[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
FULL COMMITTEE HEARING ON
HEROES OF SMALL BUSINESS
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
MAY 26, 2010
__________
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
Small Business Committee Document Number 111-070
Available via the GPO Website: http://www.access.gpo.gov/congress/house
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
DENNIS MOORE, Kansas
HEATH SHULER, North Carolina
KATHY DAHLKEMPER, Pennsylvania
KURT SCHRADER, Oregon
ANN KIRKPATRICK, Arizona
GLENN NYE, Virginia
MARK CRITZ, Pennsylvania
MICHAEL MICHAUD, Maine
MELISSA BEAN, Illinois
DAN LIPINSKI, Illinois
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
BRAD ELLSWORTH, Indiana
JOE SESTAK, Pennsylvania
BOBBY BRIGHT, Alabama
DEBORAH HALVORSON, Illinois
SAM GRAVES, Missouri, Ranking Member
ROSCOE G. BARTLETT, Maryland
W. TODD AKIN, Missouri
STEVE KING, Iowa
LYNN A. WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
BLAINE LUETKEMEYER, Missouri
AARON SCHOCK, Illinois
GLENN THOMPSON, Pennsylvania
MIKE COFFMAN, Colorado
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Karen Haas, Minority Staff Director
.........................................................
(ii)
STANDING SUBCOMMITTEES
______
Subcommittee on Contracting and Technology
GLENN NYE, Virginia, Chairman
YVETTE CLARKE, New York AARON SCHOCK, Illinois, Ranking
BRAD ELLSWORTH, Indiana ROSCOE BARTLETT, Maryland
KURT SCHRADER, Oregon W. TODD AKIN, Missouri
DEBORAH HALVORSON, Illinois MARY FALLIN, Oklahoma
MELISSA BEAN, Illinois GLENN THOMPSON, Pennsylvania
JOE SESTAK, Pennsylvania
MARK CRITZ, Pennsylvania
______
Subcommittee on Finance and Tax
KURT SCHRADER, Oregon, Chairman
DENNIS MOORE, Kansas VERN BUCHANAN, Florida, Ranking
ANN KIRKPATRICK, Arizona STEVE KING, Iowa
MELISSA BEAN, Illinois W. TODD AKIN, Missouri
JOE SESTAK, Pennsylvania BLAINE LUETKEMEYER, Missouri
DEBORAH HALVORSON, Illinois MIKE COFFMAN, Colorado
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine
______
Subcommittee on Investigations and Oversight
JASON ALTMIRE, Pennsylvania, Chairman
HEATH SHULER, North Carolina MARY FALLIN, Oklahoma, Ranking
BRAD ELLSWORTH, Indiana LOUIE GOHMERT, Texas
(iii)
?
Subcommittee on Regulations and Healthcare
KATHY DAHLKEMPER, Pennsylvania, Chairwoman
DAN LIPINSKI, Illinois LYNN WESTMORELAND, Georgia,
MELISSA BEAN, Illinois Ranking
JASON ALTMIRE, Pennsylvania STEVE KING, Iowa
JOE SESTAK, Pennsylvania VERN BUCHANAN, Florida
BOBBY BRIGHT, Alabama GLENN THOMPSON, Pennsylvania
MARK CRITZ, Pennsylvania MIKE COFFMAN, Colorado
______
Subcommittee on Rural Development, Entrepreneurship and Trade
HEATH SHULER, North Carolina, Chairman
MICHAEL MICHAUD, Maine BLAINE LUETKEMEYER, Missouri,
BOBBY BRIGHT, Alabama Ranking
KATHY DAHLKEMPER, Pennsylvania STEVE KING, Iowa
ANN KIRKPATRICK, Arizona AARON SCHOCK, Illinois
YVETTE CLARKE, New York GLENN THOMPSON, Pennsylvania
(iv)
?
C O N T E N T S
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OPENING STATEMENTS
Page
Velazquez, Hon. Nydia M.......................................... 1
Luetkemeyer, Hon. Blaine......................................... 2
WITNESSES
Dippold, Mr. John, Co-Owner, Innovative Sintered Metals, Inc.,
St. Mary's, PA................................................. 4
Nelson, Ms. Michelle, President/CEO, Blue Strategy and Creative
Intl, LLC, Sarasota, FL........................................ 5
Gay, Mr. Will, Diamond Brand, Fletcher, NC....................... 7
Norman, Mr. Time, President, STL Technology Partners.
Bloomington, IL................................................ 10
Eiffert, Mr. Brad, Owner and Manager, Boone County Lumber
Company, Columbia, MO.......................................... 13
Kuknyo, Mr. Chris, Owner, Patriot disposal, Prescott Valley, AZ.. 29
Hach, Mr. Robert II, President, Anemometry Specialists, Inc.,
Alta, IA....................................................... 32
Martin, Ms. Wendy, Corporate Officer, Martin Publishing Company,
Havana, IL..................................................... 34
Martinez, Ms. Maria E., Naturally Green Products LLC, Orlando, FL 36
Biddulph-Krentar, Mr. Brian, President, HIT Consulting Solutions,
Inc. & HIT Application Solutions LLC, Exton PA................. 39
Wallace, Mr. Daniel, Wallace and Pancher, Inc., Hermitage, PA.... 48
Greenley, Mr. Brian, President, Greenley Enterprises Corporation
DBA Maaco Collision Repair and Auto Painting, Littleton, CO.... 50
Kottke, Ms. Cindy, President, C You at the Movies, INC. McHenry,
IL............................................................. 52
Flynn, Mr. Dan, CEO, Accipter Systems, Wexford PA................ 54
Bailes, Mr. Lea, Chief Executive Officer, Guier Fence Company and
Guier Franchising Concepts, LLC, Blue Springs, MO.............. 56
(v)
?
APPENDIX
Prepared Statements:
Dippold, Mr. John, Co-Owner, Innovative Sintered Metals, Inc.,
St. Mary's, PA................................................. 67
Nelson, Ms. Michelle, President/CEO, Blue Strategy and Creative
Intl, LLC, Sarasota, FL........................................ 72
Gay, Mr. Will, Diamond Brand, Fletcher, NC....................... 75
Norman, Mr. Time, President, STL Technology Partners.
Bloomington, IL................................................ 81
Eiffert, Mr. Brad, Owner and Manager, Boone County Lumber
Company, Columbia, MO.......................................... 83
Kuknyo, Mr. Chris, Owner, Patriot disposal, Prescott Valley, AZ.. 85
Hach, Mr. Robert II, President, Anemometry Specialists, Inc.,
Alta, IA....................................................... 83
Martin, Ms. Wendy, Corporate Officer, Martin Publishing Company,
Havana, IL..................................................... 91
Martinez, Ms. Maria E., Naturally Green Products LLC, Orlando, FL 92
Biddulph-Krentar, Mr. Brian, President, HIT Consulting Solutions,
Inc. & HIT Application Solutions LLC, Exton PA................. 96
Wallace, Mr. Daniel, Wallace and Pancher, Inc., Hermitage, PA.... 98
Greenley, Mr. Brian, President, Greenley Enterprises Corporation
DBA Maaco Collision Repair and Auto Painting, Littleton, CO.... 103
Kottke, Ms. Cindy, President, C You at the Movies, INC. McHenry,
IL............................................................. 107
Flynn, Mr. Dan, CEO, Accipter Systems, Wexford PA................ 110
Bailes, Mr. Lea, Chief Executive Officer, Guier Fence Company and
Guier Franchising Concepts, LLC, Blue Springs, MO.............. 111
Luetkemeyer, Hon. Blaine......................................... 115
Heckman, Mr. Kurt, President, Sycamore.US, Inc., Frederick, MD... 117
Tamny, Mr. David, Owner, Professional Property Inspection
Consultants, Columbus, OH...................................... 119
(vi)
FULL COMMITTEE HEARING ON
HEROES OF SMALL BUSINESS
----------
Wednesday, May 26, 2010
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in Room
2360 Rayburn House Office Building, Hon. Nydia Vel zquez
[chairwoman of the Committee] presiding.
