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Published: Sunday, 2/1/2004

For metro Toledo firms, definition of small varies

BY HOMER BRICKEY
BLADE SENIOR BUSINESS WRITER
Linda Copti, with two clients, owns a truly small business: three full-time employees and seven part-timers. Linda Copti, with two clients, owns a truly small business: three full-time employees and seven part-timers.
LONG / BLADE Enlarge

There are more than 15,000 small businesses in metropolitan Toledo, according to the U.S. Census Bureau. But by some other federal government measures, there may be more than 30,000 small businesses in the area, counting self-employed workers and seasonal enterprises.

Such businesses range from mom-and-pop operations to what most people would consider pretty big firms.

For example, Master Chemical Corp. in Perrysburg, a maker of cutting and grinding fluids, is considered a small business by the U.S. Small Business Administration even though its annual sales are $40 million and it employs 135 in the United States and about 30 in China.

"We're a big small company," said William Sluhan, chairman.

Because of its classification as a small firm, Master Chemical is eligible for such benefits as government-backed loans, contracts, and procurement programs, but it has shunned such help.

"We've never had a problem getting local financing," Mr. Sluhan said. "My dad [the late Clyde Sluhan, founder] and I always just preferred to have as little to do with the government as we absolutely had to."

Ginni Jacobson hopes to grow her software company. Ginni Jacobson hopes to grow her software company.
SIMMONS / BLADE Enlarge

But Ginni Jacobson, president of Unique Systems Inc. in Springfield Township, knew she needed some sort of assistance when her husband, founder of the 14-year-old software supplier, died last year.

"It was a shock, and I felt I needed all the help I could get," said Mrs. Jacobson, explaining why she went to the Toledo chapter of SCORE - the Service Corps of Retired Executives - an affiliate of the Small Business Administration.

She credits the group for helping get her small business, which employs four others, refocused and back on a growth track after a dip in volume in the last two years. She estimated that the firm will have sales of

about $700,000 this year, nearly where it was in 2001. "We're doing fine now," she said.

Although the recession was hard on many of the small businesses in the area, some owners are happy to have a bit of a breather.

"I'm actually thinking of downsizing a bit," said Linda Copti, founder of Pups 'N' People Dog Training, a 20-year-old Maumee business that also has a "doggy day-care" operation. "Quality and service are important."

Ms. Copti has three full-time employees and seven part-timers. "It's paying me a decent salary but not much more than that," she noted.

There is considerable confusion over the definition of small business, said Denny Dennis, a senior researcher for NFIB Research Foundation, an arm of Washington-based National Federation of Independent Business.

The federal government likely will recognize as many as 25 million small businesses this year, he said. It might include every taxpayer who files a Schedule C or C-EZ form to claim business income and deductions on their income-tax returns.

But of those, about half represent small sideline enterprises, "such as a person who goes to a flea market a couple of afternoons and sells $500 worth of stuff," he contended.

Most of the remaining 13 million bona fide businesses are literally one-person operations solely for the benefit of the self-employed workers, he said. That leaves fewer than 6 million businesses that have employees.

But if the U.S. standards seem confusing, it's even worse around the world, Mr. Dennis said. Some countries count such factors as ownership capital and square footage, and many have a separate "micro" category for the very smallest of businesses.

The SBA has issued voluminous guidelines for determining which firms qualify as small. The ceiling for many types of farms is just $750,000 in average annual revenue.

General contractors can do as much as $28.5 million in volume and still be considered small. For manufacturers, there's no dollar limit, but rather a maximum of 500 workers for most and up to 1,500 for some specialty manufacturers.

Most retailers need to have sales of less than $6 million, but a car dealer can take in more than $24 million and still qualify as small.

About 15,000 publicly traded companies are considered small businesses by the federal government, but shouldn't be, Mr. Dennis said.

Among them are three in the Toledo area - N-Viro International Corp., Toledo-based licensor of wastewater-treatment technology, with annual sales of about $5 million; Bryan-based toymaker Ohio Art Co.; and Exchange Bancshares Inc., of Luckey (its assets of $105 million are well below the $150 million cap for small banks by the SBA's standards).

Ohio Art makes products known around the world, such as its Etch A Sketch toys and Betty Spaghetty fashion dolls, but it has fewer than 200 workers, and had sales of about $32 million last year. "We're small," said Jerry Kneipp, chief financial officer. "And yet we have a pretty good name."

Ohio Art's total market capitalization (stock price times number of outstanding shares) is less than $10 million. Several Fortune 1,000 firms in the region have market caps of more than $1 billion.

Typically, between 1,000 and 1,400 new companies are formed in the four-county metro Toledo area each year, according to the Ohio Development Department's Office of Strategic Research. That is usually, but not always, enough to replace those that fail or close for other reasons.

In the two decades between 1982 and 2001, the number of metro Toledo firms employing fewer than 100 grew by 28 percent, to nearly 16,000, according to U.S. Census data.

Loren Frendt, one of 40 SCORE advisers in Toledo, said the longer a firm is operating, the greater its chances of survival. Area bank statistics show that a business in its first year has a 65 percent chance of failing within 10 years, he said. But if a business is two years old, the chance of failure drops to 45 percent, and businesses older than three years have a 25 percent chance of failure, he explained.

A retired former owner of a chemical distributor, Mr. Frendt said SCORE's area advisers held 790 counseling sessions with business owners last year and spent 4,200 hours trying to help them succeed.

The Toledo Area Chamber of Commerce's Small Business Development Center for a nine-county northwest Ohio territory generated nearly $16 million in loans for area businesses in the last two years, a spokesman said.

If the Toledo area mirrors national SBA statistics, small businesses here could provide employment, full time or part time, to as many as 145,000 and could contribute several billion dollars to the economy annually.

Although the experts say the most common small-business problem is financing, there are others.

"What I see is that a lot of employees of small businesses are jacks of all trades," said Linda Fayerweather, a business coach and co-executive director of the Women's Entrepreneurial Network for northwest Ohio. "If you wanted to see their employee manual, they won't have one: They'll just tell you what [the practices are]."



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