Recession Hits Small Businesses

Financial Family Tree Now Stretches Offshore

(CBS)  The "Financial Family Tree" series tracks how the recession has hurt people and small businesses from Florida -- to California, overseas to China -- and back home to New York.

We move on to the Midwest tonight, where CBS News Correspondent Dean Reynolds picks up the story.

When we met Roxanna White she was optimistic about her gift basket business in Huxley, Iowa. But 15 months after starting it she's still looking for a profit while her store is piling up with supply.

The slowdown in her business has had a negative effect on Mike McKearnan's company, 333 miles away in Glendale Heights, Illinois.

McKearnan says, "Our business is down about 25 percent from last year. All our customers are ordering smaller, being very cautious."

At Imperial Foods, McKearnan distributes all the ingredients that go into the baskets that White sells. This includes the coffee, the biscotti, the pretzels and rum cakes to name a few.

Business had expanded about 10 percent annually since 2004. But orders dried up last year. They're expecting a $300,000 to $400,000 loss in sales this year.

McKearnan's had to lay off one warehouse worker. He's cut back office hours from 40 to 30 hours a week.

He's had to hold the line on everything else. He said, "Our phone bill, our rent, bank costs. Any costs that we can try to monitor and reduce these as much as possible."

So now McKearnan is purchasing less coffee from Sandra Knight, president of the Chicago Coffee Roastery in Huntley, Illinois.

Knight says "nobody can afford to be giving out gifts like they were before."

They roast 20,000 pounds of beans every month at her 19-year-old business.

The gift basket business used to account for one out of every four sales she made.

Today, it's one out of ten.

Plans to expand to an adjacent parcel of land are on hold.

When asked if she was hiring, she said, "No, I'm not doing any hiring."

Still, she is both bullish and superstitious about the rest of the year, saying "I am very optimistic. My fingers are crossed. "

In the gift basket, the coffee's neighbor is the biscotti from Facet Foods in New York.

Eight out of every ten sales that Matthew Weinberg makes go into gift baskets.

But this year his sales have taken a big hit.

"Probably 20 to 30 percent. There's been a big drop-off," he says.

In a good year, Weinberg sells about 100-thousand packs of biscotti. Now, he'll be lucky to hit 70,000, but enough he hopes - to make it through the year.

Weinberg says, "Then after that I'm going to have to take a good look at the business and really see if it's economically viable to stay in business."

Next to the biscotti you'll find the mustard and pretzels produced by East Shore Specialty Foods of Hartland, Wisconsin.

First quarter sales were down by nearly 20 percent from a year ago, or $120,000.

That's put Jeri Mesching's 23-year-old company in something of a squeeze.

To avoid layoff, she's foregoing new manufacturing equipment.

Also in the basket is the Tortuga Rum Company's rum cake. It's the number one export of the Cayman Islands.

The cakes may be hot out of the oven, but sales are cold - down 30 percent this year.

Monique Simmonds, president of the Tortuga Rum Company, says "We are spending a lot of time putting our heads together, to see what can we do to try and increase business."

Simmonds praises the hard work of her employees, saying "We have over 100 employees and without this wonderful team we could not do it."

But the sad fact is that her team has 40 fewer people today than it did just six months ago. It's a sign of how far and wide the economic ripples can reach. It can reach a Caribbean island almost 500 miles off America's coast.

[mlgreen8753]

The best thing small business can do is cut costs where possible. Advertising is usually the first to go but it's the thing that is necessary to make sales, especially if you don't have a strong existing customer base. Instead of eliminating advertising, small business should simply find cheaper advertising alternatives. Cutting offling advertising and taking advantage of online advertising opportunities such as Adwido.com can help small businesses push through these hard business times.

[Next_PresidentoftheUSA]

What we need to do Is take the Financial Family Tree and start with the Auto Industry and work it's way down , The Auto Industry runs the USA or maybe the CBS portion will work up to the Auto Workers who knows. Just remember a few years ago when Ross Perot was running for President what would of happened to our country if he had won.Remember his speech "The giant sucking sound of your jobs going over seas" We need to run a story on "WHAT IF". what would of happened
America we need to wake up and take care of each other buy from one another American Made until we are all back to work and start with American Auto's and from there you will see the Financial Family Tree grow once again.

[Hairmakeupman1]

It's odd when you show Katie Couric with this huge smile after mentioning, "Children of the Recession". I love Katie and have been watching her since she became the CBS News anchorperson. And I still watch it even if she is off on assignment. Maybe using the smile she has on the top of the CBS Evening News website.