Present: Representatives Vel zquez, Shuler, Dahlkemper,
Kirkpatrick, Critz, Bean, Altmire, Sestak, Halvorson, King,
Buchanan, Luetkemeyer, Schock, Thompson and Coffman.
Chairwoman Velazquez. The Committee will come to order.
Today we observe National Small Business Week, a salute to
the hardworking entrepreneurs that make our nation great.
In large cities, small towns, and everywhere in between,
small business owners serve as the backbone of our economy.
Most Americans get their first job at a small business, and
studies consistently show that these firms create the most new
jobs. Equally important, they generate jobs here in the United
States that will not be exported later.
Today our economy is showing encouraging signs of recovery.
Last month we saw 290,000 new jobs, the largest increase in
four years. To sustain that momentum, we are going to need
further growth in the small business sector. Running a small
business is never easy. It means working long hours and
sacrificing time away from friends and family. Often
entrepreneurs have to risk personal income to get their
enterprise off the ground.
Entrepreneurship means going against the grain, taking a
chance, and building something new. When entrepreneurs do well,
our country, as a whole, prospers. During the downturn of the
mid-1990s, small businesses created 3.8 million new jobs. As we
work our way out of this recession, we are going to need that
job-creating power. In addition to generating jobs, small
businesses are our best innovators, developing new products and
pioneering high-tech fields like green energy and biomedicine.
But beyond simply providing the fuel that makes the economy
go, main street businesses are the anchors of our local
communities. Whether it is contributing to the local church,
sponsoring a Little League team, or raising money for
charitable causes, small businesses may our neighborhood
stronger and better.
We have before us today companies engaged in everything
from publishing to lumber to developing next-generation data
systems for the Defense Department. You have all come from
every corner of the nation to be with us today, and thank you
for being here.
You may be in different industries and represent diverse
parts of the country, but there is no denying that your
ingenuity and hard work are common bonds that unite all
entrepreneurs. These characteristics are part of our national
fabric. Indeed, they are part of the American story.
Today we are looking forward to hearing your personal
stories, as well as your perspective on what it means to be an
entrepreneur. As Americans look beyond the current recession
and toward a stronger, brighter future, they are increasingly
looking to small firms for answers, men and women like all of
you.
So, again, thank you for being here to offer us your
insight.
With that, I yield to Ranking Member, Mr. Luetkemeyer, for
an opening statement.
Mr. Luetkemeyer. Thank you, Madam Chairwoman, and thank you
for calling this hearing to honor entrepreneurs during Small
Business Week.
A special thanks to our witnesses who have traveled from
all over the country and taken time from their businesses to be
with us today.
It is no secret that small businesses are our nation's
economic powerhouse. Small businesses excel at innovation,
creativity, and filling a needed niche in the marketplace. As
our economy fights to stabilize and recover, we are counting on
small companies to put our country back on the path to
prosperity.
However, the economic climate remains uncertain. Many small
businesses are struggling. Last week the Labor Department
announced that new claims for unemployment benefits rose
despite previous predictions to the contrary. The weak economy
is putting pressure on prices, and sales are lackluster.
According to the National Federation of Independent
Business, more small businesses plan to eliminate jobs than
create them over the next three months. At the same time, a
flood of mandates, regulations, and additional taxes threaten
small businesses' ability to grow or even survive.
The new health care law, proposed climate change
legislation, stricter environmental regulations, and a
ballooning deficit are all economic roadblocks. These obstacles
make it increasingly difficult for small businesses to help
turn our economy around.
We need to get government out of the way and allow small
businesses to flourish. Congress should end job-killing taxes,
reduce regulatory barriers, and pass the three pending free
trade agreements to help increase small business exports. Each
of these steps would help create jobs and reinvigorate the
economy.
Madam Chairwoman, thank you for calling this hearing. I
look forward to hearing from this impressive group of witnesses
about how they have overcome the difficult economy and become
models for success.
Thank you. I yield back.
Mr. Luetkemeyer. Now the chair recognizes Mr. Thompson for
the purpose of introducing our first witness.
Mr. Thompson. Thank you, Madam Chair, Ranking Member. It is
my distinct honor to present to the Committee Mr. John Dippold,
President and Co-Owner of Innovative Sintered Metals,
Incorporated, located in Pennsylvania's 5th congressional
district, in St. Mary's, Elk County, Pennsylvania.
The powdered metals industry, for those unfamiliar,
involves the production of a hard solid metal starting from
powder. A much wider range of production can be attained from
powder processes and direct alloying of fused materials.
Powdered metal products are utilized by a variety--a wide array
of industries, from automotive and aerospace applications to
power tools and household appliances.
Innovative Sintered Metals is a diversified organization
serving the commercial construction, pump, automotive,
appliance, and lock industries. Mr. Dippold began with
Innovative Sintered Metals in 2003 as the Vice President of
Marketing and Sales, where he was able to assist with the
company's growth from $1.1 million in sales to over $4 million
in sales in 2009.
Mr. Dippold holds a bachelor's degree in business
administration from the University of Pennsylvania-Indiana, is
a member of several professional business and volunteer
organizations, including, but not limited to, the Metal Powder
Industry Federation, the American Powdered Metal International,
and the Boy Scouts of America.
As a member of Congress, I am honored to have the privilege
to represent the hardworking and innovative people of
northwestern and central Pennsylvania. Mr. Dippold is a true
testament to the resourcefulness that is so prevalent in the
5th congressional district, and I want to welcome Mr. Dippold
to the Small Business Committee and look forward to his
testimony today.
Chairwoman Velazquez. And the chair now recognizes Mr.
Buchanan.
Mr. Buchanan. Thank you, Madam Chair. I would like to
welcome Michelle Nelson, a small business owner from Sarasota,
Florida, with 15 years of experience. I was talking to her a
little earlier, and her and her husband, like many, have come
from, as I did, Michigan, settle in our district. They are from
Chicago.
Michelle Nelson is the CEO of Blue Strategy + Creative
International and many other companies. Her companies are
headquartered in my home district of Sarasota, Florida.
Michelle has served on the Board of Directors and been Chairman
of the Small Business Council for the Greater Sarasota Chamber.
She is the recipient of countless local small business awards,
including the 2004 Excellence in Industry Award.
We were talking a few minutes earlier, and she was
telling--we were talking about this tough economy all over the
country, but in our area we have had a great run for a lot of
years, but it has been tough the last couple of years. It has
been just their hard work and vision that kept them going and
continue to build their business every day.
Michelle is a passionate business owner with a tremendous
vision. I am proud to have her as a witness with us today.
Chairwoman Velazquez. Mr. Dippold and Ms. Nelson, you both
will have five minutes to make your remarks. Go ahead.
STATEMENT OF JOHN DIPPOLD
Mr. Dippold. Madam Chair and Ranking Member Luetkemeyer,
thank you, and members of the Committee. My name is John
Dippold, and I am the President and Co-Owner of Innovative
Sintered Metals.
Powder metallurgy is a very interesting industry. It begins
with metal powders, which are produced from recycled metal
scrap, pressed at high pressures into a variety of shapes.
These parts are then sintered in continuous furnaces just below
their melting point. Our technology facilitates the manufacture
of high strength, complex shapes, which are impractical or
impossible with other metal-working processes.
Our company sales this year will be $4-1/2 million, an
increase almost 100 percent over last year. Our workforce has
doubled since 2004 when we took over the business.
I certainly appreciate the opportunity to testify about the
state of small business in America, particularly as it relates
to manufacturing, which has been, and continues to be, a huge
part of the economy throughout Pennsylvania's 5th district.
