brick-and-mortar restaurant, Sit…Stay, is located near First and Roosevelt streets.

Moore said he feels confident in the local economy, adding he would not be taking such a big leap with his business if he did not have that confidence.

“I think it gives you a lot of confidence when you’re able to see a repeat of customers, and when you see that people are very emotionally invested in what you’re doing and what you’re trying to create,” Moore said.

Short Leash is among many local businesses in Phoenix that appear to be thriving.

Small business owners look at the Phoenix economy favorably as experts believe it is continuing to grow, according to the 2013 Chase-Greater Phoenix Chamber of Commerce Pulse of the Small Business Survey conducted by Chase Bank and the Greater Phoenix Chamber of Commerce in June. The surveyors contacted 802 small businesses throughout the country including 309 Phoenix businesses.

According to the survey, 72 percent of Phoenix small business owners expect their business’s revenue to rise and whereas only 55 percent of national small business owners said the same. And while 44 percent of the national businesses said they saw a profit in the past year, 56 percent of Phoenix small businesses said they saw an increased revenue.

When it came to employment, 38 percent of Phoenix business owners said they were able to hire more employees compared to 17 percent of national businesses and almost half of Phoenix business owners said they think they can hire more, compared to nearly a quarter of national businesses.

Lawn Gnome Publishing owner Aaron Johnson runs his bookstore with mostly volunteer workers, however after his year-and-a-half of business, he has been able to hire more employees. He also said sales have been increasing.

“I’ve been open for a year and about six months now,” Johnson said. “My first summer was really, really hard. It was really difficult and I almost called it quits after that first summer, but we made it through…Now that I am in my second summer, sales have been substantially more than they were last year.”

(Madeline Pado/DD)

Short Leash Hot Dogs will open their brick-and-motor location on July 23, joining the other small businesses on Roosevelt Street. (Madeline Pado/DD)

Greater Phoenix Economic Council Business Development Director Jaime Northam said small businesses are specifically impacted during a recession, so small business owners showing positive outlooks on the economy shows the economy may be back on track. Northam added that poor sales affect small businesses more than large business. She defined a small business as having less than 100 employees.

“Having that renewed confidence and positive outlooks from small business owners demonstrates that their businesses are stabilizing, increasing, and that they are hiring,” Northam said. “That all speaks to the confidence levels both locally and nationally, and I think when you look at those levels they’re at a five year high. And having those growth patterns in the past several months, that all goes well for our economy, and I think it will continue to get better and I think we are well on our way to recovery (from the recession).”

Northam said job growth is the first indicator of economic recovery, adding that Phoenix is ahead of the national average.

ASU’s W.P. Carey School of Business professor Lee McPheters, who was a panelist at the Pulse of the Small Business luncheon last month where the results were shared, said Phoenix’s job growth rate this year will increase approximately 2 1/2 percent, while on the national level jobs are growing by about 1 1/2 percent.

“This is still below what we would expect to see if the recovery was more normal in its pace,” McPheters said. “We would expect to see maybe 3 to 3 1/2 percent job growth at this point. We’re still not seeing that, but we’re doing better than most places and I think businesses must be aware of that.”

McPheters said one change in the local economy that may have contributed to small business owners believing the economy is strengthening is the increase of population growth.

“Arizona, and Phoenix in particular, depend on population growth,” he said. “And we had a couple of very weak years of growth, but it looks like this year’s population growth is probably going to be about 1 1/2 percent, which doesn’t sound like a lot but the national population growth is a little less than 1 percent…I would look at the rebound of population growth as the number one thing that will tell us when Phoenix is really beginning to come up to speed.”

Made Boutique owner Cindy Dach has seen a lot of growth downtown and said businesses are becoming more sustainable.

“What I think has the most influence in feeling positive about it is how many young people, especially in the past year, have just made downtown their go-to place,” she said. “As young people come downtown, that attracts more people. It used to be a deserted place with a couple of businesses struggling, and now there’s a bunch of people coming downtown to be a part of what’s happening.”

Northam said Arizona is a great place for startup companies because “there is a lot of resources and support.”

Economic Development Officer for the City Phoenix Hank Marshall said Phoenix is a positive environment for businesses.

(Alexandra Scoville/DD)

Lawn Gnome Publishing, the year-and-a-half old business, is now experiencing growth, allowing owner Aaron Johnson to hire more employees. (Alexandra Scoville/DD)

“When you can point to them being robust, that they are positive, they are experiencing revenue growth, that can really play a big role in our department in terms of attracting new business to the area, because you can say, ‘Hey listen, don’t take my word for it. Look at all these businesses doing well, and when you look at San Antonio, Texas, Albuquerque, New Mexico, San Diego and Denver, make sure you witness the same kind of positive indicators because you will see it here,’” Marshall said. “A thriving, growing business community in the greater Phoenix area is an absolute magnet for businesses who are looking to expand from another region, or another place around the world.”

Additionally, Northam said businesses are relocating specifically from California because of the struggling business market there.

According to the Community and Economic Development Department, for every $100 that is spent at a local business $73 stays in Phoenix that contributes to economic growth for the city.

“I think it’s a very business friendly state, and there’s been some legislation in the past two-of-three years by the Arizona Legislature to try to cut business taxes, to try to help out especially small businesses, try to keep the regulation to a minimum, and to keep taxation as reasonable as possible,” McPheters said.

“Sometimes people will be critical of Phoenix and say that it’s not a corporate headquarters town,” McPheters said. “And we do have some corporate headquarters here, but it’s not like a Dallas or some other metropolitan area that has even more corporate headquarters, but what we are is very much a small business oriented, growth oriented, community.”

Marshall had a similar comment as McPheters on how the state is a good environment for business and added that there has been an “emergence of a can-do spirit” making Arizona inclusive, open and easy to do business in.

“What Phoenix ultimately wants to do is to either facilitate or steward the growth of the economic vitality of the region for a number of reasons,” Marshall said. “One, you want to 100,000 plus businesses that are already here to thrive. They need to grow because when they don’t it impacts everybody, house values, tax revenue, it doesn’t work. Small and medium enterprises is the component that makes this economy.”

One issue the 2013 Chase-Greater Phoenix Chamber of Commerce Pulse of the Small Business Survey revealed was that 71 percent of the Phoenix small business owners said they had difficulty in finding qualified employees for their businesses, yet the unemployment rate in Arizona is higher than the national average, said McPheters.

“It’s kind of a puzzle,” McPheters said. “With so many people unemployed why can’t we find the right people? I don’t know the answer, but it’s something that ought to be looked at because it would seem to me that one possibility would be that business owners haven’t adjusted to the fact that they may have to pay higher wages to really get workers that they want.”

McPheters noted that some employers may think they don’t need to pay their employees top-dollar wages because the unemployment rate is so high, but he said he believes all qualified employees deserve to be paid high wages.

As revenue increases more jobs are created, Northam said.

“When small businesses have more revenue they are able to invest more into their company,” she said adding that investing may have been something business owners have been scared to do in previous years because of the recession.

“In this area where I’m at on Fifth Street and Roosevelt, there’s a lot of more small businesses opening, which I’m sure contributes to more traffic in general, but also that the economy must be getting better to the point that people aren’t afraid to spend a little money to open a business,” Johnson said.

Correction: July 16, 2013

A previous version of this article incorrectly spelled Jaime Northam’s name.

Contact the reporter at alejandra.armstrong@asu.edu