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Business Closings Reach Record

Greg Bordonaro

April 20, 2009

A record number of Connecticut businesses closed their doors during the first quarter of 2009, while the number of new business starts in the state reached their lowest levels in nearly a decade. total of 3,477 businesses filed paperwork to dissolve their company from Jan. 1 through March 31, a 19 percent increase from a year earlier and the most closings the state has seen during that time period since the Secretary of the State’s office began tracking the data.

Connecticut also saw 6,941 new business starts in the first quarter of 2009, a 13 percent decline from last year and the second lowest figure on record. Only the first quarter of 2001 saw fewer new business starts.

Hartford was the hardest hit city, losing 111 businesses, followed by Stamford, Greenwich and Norwalk which lost 104, 87, and 70 companies respectively, according to a Hartford Business Journal analysis of business data.

Fairfield County, which has been hit hard by the financial services meltdown, lost 805 businesses or 23 percent of all the companies that dissolved in the state during the first quarter.

“It’s the reality,” said R. Nelson “Oz” Griebel, president and CEO of the MetroHartford Alliance. “The numbers are confirming what we already know anecdotally. When you get this kind of deterioration in the economy the fallout is going to be steep.”

Coupled with the latest unemployment numbers that showed Connecticut lost nearly 14,300 jobs in February, and more than 50,000 since the start of the recession, 2009 is proving to be especially difficult for businesses.

“The first quarter may be the worst part of the recession,” said Peter Gioia, an economist with the Connecticut Business & Industry Association. “All industries have been affected.”

Among the Connecticut companies that shut down during the first quarter was Marshall Development, a small real estate development business based in Manchester.

Pamela Buckwold, who co-owned the four-year-old business with her husband Ralph, said the steep decline in demand for new homes and the rising costs of commodities forced the company to close its doors.

“It’s very risky right now,” said Buckwold, who also co-owns Tryton Solutions, an IT staffing and solutions business. “We decided this isn’t the right real estate/new construction market for us as a small business, and that we needed to close it down.”

A few years ago, Buckwold said, her company purchased land in Windsor and developed four homes on the property.

But as the housing market began to dry up, it had a difficult time selling the most recently built homes.

When the Buckwolds finally sold the last home in August, they weren’t able to turn a profit on the deal.

“The plan was to keep building,” Buckwold said. “We wanted to buy large areas of land and develop them. I feel we were very fortunate to have sold the homes when we did. To have new inventory sitting empty longer than a few months just doesn’t make good business sense.”

Gioia said all industries ranging from housing, to construction, support services, and retail have been impacted by the downturn.

“Add in the calamities of the financial services sectors and you have a perfect storm,” Gioia added.

Griebel said there is a lack of confidence among consumers who are holding onto cash.

As a result, businesses are seeing major revenue declines, which leads to job losses and failed companies.

“It’s a vicious cycle,” he said.

Griebel also said that it’s not just small businesses that are feeling the pain.

He noted that many of Greater Hartford’s larger corporations have shed jobs, including United Technologies Corp., The Hartford, and Aetna.

The large number of business closings in Fairfield County also means more bad news for the state, which is grappling with an $8.7 million budget deficit.

That’s because more than 40 percent of state income tax revenue has come from the region.

Secretary of the State Susan Bysiewicz, whose office tracks business data, said it’s not only the current recession that is negatively impacting businesses.

She said expensive health care and utility costs are also contributing to the pain.

“Health insurance costs are making it difficult to survive,” Bysiewicz said. “Some businesses are now being forced to go without that expense because it has gotten so high.”

Bysiewicz said small businesses are vulnerable to higher utility costs, often paying an average of 30 percent more because they lack purchasing power.

Despite the bleak news, there may be some hope. Gioia said Connecticut will likely see a rough second quarter, but that there could be a turnaround by the end of the year.

“People eventually start spending again,” he said. “We may well have some positive change in GDP by the end of this year.”

That is welcomed news for Buckwold, who refuses to give up on her small business aspirations.

“Once you are an entrepreneur, you are always an entrepreneur,” said Buckwold, who hasn’t ruled out getting back into the real estate business once the market steadies.

“I think until the day I die, I’ll always live that dream,” she said.

Reprinted with permission of the Hartford Business Journal. To view other stories on this topic, search the Hartford Business Journal Archives at http://www.hartfordbusiness.com/archives.php.
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