I am certainly not a hero in any sense of the word. I am
reacting to very real and powerful forces throughout our
economy. Twenty years ago, at the local level, my industry was
dominated by several large family-owned operations. Many have
since been acquired by multi-national corporations seeking
efficiency and economies of scale.
To be frank, this has been a very painful process for many
in the region. But in crises there are always opportunities. I
am just one of many entrepreneurs in the industry that saw a
niche for nimbler firms that could react quickly in the global
marketplace. Today that niche is growing. Once dominated by a
few firms employing 500, 800, or 1,000 workers, we are now
seeing companies that employ 10, 20, and 50.
Again, this has not been an easy transition, but I see real
optimism for American manufacturing. People often ask, ``How
long is American manufacturing going to be a superpower?'' My
answer is, ``It depends on tax structures, wage disparities,
health care reform, and regulatory hurdles.''
Don't believe everything you read, though. When my partner
and I purchased the business in 2004, the company did very
little work for the auto industry. We had 10 employees, and the
company was in the red financially. Since we had a lot of
experience in this field, automotive became a big part of our
business, growing to 40 percent.
So why didn't we collapse when the auto industry tanked?
The answer has a lot to do with our size, the way we approached
the marketplace, and our steady growth. Rather than scale, our
competitive advantage is service. My partner, an engineer by
trade, works with clients on a personal basis. There is no
administrative people between he and our customers. Customers
are working right with the key people and decision-makers in
our business.
We have a small operation with tight margins. Every account
is vitally important. I can tell you from experience, 20 years
ago major automotive suppliers would have serious reservations
working with a company our size. But today people are operating
leaner and looking for the best service and the best value.
We change with the demands in the marketplace. Powerful
component design software and our focus on niche marketing has
given us a real advantage. In some lucrative market segments,
such as stainless steel, very few players have installed
stainless technology, and it allows us to actually charge a
premium for those services.
With that, American manufacturing is changing, and small
businesses have a increasing important role in its future. I
thank the Committee for all it does to make it possible for
companies like Innovative Sintered Metals not only to survive
in hard times but to thrive in hard times.
With that, I would be happy to answer any questions that
you may have.
[The prepared statement of Mr. Dippold is included in the
appendix.]
Chairwoman Velazquez. Thank you. Very impressive.
Ms. Nelson.
STATEMENT OF MICHELLE NELSON
Ms. Nelson. Madam Chairwoman, Ranking Member, Congressman
Buchanan, thank you for inviting me here today. My name is
Michelle Nelson. I am the CEO of Blue Strategy + Creative
International, located in Sarasota, Florida. I am also the
owner of Anexio, a technology and managed service provider also
located in Sarasota, Florida.
I own and run these companies with my husband, Jeffrey
Nelson. Our companies are B2B, serving the Gulf Coast as well
as globally.
I would like to thank the Greater Sarasota Chamber of
Commerce for getting me here. They play a powerful role in
supporting small business in Sarasota County.
Your request was to testify with regards to how we have
been successful despite the tough economic times. Our nation's
economic crisis brought significant obstacles for small
businesses, for our small businesses--decreased consumer
confidence, long-term clients closing their doors, increased
costs of goods, staffing concerns, and, of course, our number
one obstacle was credit.
As savvy business owners, we built strong credit,
maintaining the strength and financial agility for our company.
In good economic times, we planned for cyclical down times of
the economy. We had seen it before, and in a booming economy we
knew that it would shift. What we did not anticipate was that
the banks would take back our credit lines and double our
interest rates.
As we watched our nation bail out our financial
institutions, these same institutions turned their backs on us.
What did we do? We rolled up our sleeves and we worked harder.
Fueled by the insanity of the credit crisis and committed to
survival, we pioneered new ways to do business.
It was obvious that, if we were to make it through, we had
to take complete responsibility for the survival of our
companies and take immediate action. We pleaded with our banks
and vendors to keep our credit lines open and negotiated
interest rates. We never received any financial assistance or
tolerance from our bank, despite our strong financial history.
Instead, our vendors and other private banks--or other
private industries were the most generous, maintaining and in
some cases extending our credit lines. We extended credit to
our clients, so their businesses could continue to thrive. We
shouldered the burden of our clients' financial limitations by
allowing them to make payments over long periods. We, in
essence, became a bank funding the commerce that we desperately
needed.
We did not look for government assistance or SBA loans. Our
experience with these programs showed that they can be costly.
The time and investment needed make it through--make it through
the bureaucracy can be sometimes devastating for a small
company. So we developed new programs and services to keep our
global business communities moving.
One of those programs, our technology support company
created our own T.A.R.P. program, Technology Assistance Relief
Program, for small business. We understood that leveraging
proper technology was critical to our clients' survival. So we
provided technology support through managed services at fees
that our clients could afford.
Our marketing agency created small business marketing
assistance. History tells us that marketing in a down economy
brings great financial gains to the economy--or brings great
financial gains when the economy returns. We knew that
businesses needed to be clearer and more direct with delivering
their message to their consumer. So we provided marketing
products and services with extended payment plans and empowered
our clients with market-ready products.
We created these programs by retooling our product lines.
We met with each of our clients to understand what they could
pay, and we created services to fit those budgets. We had less
revenue, we had less profit, and we had a huge risk. We also
had new businesses joining us and new revenue streams.
We were sustaining, growing our client base, while watching
our clients succeed as well. Over 75 percent of the businesses
in our community that joined our programs are still in business
today, and are still using our programs.
In closing, we are surviving in this economy because we are
pioneers, and, quite honestly, because the calculated risks we
took are paying off. I can tell you that my businesses are the
fortunate ones. A number of our brethren in the small business
community, our relatives and professional cohorts, are not so
lucky, most of them devastated by the condition of our nation,
largely due to the credit crisis and the billions of dollars
that never reached the small business community.
We need Congress to identify and implement small business
relief programs that are direct to the pioneers of our great
economic stimulus engine--small business. No trickle-down,
start with the small businesses, those opportunities already
exist.
I implore Congress to bring the fortitude of the pioneer
back to our country. You can do that by directly financing,
financially assisting the pioneers and the innovators of small
business--those who are willing to do whatever it takes to keep
their vision alive, those who are willing to risk everything to
create enterprise.
It is the embodiment of our forefathers for this nation. I
learned these ideals from my parents, my father a craftsman and
stair builder in New England. Further generations have the
opportunity to learn these ideals as well, to experience what
it truly takes to succeed--hard work and the determination to
create something with permanence.
Thank you for the opportunity to testify. I will be happy
to take any questions.
[The prepared statement of Ms. Nelson is included in the
appendix.]
Chairwoman Velazquez. Thank you, Ms. Nelson.
Before the chair recognizes Mr. Shuler, I would like to
introduce and present to the members of the Committee our
newest member, Mr. Mark Critz. Welcome.
And he has been appointed to the Small Business Committee
this week. Congressman Critz represents the 12th district of
Pennsylvania in Congress. He comes to the Committee having
worked a number of years for small businesses. Congressman
Critz also brings his expertise on economic development issues,
so he will be a great addition to this Committee.
He spent the past 12 years focusing on those matters for
the Pennsylvanians he now represents. Congressman Critz has
received the Patrick Henry Award from the National Guard, which
is the highest honor given to a civilian by the National Guard.
Welcome to the Committee.
Mr. Critz. Thank you very much.
Chairwoman Velazquez. And now the chair recognizes Mr.
Shuler.
Mr. Shuler. Madam Chair, thank you so much for holding this
very important hearing today and listening to our small
business owners throughout most of our districts.
Today it is an honor for me to introduce one of our great
employers of the 11th district, who is not only able to
participate in developing great technologies for the sporting
industry such as, sports gear, and outdoor gear, but also be
able to manufacture tents, for our military and for our Boy
Scouts. It is impressive to go through their facility to see
their technology and the way they are able to gain market
share.
