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Connecticut's A Tough Environment For Small Businesses

Stan Simpson

July 22, 2009

Pat Robertson's Bloomfield service and gas station on Blue Hills Avenue extension has been around for 36 yearsBut he tells you, point blank, that if he were starting the family business from scratch today, he wouldn't make it. Heck, he's barely making it now.

So, no, it's no surprise to Robertson that Connecticut has seen a record number of new businesses shut down in the first half of 2009. The nearly 7,000 closures — up 17 percent from the same time last year — reflect the largest number of shuttered state businesses in this time frame in a decade.

"If you were trying to start a small business today, you'd have almost no chance, because you don't have any existing customers," Robertson, 40, said. "The only reason I'm able to stay in business is I've got a huge client base. I don't have to spend thousands of dollars just advertising and getting new people in."

Advertising is just one of the costs that have combined to become a prohibitive drain on state entrepreneurs. They tell you that Connecticut's property taxes and excessive filing fees, plus exploding insurance costs, make the state's climate for doing business a chilly one.

The snapshot of the Nutmeg State's economy is gloomy: This is an aging state, in huge debt, whose young people can't afford to live here. Small businesses are closing in record numbers — yes, the same small businesses that the secretary of the state's office says made up 90 percent of all new Connecticut jobs in the last decade.

"The long-term impact is that we're going to get more people into the unemployment line, people who used to run these businesses and the people who used to work for these businesses," said small-business owner and advocate Jerry Long, a member of the CBIA's board of directors and past chamber of commerce leader in Hartford and Bloomfield.

"Connecticut is not a very business-friendly state when you talk about the mandates that the legislature puts on you," Long said. "And that's becoming exposed."

Like others, Long says the state has too many fees and requirements that siphon revenue.

Robertson says he's barely breaking even these days. The bulk of his money comes from servicing cars, but he estimated that he made about $2,000 in gas profits last year. However, he spent $2,500 for mandatory testing of gas pumps. And, of course, there are utilities and insurance. Liability insurance alone can range from $10,000 to well over $30,000 a year for businesses such as convenience stores.

Connecticut's business climate is spiraling at a time when national economic indicators forecast a modest break in this recession by early next year. The number of newly established state businesses is also down.

An untold reality for these small-business owners is that many go weeks without taking a paycheck.

"So, you end up working for free," Robertson said. "And once a lot of people decide they've been working for free for too long, they just close the doors. It's no fun to work for free — and that happens a lot."

Connecticut economist Fred McKinney says another compounding problem for entrepreneurs is that too many have their home equity attached to the financing of their business. As business slows and the housing market struggles, McKinney predicts there'll be a new wave of "entrepreneur foreclosures" in the housing sector.

Small businesses have long been identified as the engines that can rev up an economy. Granted, it's sputtering around the country.

But in Connecticut it's in need of an overhaul.