Entrepreneurs being squeezed on all sides

New York City's small-business owners are the most troubled entrepreneurs in America.

Across the US, small-business owners have emerged financially stronger from the Great Recession, but not their Empire State counterparts, many of whom are drowning in red ink. Almost 30 percent say their enterprise is a "sinking ship."

"One of our biggest challenges is attracting employees to stay in the city," says Rachel Thebault, owner of specialty bakery Tribeca Treats.

"We've had people who've moved to less expensive cities because they just can't afford to live here."

These entrepreneurs are reaching for the life jackets, saying their businesses are "in jeopardy," according to a new American Express small-business report.

Sixty-four percent of New York's small-business owners have cash-flow concerns, up from 51 percent a year ago. That compares with 17 percent in the Northeast and 13 percent for the US overall.

After opening her popular downtown bakery on Reade Street in 2007, Thebault saw revenues grow between 25 and 30 percent annually. It has since slowed to a more modest 5 percent for her 12,000 square-foot bakery, which employs 10.

"We're struggling with whether to increase our prices, because we haven't done so in seven years on a lot of products, and our costs are going up a lot," said Thebault, 38, a former investment banker at Bank of America and a mother of three daughters who is married to a financial-services employee. "We have personal, face-to-face contact with customers, so it might be difficult but still necessary," Thebault added.

Shrinking margins and profits, skyrocketing rents and labor shortages — coupled with operating costs, utilities and meddlesome regulation — are blamed by analysts for the difficulties of Gotham's small-business owners.

A new KPMG survey of US metro areas ranks New York and San Francisco as the most expensive large US cities to do business in.

"Business owners everywhere feel the pinch with the high costs they pay for goods and services — and not being able to raise prices to keep up," Alice Bredin, small business adviser to American Express, said. "In New York, these expensive business items are even more expensive."

The overwhelming evidence does not bode well for the local economy — and an unemployment rate of 8 percent in NYC, 6.9 percent for the state, compared with the nation's 6.3 percent, rubs salt in the wounds. Small-business owners, employing more than half of New York's nonfarm private-sector workers, are worried.

Thebault's three biggest costs are energy, rent and labor. Energy prices are "ridiculous and unpredictable"; rent is a factor of New York City's red-hot real estate market; and while she prides herself on compensating staff fairly, it's hard to compete with other cities.

New York consumers know the feeling — they regularly shop across state lines in New Jersey and other states. "Go through the Holland Tunnel, and you will find an A&P, Newport Mall, Home Depot, Best Buy. The parking is free and ample," said New York City resident Andrew Feinman, complaining about New York City's notorious "hidden delivery taxes."

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