Will Gay and his entire staff has done an incredible job of
maintaining market share, but also being innovative through
their technology and the ways they have conducted their
business. In tough times, they have been able to cut back in
areas, look at their overall business portfolio, and understand
how they can be a true competitor in this industry.
And so, Madam Chair, without further ado, I would like to
welcome Mr. Will Gay to the Committee.
STATEMENT OF WILL GAY
Mr. Gay. Thank you. Madam Chairwoman, Ranking Member
Luetkemeyer, and members of the Committee, Congressman Shuler,
thank you for the opportunity to testify before you today. It
is truly a great honor to me and my company.
My name is Will Gay. I live in Asheville, North Carolina. I
am the Chief Executive Officer of Diamond Brand Canvas Products
and Diamond Brand Outdoors. Diamond Brand was originally
established in Philadelphia in 1881. We have been involved in
the sewn products industry since 1920 when we first began to
manufacture tarpaulins and other heavy canvas items. We are the
oldest, continuously operating sewn product manufacturer in the
country.
In 1931, Diamond Brand manufactured the very first backpack
for the Boy Scouts. Throughout the years, we have manufactured
outdoor equipment for other well-known organizations and
companies, including the Girl Scouts, L.L. Bean, and Eddie
Bauer.
A little over 45 years ago, our foray into the outdoor
retail market began in a small garage connected to our
manufacturing facility, and it has now grown to three stores
with more than 40,000 square feet of retail floor space. We are
currently exploring expansion opportunities, both within and
outside the current local markets that we serve.
Diamond Brand has received many local and national awards,
including Best Outdoor Outfitter in western North Carolina for
the past six years in a row; the DLA Top Supplier Award,
presented by the United States Department of Defense; and the
Export Achievement Award, presented by the United States
Commerce Department.
Asheville is nestled in the beautiful Blue Ridge Mountains
of western North Carolina, an area with countless resources for
being outdoors. We conduct regular in-store educational
programs that are free to our community, to help them begin
their own outdoor pursuits. Our employees contribute hundreds
of volunteer hours annually to trail maintenance and river
cleanup initiatives. We are also active members on many of the
local environmental organizations.
Diamond Brand prides itself on its mission of being an
outwardly community-focused organization. We give back more
than $100,000 per year to organizations that share our values
and beliefs. We have partnered with the YMCA of western North
Carolina at the highest level of financial support in its
Strong Kids Campaign, an initiative focused on activity and
exercise for kids.
We also provide in-kind gifts and services and further
support at summer camp initiatives for underprivileged children
in our area. During World War II, Diamond Brand manufactured
products for over 144 different government contracts to support
the United States war effort. During the past 25 years, we have
refocused our efforts to manufacture many products for the
Department of Defense and have made government contracting a
significant part of our area of expertise.
Diamond Brand currently holds two multi-year contracts to
produce the soldier crew tent for the United States Army and
the two-man combat tent currently being fielded by the United
States Marine Corps, Army, and Air Force. This tent has also
gained favor and recognition with several allied foreign
militaries and is being evaluated for a number of large
contract tenders overseas.
Diamond Brand is currently involved in several technology
development initiatives for new tents and shelters for the
United States Special Forces, the Marine Corps, and the Army.
Diamond Brand is also manufacturing a platform of proprietary
anti-corrosion operational weapons and shipping covers for most
of the Department of Defense's rotary winged aircraft
platforms, as well as the MRAP, Mine-Resistant Vehicles, and
the Patriot Missile Systems that are deployed worldwide.
Over the last decade, our regional economy in western North
Carolina has suffered greatly from the loss of manufacturing
jobs. Diamond Brand currently employs more than 140 people in
our manufacturing and retail business platforms. We are
fortunate that through our planning efforts and growth
initiatives Diamond Brand has continued to aggressively hire
and provide jobs and benefits for our employees.
Our employees come from many diverse backgrounds and
nationalities and cultures, with each one making a unique
contribution on our business. As a small business, we know our
employees, and we know that without their talent and dedication
we would not be standing here before you to talk about the
success we have enjoyed.
I would like to tell you about a few of these special
people whose contributions have made Diamond Brand what it is
today. Wanda Hensley is 61 years old and has worked at Diamond
Brand in our Boy Scout of America and military tent line for 14
years. Both her husband and son are currently laid off from
other manufacturers in our area, so this job is crucial to the
well being of her family.
She takes advantage of our benefits package and 401(k),
because her husband, who worked for his former employer for 24
years, lost all of his benefits that the company had committed
to provide before they closed their doors.
Marcus Wick is 29 years old and recently married with a
young child. He graduated from Cal State with a degree in
geography but has not been able to find a job in his field of
interest. His last employer laid him off during the economic
downturn. And although he had no experience in industrial
sewing, Diamond Brand was the only company hiring, so he
accepted our job offer. And today he is one of our top-
producing employees.
In conclusion, I would like to thank you for the
opportunity to testify before this Committee today. I continue
to ask each of you to be mindful that our ability to operate as
a successful small business, remaining financially viable and
nimble to respond to the needs of the marketplace, relies
directly on our ability to run our business profitably.
In doing so, we need to have the opportunity to reinvest
our resources and capital into new technology that makes us
more efficient in what we do, as well as invest in the ongoing
training, hiring, and retention of our employees who make what
we do possible.
I want my company to continue to be a place where people
want to work, knowing that they will be provided for and thus
be able to provide for their families. I want to continue to
dream big for the future of my family, company, and my
community, in an area and an industry that has been hard hit
during the past year.
And I want to be reassured that the laws and policies that
are currently being crafted and implemented today will offer us
the ability to be the leaders of the entrepreneurial spirit and
the engine of growth that this country has depended on for so
many years.
Thank you again for this opportunity.
[The prepared statement of Mr. Gay is included in the
appendix.]
Chairwoman Velazquez. Thank you, Mr. Gay.
The chair recognizes Ms. Halvorson.
Ms. Halvorson. Thank you, Madam Chair. I am pleased to be
able to be joined today by Mr. Tim Norman of Bloomington,
Illinois, which I have the honor to represent here in Congress.
Tim is President of STL, a technology services company based in
Bloomington. Tim started the company with his wife Katie, who
also is with us today, and currently serves as CEO of STL.
This week we are celebrating National Small Business Week,
and the title of our hearing today is Heroes of Small Business.
And Tim and Katie certainly merit that recognition as heroes of
small business.
Tim and Katie both had good jobs at large companies when
they decided to take a risk and start their own small business.
Today, after nearly two decades of hard work and perseverance,
Tim and Katie have grown STL into a thriving business that is a
major employer in Bloomington-Normal metro area, and as well as
throughout Illinois.
They have navigated their business through tough economic
times and are taking the lead in putting people back to work.
Tim and Katie are also both active members in their community.
Tim and Katie are members of the McLean County Chamber of
Commerce and active supporters of Easter Seals and the American
Red Cross, for which Tim served on the local Board of
Directors.
As a member of this Committee, I am so proud of the work
that we have done to empower small businesses like Tim and
Katie Norman, and we need to continue to ensure that our
nation's small businesses have access to capital that they need
to grow and put people back to work, such as all of those on
our panel today. And I am eager to work with my colleagues to
do so.
Once again, on behalf of this Committee, I welcome Tim to
Washington, D.C., and look forward to his testimony.
Thank you, Madam Chair, and I look forward to their
testimony.
STATEMENT OF TIM NORMAN
Mr. Norman. Thank you, Madam Chairwoman, Small Business
Committee, and Congresswoman Halvorson. As Congresswoman
Halvorson said, Katie and I started the business about 18 years
ago, and really what that means is we spend about 24 hours a
day together.
Some of those hours are pleasurable, some of those hours
can be difficult at times, because the businesses are basically
operated along with the children that we have. We have three
children--our daughter Nicki who is 17, our daughter Cassie who
is 15, and our son TJ who is seven. And they pretty much run
the house. And when we are not chasing them around to softball
games and everything else, we run our business.
We have been very fortunate in the last 18 years. I say
that because we are still standing. We are still moving
forward. And one of the things, as the economy has had its ups
and downs, the one thing that I can honestly tell you is that
the passion still survives. And we are very proud to be a small
business owner and slugging it out, being in the one-armed
knife fight in a phone booth, and trying to figure this thing
out.
One thing I will say is that some of the stimulus plans
that you have enacted have made a difference. We are living
proof. What I mean by that is we just recently built a hardened
data center, Tier 3, to the Tier 3 specifications, which means
everything--it is designed not to break. And it is below grade.
It is a true bunker.
And I don't know if anyone has tried to get money during a
time when there is a recession and the banks are collapsing,
but it can be difficult. But the SBA, using the 504 loan
program, with the refinance option, allowed us to recapitalize
our business, get our data center built, and I think the main
thing to focus in on there is to get it built, because our bank
was failing.
And so midstream the SBA was able to make the bank whole,
actually move us to a bank that was able to get this thing
stood up and get this thing moving, because to build a special
use building at a time of a recession, at the point in time
that it was happening, you know, I think that we were
scratching our heads thinking this is the worst time to ever be
thinking about doing this. But I can honestly tell you getting
a 4.83 percent interest rate for 20 years turned into one of
the best times to build.
With that, we have been able to really drive our business.
In driving our business, you know, there is really four
different ones there. We are about a $14 million services
business, so we are people and we are managed services. What I
mean by that is we focus on leverage managed services, we focus
on dollars that are recurring in nature.
We do work with the Federal Government through the
Department of Defense. We have some people onsite as
contractors, but we have a Professional Services Division that
focuses around IT. We have a Commercial Staffing Division that
focuses around more of the manufacturing trades. Then, we have
our Data Center that is, again, special use. And I am
forgetting one. And then, we have BTS, which is more an IT
managed services business, that focus on the small business.
As we have grown and evolved our businesses, the diversity
across the board helped immensely, because when one was up the
other one was down. At this point in time, again, getting back
to that SBA 504 loan program, it has allowed us to recapitalize
our business, or allowed us to recapitalize our business,
because our payroll has gone up $80,000 a week over the last
three months.
And if that money was to be invested into our data center,
cash would be tight right now, but the money is becoming more
available within the markets, and it is working. We have put to
work over 150 people over the last two and a half months, and
that is throughout the Midwest. We have got offices in Green
Bay, Wisconsin; Appleton, Wisconsin; Bloomington, Illinois;
East Peoria; Springfield, Illinois; and O'Fallon, Illinois.
So we are trying to make it--use it as an advantage to get
moving and to get growing, because now is the time to grow.
One of my good friends who went to the military, upon his
leaving he said--I said to him I said, ``You know, I feel like
we need to do something. I respect you for what you are doing
and the services that you are offering our nation.'' And he
looked at me and he said, ``Tim, I want to tell you something.
We will defend this country; you create jobs.'' And that is
what we are doing.
And one of the things that can help, as we are growing and
we are putting people to work, there has been a recurring theme
that a lot of people find it more--find it better to stay on
unemployment than to allow us to put them back to work. And if
we were to shrink some of those benefits, it will force some
people to get back into the labor force, to start paying some
taxes versus putting it back upon some of the employers.
With that, thank you very much for allowing us to be here
and speak on our behalf. Our people appreciate what you have
done, and for the work that you do as well.
Thank you.
[The prepared statement of Mr. Norman is included in the
appendix.]
Chairwoman Velazquez. Thank you. And the chair recognizes
Mr. Luetkemeyer.
Mr. Luetkemeyer. Thank you, Madam Chairwoman. It is a
pleasure this morning to welcome Brad Eiffert to the Committee.
Brad is from Columbia, Missouri. He is Vice President and
General Manager of Boone County Lumber Company there in
Columbia.
In 1965, Brad's father, Howard Eiffert, established Boone
County Lumber in Columbia, which is the county seat and which
was named after Nathan and Morgan Boone, two sons of the famed
pioneer Daniel Boone. Fittingly, two sons now co-manage the
business that their father began 45 years ago and at which both
brothers worked during high school.
Brad obtained a bachelor's degree in economics and a
master's degree in business administration from Mizzou's home
campus there in Columbia. He also served as a U.S. Air Force
pilot for eight years and is a veteran of Operation Desert
Shield. Brad worked for a lumber company in Chicago and later
for International Paper there in Columbia, before joining his
brother in 1993.
Over the years, Boone County Lumber has grown to three
locations, 34 employees, and four part-time employees,
supplying building materials to contractors and customers
across much of central Missouri. Boone County Lumber is the
2006 winner of Pro Sales Magazine Marketing and Customer
Service Award, and the 2004 Columbia Chamber of Commerce's
Outstanding Small Business of the Year.
Brad is also active in his community and serves as a member
of the Columbia Salvation Army Advisory Board and the Calloway
Bank Board of Directors. He has served on the National
Federation of Independent Business Board of Directors since
2003, serving as National Chairman of the NFIB from 2006 to
2008.
Brad, thank you for being here with us today, and I also
might mention that Ryan, your son, is with us today, perhaps
the third generation in the family business. And I look forward
to your testimony.
Welcome.
STATEMENT OF BRAD EIFFERT
Mr. Eiffert. Madam Chairwoman, Ranking Member Luetkemeyer,
and distinguished members of this Committee, thank you for
inviting me to testify today.
My name is Brad Eiffert, and I co-own and operate Boone
County Lumber Company in Columbia, Missouri. And I am
accompanied by my 15-year-old son, Ryan, a ninth grader at West
Junior High.
Boone County Lumber is a family-owned company celebrating
its 45th anniversary this year. In 1965, four men provided
startup capital of $2,500 each, and this, combined with the
$100 my father, Howard, had to invest, began the company that
now operates in three locations and employs 34 full-time and
four part-time employees.
Today, my brother Greg manages our Boone County Millwork
location, while I manage the lumberyard. Together, we serve the
professional home builder, remodeler, and commercial contractor
by providing a variety of forest products, doors, windows, and
moldings.
Thank you for inviting me to share some of the challenges
and successes of the last four years and our situation today.
This July 2010 will mark the end of four full years since
the housing market slump started a deep recession from which it
has yet to recover. New single-family home permits in our
community went from rates as high as just over 1,000 in 2005 to
as low as 230 in 2008. While the demand for our products
plummeted, the market values of many forest products dropped
accordingly. This combination of factors has crushed our
revenue for the duration of the slowdown.
One of the biggest challenges early on was answering the
constantly begging question of when things might turn around.
We have since moved on from that question to asking how we can
most effectively adapt to what we call ``the new reality.''
There have been two sets of heroes in our story. One is the
professional builder and remodeler we serve on a daily basis,
who did not participate in the excesses of the housing boom. We
have been fortunate to serve some customers for two generations
and are proud to stand beside this group of resilient
survivors.
This leads me to the second group of heroes of the last
four years--our people. The personal sacrifice made by everyone
in our company is the only reason I am before you today. We not
only cut hours and overtime, but every salaried person took a
pay cut as well.
While doing this, we asked our employees to perform
services we used to be able to afford from outside companies.
We became our own custodians, Ryan is now our lawn service, and
we decided to live without water coolers, newspaper
subscriptions, coffee and vending machine services, weekly
entry rug cleaning, and learning to live with changes like high
deductible HSA health plans and reduced employer contributions
to 401(k) accounts.
We have not purchased a new truck in four years, and
oftentimes will park a vehicle rather than fix it, based on
seasonal needs.
Ironically, the office building we constructed with our own
employees during the housing slump in 1981-'82, in order to
keep them busy and productive, is the same building we have
completely remodeled on the exterior in order to provide
productive activity for our staff during the last three years.
We completely remodeled the exterior of our building using our
truck drivers, lumber yard, and office staff.
While facing the severe slowdown, we never stopped asking
what we can do during this time to take advantage of untapped
opportunities. Two years ago, despite the recession, we opened
a new showroom in the central Missouri area of Lake of the
Ozarks to display windows, doors, and moldings. Our
geographical service area is expanded and, so far this year,
almost 10 percent of our total sales have come from this new
market area.
In March of this year, another opportunity presented
itself, and we took aggressive action. Our primary local
competitor in the commercial door and hardware market went
bankrupt. We assumed the completion of several ongoing
projects, purchased much of their equipment and inventory, and
offered four employees employment with us in our commercial
door division.
This effectively doubled the size of our commercial door
operations in the last 60 days and increased our commercial
sales exposure to new vendors and to new customers. While it is
early in the process, we are excited to continue to diversify
ourselves beyond the residential housing market.
Our latest challenge today remains moving beyond break
even. We need to continue to find efficiencies and sales
opportunities and become more profitable. We need to be able to
make money and retain it in our business in order to fully
restore the incomes of our committed employees and reinvest in
our business.
While we remain cautious regarding the current situation,
we are optimistic that the worst of the crisis is behind us,
and we are well positioned to move into the new reality of
today's housing and commercial construction market for another
45 years.
Thank you for the opportunity to testify before you here
today, and I will be glad to answer any questions.
[The prepared statement of Mr. Eiffert is included in the
appendix.]
Chairwoman Velazquez. Thank you, Mr. Eiffert.
And now the chair recognizes Mr. Luetkemeyer.
Mr. Luetkemeyer. Thank you, Madam Chairwoman.
Congratulations to each of you. As I listened to the
testimony this morning, you have managed to take lemons and
make lemonade out of it. You have each looked at opportunities
in a difficult time, in a difficult period here, and look at
from the standpoint of how can we, you know, pull up our
bootstraps and make something work here. So congratulations,
and I continue to applaud you.
And I can tell you we are adamant about trying to continue
to keep you in business and make sure that you continue to be
able to take advantage of those opportunities.
Along that line, I would just like to start out, Mr.
Eiffert, with you. I know that there is a couple of things I
would like to talk to you about this morning with regards--one
of them is the new home buyer's tax credit being in the
construction business, which has been hammered over the last
several years here.
Can you tell me the impact that it has had? Has it been
positive, negative? Would you like to see it extended? Have you
had enough of it? Can you just give me an overview of what you
feel in your area, what it would be? Is it something that would
be beneficial, or time to move on?
Mr. Eiffert. Overall, I have heard some of the criticisms
that it perhaps moved demand and concentrated the demand into a
narrower timeframe. But at the same time, a lot of my new home
builder-oriented customers, the ones that predominantly build
new spec homes, have seen their inventories turn.
And I think that an aspect of the most recent credit that
was very effective was that there was also an incentive for the
not first time home buyer, the $6,500 for those that had
already purchased a home in the past. But what we saw with the
tax credit overall was I think it increased the liquidity in
the housing market.
We had heard a number of people that said, ``I could sell
my home if my prospective buyer could sell their home.'' And so
what we saw was that the tax credit put some liquidity in the
housing market, and we saw more transactions taking place
across not only the new home but the existing home spectrum.
And so in our community I think it did make an impact, and I
think it was directly related to overall liquidity and
transaction volume in the market at large.
So I would say it has been quite effective, and it has been
something that certainly I have seen an on-the-streets impact
from it.
Mr. Luetkemeyer. I notice that, Mr. Norman and Ms. Nelson,
you guys talked about access to credit this morning and your
experiences with it. And, Mr. Norman, you have a bank failure
in the middle of a loan process. That is a rather stressful
situation. Can you elaborate on that just a little bit?
Mr. Norman. Yes. When it is good, it is great. When it is
bad, it is pretty darn bad.
[Laughter.]
We were pretty fortunate in the fact that we have got a
pretty good banking relationship with the banks that were
failing and the banks that weren't failing. And our loan
officer was acting a little squirrelly at one point, and I
said, ``Sir, if at any point in time you don't have faith in
the bank to be able to deliver the services that we need, and
the capital that we need, I want to know.''
And he made a call one day and he said, ``I will do
everything I possibly can to get you landed in a bank,'' and he
said, ``This is no reflection upon your business. This is a
reflection upon ours. And I can't service you.'' And so he
literally had me in another bank in about an hour, but it felt
like about three months.
Mr. Luetkemeyer. Ms. Nelson?
Ms. Nelson. My experience with the SBA loans, both through
my chair position with the Greater Sarasota Chamber, as well as
my own due diligence, was that it was a very cumbersome
process. I think a lot can be done to not only assist the small
business owner in making their way through all that paperwork,
but streamlining the process so that it is easy.
There is not a lot of time. We already wear a lot of hats.
So to take time away from the business, the limited time that
we already have, it is really hard to take on a process like
that, make your way through it. And typically the process, from
the initial paperwork to funding, is long, and typically that
doesn't work.
Mr. Luetkemeyer. I know that a couple of things that were
in the health care bill, one of them was with regards to if you
have $600 worth of economic or, you know, some transactions
with individuals, that you have got to send them a 1099. Does
that affect any of your businesses? Mr. Dippold, yours?
Mr. Dippold. Yes. We have several contractors that we
utilize that, yes, that does affect our business.
Chairwoman Velazquez. Is your mic on?
Mr. Dippold. I will bring it closer. How is that?
Mr. Luetkemeyer. There you go.
Mr. Dippold. Yes, that does affect our business somewhat,
that $600. Certainly, the 1099, we must pass those on, and we,
you know, follow those areas. So, yes, it certainly does make a
difference for our business.
Mr. Luetkemeyer. Mr. Eiffert?
Mr. Eiffert. Absolutely. I mean, I look at something like
that and I say, ``Okay. What is the personal impact of this?''
Well, the personal impact in my business is it will land on a
lady's desk named Vicki Mansfield, who has been with me just
over 30 years. And she will have to go through the process of
now trying to find taxpayer ID information on all the vendors
that we have done business with.
And I can't even imagine the number of hours that this is
going to take, to try to get the information that is going to
be required to fill those out. But I would think that we would
probably have to do 100 to 200 1099s.
Mr. Luetkemeyer. Okay. Just very quickly, have each of you
looked at the health care bill? And is it going to be a good
deal for you? Is it going to cost you money? Are the provisions
in there about mandatory insurance, is that a problem for any
of you?
Mr. Norman. With our business, on our core employees, we
already have carry a health plan for them. On the staffing side
of our business, to where, you know, it can grow by the
hundreds in a couple weeks, I have no clue how it is going to
affect us. And I don't know how to really dissect it. So yes
and no.
Mr. Luetkemeyer. Ms. Nelson, I see you--
Ms. Nelson. Yes. I haven't had a chance to dissect it
either. I am not familiar enough with it to know. We do offer
health insurance currently, and it is working. So I am half-
tempted, with all the other hats we have, to, you know,
continue to hold on to that while we focus on other fires. But
rumor has it from my business partner and husband that there is
some grumbling that there will be some difficulties. I just
don't know what those are at this point.
Mr. Luetkemeyer. Okay. I see my time expired. Thank you,
Madam Chair.
Chairwoman Velazquez. Ms. Halvorson.
Ms. Halvorson. Thank you, Madam Chair. I know that Mr.
Norman has had some good experiences with the 504 loan
programs, and, Ms. Nelson, you say it is cumbersome. Tim, did
you find that it was cumbersome when you were put into an other
loan in an hour?
Mr. Norman. Well, I think there is two different pieces and
parts to it. We actually used--I would have to defer to Katie
on the actual name.
Ms. Halvorson. But I guess my point is--you are right. And
Katie probably worked on that, too. But we are trying to make
this process not cumbersome, you know, the application is
smaller, the process has gotten less, the fees have been taken
off. I mean, we are doing everything in our power to make it
not cumbersome.
And, you know, some of the problems lie with the perception
of being cumbersome. So we would like your input in writing to
our offices or to the chairwoman, but everything we have done
since we have reauthorized the SBA process has been to
eliminate that cumbersome process.
You know, we have increased the government--the part that
the government backs, so everything we have done is to try to
make that process not cumbersome. So, you know, and I would
like the other people to give their inputs, because if it has
still got the perception that it is cumbersome, we still have
our work cut out for us, because we are doing everything to
make sure it is not.
So I would like to make sure that we are doing whatever it
takes to make sure it is not. Mr. Norman?
Mr. Norman. We used a third party, and they actually did--
Ms. Halvorson. Oh, that is right.
Mr. Norman. --the whole process. I think it was called
the--
Ms. Halvorson. Yes.
Mr. Norman. --Small Business Growth.
Ms. Halvorson. Right. We talked about that yesterday. You
are right.
Mr. Norman. So they did all of the paperwork, and they
actually knew the new regs coming out before the SBA did.
Ms. Halvorson. Right, right. And there are other things.
But does anyone else want to share some of the processes, if
they have used the 504 loan program or some of the other
programs that the SBA offers?
Mr. Dippold. We have used the programs considerably over
the last two years. We moved into a new facility. We are now in
the process of putting on--a new addition onto our
manufacturing. In our region--I can only speak at that, and it
is North Central Economic Development--whether or not--I can't
comment on how complex and cumbersome it is, because they take
care of everything. They do a wonderful job. They make it easy
for me.
Ms. Halvorson. Correct.
Mr. Dippold. And have made it very easy for me. And they
are very quick to react, they are very quick to get the loans
through to committee, get approval, and I see very little. I am
called to come down and sign documents.
Ms. Halvorson. Right.
Mr. Dippold. --to make signatures. So I am not sure how
complicated--
Ms. Halvorson. Okay.
Mr. Dippold. --the system is, but they certainly handle--do
a great job of handling that very quickly.
Ms. Halvorson. So then maybe it is the region or we need--
so does anybody have any other comments about--because the only
other thing I would like to hear from any of you is maybe your
input on some of the thoughts of the $30 billion lending that
is being proposed by the administration that is currently
working its way through Congress about believing that this
infusion of capital into community banks will help the lending
to all of you, because the number one thing I hear from every
small business that I talk to is the lack of capital that you
are able to get.
And everybody is trying to point fingers somewhere. And do
you think that this infusion into the community banks somehow,
or the banks, are going to help you get your loans any easier?
I don't know, Mr. Eiffert, if you have heard of this going to
Congress, or if you think that that is going to help at all.
Mr. Eiffert. You know, kind of with my bank board hat on
now, we just haven't seen a lot of loan demand out there. And
some of the loan demand that is out there is because it is
coming from some place where they don't want it any more, just
because of the lack of liquidity or it is just not that good of
credit.
So, overall, I think most of the lenders that I speak with
just haven't seen a robust demand for loans.
Ms. Halvorson. Okay.
Mr. Eiffert. That is what I hear oftentimes.
Ms. Halvorson. Mr. Gay?
Mr. Gay. I would echo--our banking relationships have
traditionally been with some of the larger banks, those that
received help from the government. And after 10 years that my
wife and I have owned the business, and run it profitably and
successfully, we were told that we would have about a 50/50
chance of seeing our line of credit renewal. We have paid back
all of the term debt. All we had was basically a line for
working capital left. And they came back and told us 50/50.
Ms. Halvorson. Okay.
Mr. Gay. So we have started looking at the community banks,
because what we are looking for is a relationship. And I do
believe that that can help.
Ms. Halvorson. Okay. And I--my time is up. I yield back to
the chairman.
Chairwoman Velazquez. Mr. Thompson.
Mr. Thompson. Thank you, Madam Chairwoman, and thanks to
the panel for what you do in your communities, for jobs, and
how you are involved in the communities, too, beyond your
businesses, just as being active members of the community.
Mr. Dippold, I wanted to come back to the--I mean, the
powdered--as I follow the powdered metals industry, 2008 and
2009 tied a lot to the meltdown of the auto industry, there
were just a lot of powdered metal industries that--or
businesses that were just suffering tremendously with business
loss.
That was not your story, though. I mean, your record is one
of really just a remarkable record during a very, very
difficult time. And so I wanted to come back and ask you, what
were the differences? What did you do during very difficult
economic times to make sure that your business was successful,
that your employees had that security that came working for a
successful small business?
Mr. Dippold. Yes, thank you. Really it was. Our area--we
are in Elk County in Pennsylvania, and it is very
industrialized, very automotive-based. And we have always had
the pleasure of having one of the lowest unemployment rates in
the State of Pennsylvania. And, unfortunately, over the last
couple of years we have had the distinct honor or dishonor of
having the highest unemployment. So we live and die with the
automotive industry, like it or not like it.
In our situation, we are a rather small company. We have
been able to really get into some niche markets and niche
technologies that allowed us steady growth. And we were
successful in years prior to the recession of having
opportunities lined up that our sales continued to grow.
We did see a 10 percent reduction in sales in 2009. We
actually grew from '07 to '08 and saw a reduction of 10 percent
in '09. At one point, the early part of '09, we were down about
30 percent, but some of our new programs started hitting and
really made a huge difference for us personally.
Our area, I can say that people are busy again. Things are
starting to look good. I certainly think our economy is still
fragile. I think any large disruption could certainly knock us
off the rail. But I see opportunity, and I see opportunity for
small business.
And we continue to work with our employees. We did rotating
layoffs. We did schedule changes. We accommodated, we worked
with our employees, and our big thing is to keep our employees
with us. We implemented gain-sharing opportunities with them,
and we work for ways to keep not just their base compensation
but be part of the business and be part of the business
success.
Mr. Thompson. Great. Thank you. A question to throw out to
the panel. If you had the opportunity to have--what one
program, what one program could--or policy change that Congress
could make that would help your business grow? What would that
one policy change be?
Mr. Norman. Less tax.
Mr. Thompson. Okay.
Ms. Nelson. No surprise there.
Mr. Gay. I will echo that, but I would also say further
support to help get people off the unemployment rolls. Where we
currently stand in double digit unemployment in our area, we
are still having a terrible time getting people to come back to
work. And while we want to be sympathetic and understand that
there is a lot of difficulty with people losing their jobs,
they also have to have some incentive to go back to work.
Mr. Thompson. Very good.
Mr. Eiffert. I am also concerned about the tax environment,
because I see as the economy recovers, and we have tax cuts
expire, I think they are going to be expiring at a critical
time when capital is needed in our companies.
As I said, it has been a long time since we purchased new
delivery equipment, and I think that as we recover, keeping
funds in the hands of entrepreneurs so that they can reinvest
in their companies, in equipment, that will help the economic
activity of, you know, truck dealers, car dealers, equipment
manufacturers, and just keep more money out there in the
private economy. But I think otherwise we will be providing a
little bit of a headwind to the recovery, if you will.
Mr. Dippold. In our industry, there is a bit of a
disparity. Certainly, I am a bit biased, but I certainly feel
small business is where it is at. And we have made significant
strides in service and bringing opportunities and great
quality, great delivery, to our customers. Where I see a
problem in our business is if there was some way that we could
get some sort of funding, industry funding for an R&D
development that would allow smaller businesses to create jobs
and advance the technology.
Multi-national companies have the financial wherewithal to
spend a lot of money on R&D and development and creating new
products, materials, and processes, where as a small business
owner financially we are a bit bootstrapped in order to do
that.
Chairwoman Velazquez. Will you yield, Mr. Thompson?
Mr. Thompson. Please.
Chairwoman Velazquez. Mr. Dippold, are you referring to
debt financing or equity investment?
Mr. Dippold. Creating, yes.
Chairwoman Velazquez. Okay. Thank you. Thank you for
yielding.
Mr. Thompson. Okay. I think I have expired my time. Thank
you, Madam Chairwoman.
Chairwoman Velazquez. Mr. Critz.
Mr. Critz. Thank you. You know, I actually come from the
small business economic development era. I did that for
Congressman Murtha for many years. And one of the things that I
have always seen is small businesses and trying to get access
to capital, and I am curious, because in traveling throughout
our district, small businesses many times when they are going
to bigger banks don't have as much success as they do with
going to local community banks.
And I am curious for the panel, where you have received
your financing, if it has been better going to the local
community bank, and what role the SBA played, if it was helpful
or if the SBA led you to a certain bank, or what you see as a
winning strategy.
Mr. Norman. What I have found is that your bigger banks
have people that focus on SBA loans. Your community banks don't
have the resources necessarily to have a person who is an SBA
expert. And so if you were to inject some cash into a community
bank to get them an SBA education, I think that you would see
some SBA loans probably get freed up.
But it is such a complex process at times, you know, and
when you are in the foxhole, and you are not really working
from a strategic position, you need help.
Mr. Eiffert. I have not used the SBA loan process, but we
do maintain a line of credit, and it is with a local bank. But
overall I have found the value of having a relationship--I
mean, I have got a relationship with people on the Board of
Directors of my local bank. I know the leadership of the local
bank.
I have got a long-term personal relationship with the
commercial banker that I bank with. And I think the
communications and the consistency of our relationship and the
trust and the--we know one another's character. To me, just the
value of that local relationship and local ties has been
critical to maintaining a confidence in each other, actually,
you know, the reassurance that they will be there for me, and
my communication with them of what I am doing and proactive
steps that I am taking to be a good customer.
But I have a hard time understanding how anybody really
operates without just that personal kind of contact and
relationship with someone that knows your business and that you
know them.
Mr. Dippold. From our standpoint, when we purchased the
business in 2004, it was also necessary for us to move out of
our current location and into a new facility. The larger banks
really didn't want anything to do with any piece of that. We
ended up with two smaller banks who took the risk on us, but
they knew us personally. They knew our backgrounds, and they
did take the risk and they worked with us, and everything
turned out very well.
So certainly my standpoint is the smaller banks were there
for me when I needed them, and I will continue to utilize them
moving forward.
Mr. Critz. Well, thank you. Thank you. I appreciate that.
One thing, actually, for Mr. Dippold. I was wondering if--you
had mentioned that your business is starting--and you are the
only Pennsylvania company that--so I know sort of the
Pennsylvania geography.
I am curious. You said your business is picking up, and you
have weathered the storm quite well. I am wondering, does that
mean that the auto industry is buying more from you now? Have
you seen an increase in orders from out of the--like the GMs
and the Chryslers and the Fords?
Mr. Dippold. Yes. And, you know, the old adage of sometimes
it is better to be lucky than good, a lot of our new programs
that we launched over the past six months, and for the next 18
months, are Ford-related products that are on their new diesel
engine. They are on their new F-150s, engines that are coming
out, and the new designed F-150.
So we have aligned ourselves as a Tier 3 supplier through
Ford. That has been very successful for us. So, yes, we are
seeing those definite business increase, but a lot of our
products are new applications for the industry, for that
automotive supplier.
Chairwoman Velazquez. Mr. Buchanan.
Mr. Buchanan. Thank you, Madam Chair. And I want to thank
you for doing this, recognizing the heroes, because as someone
that has been an entrepreneur for 30 years and not a career
politician, I understand what you go through, and appreciate
Ms. Nelson being here today, because she has been very active
in our chamber and all that you have done.
Let me just say, and as you know this, that 99 percent of
all the businesses in Florida, in Tallahassee, our capital, are
small- and medium-sized businesses. They create 70 percent of
the jobs.
I don't think we celebrate small business enough in this
country. I think it is what makes this country great,
fundamentally. So I just want to--I can't say enough to applaud
you, and that I--I have been through two tough cycles, in the
'80s where we had 20 percent interest rates, in the '90s where
we had the S&L banking crisis. But this is the worst I have
ever seen--in the last 30 years that I have seen in business,
or the last 35 years. You would have to probably go back to the
'30s.
But, again, I applaud your success. I will give you one
other statistic, just to tell you how great you are. They have
said--the U.S. Chamber said that eight percent out of
businesses that start up, out of 100 succeed, in five years are
still standing, let alone in this environment. So, again, I
applaud your efforts.
Ms. Nelson, again, I am glad to have you here today
representing my district. What are the keys, a couple of keys
that you think are the keys for you to survive through this
struggling time? Because I have got to tell you, most of the
businesses in our area, there are some niches, are down
probably 30 percent. And many of them, unfortunately, are in
the bubble or been out of business. What has been the key to
your success, you and your husband?
Ms. Nelson. Well, I think--as we talked about before, I
think the most important piece of being a business owner--and I
think we have all talked about it--is pioneering new ways to do
business. I mean, in tough times like this, you just learn to
roll up your sleeves and get the work done, to innovate, to be
a pioneer, and we have all done that.
And you have to do things that are uncomfortable. You have
to change your staffing, you change your health care benefits.
There is a ton of things that you have to do in order to
survive. It is not comfortable, it is not what you like, and,
quite frankly, I think we get a little comfortable when things
are good. And we are used to, you know, enjoying those times.
And then, when times get tough, we complain about it a little
bit, but ultimately we turn around and we make it happen,
because that is what small business owners do.
So that has been our success. You know, as a husband and
wife team, it is a little tough. We spend a lot of time
together, and we balance work and life. But we all do that.
Everybody on this panel and everybody watching would tell you
the same thing, but that is what we sign on for when we come
on. So I think success is just that fortitude and that hard
work that gets it done, be willing to do what you have to.
Mr. Buchanan. Well, you definitely have that attitude, and
that is the reason you are successful.
Mr. Eiffert, I wanted to ask you, because you brought up
taxes, you know, the mentality up in Washington is tax the
rich. The rich I know, most of them are small business people,
medium-sized companies, with pass-through income. Either they
have got an LLC or a Subchapter S or a partnership or a sole
proprietorship.
What is your thoughts on that? You touched on that, because
what happens--if you make $750, you know you don't take home
$750. And if you have got to pay another 10 percent in taxes,
it is a couple more jobs that you are not going to be able to
hire somebody. But I would like to just have you add on, if you
think I am right on that.
Mr. Eiffert. Well, I think you are very right on that. And,
you know, one of the things--small companies, sometimes the
quickest cash that we have available in a small company is what
we don't take home as owners. You know, we have had periods of
time where you just didn't take any income home, because you
wanted to leave the money in the business.
So certainly, you know, to the extent that that--you know,
that taxes would affect the livelihood of any entrepreneur, and
what they take out of the business, versus being able to leave
the funds in the company, it certainly makes a difference,
because I know recently we have only been taking out of it what
we need to live on. And, you know, having the tax rates minimal
gives us more liquidity that we need to support our families.
So to that--
Mr. Buchanan. Thank you for that, because I have limited
time. I wanted to get one more question to the panel, because
this is something I wasn't planning on talking about, but it
has been brought up twice here today, and I heard it in a town
hall meeting a week ago Saturday.
And I am as passionate as anybody. All of us--working
families in the country are clearly hurting. But a gentleman
stood up at the town hall and he says, ``I have run ads in our
community for some time. I can't get anybody to come in and
look for a job.'' You know, you guys have got to be very
careful about the unemployment benefits, what we are doing
here, the extension. Some people need them. Some people are
taking advantage of the system.
So I talked to him after that was his comment, and I said,
``Well, tell me, you know, how are they surviving? They can't
survive.'' He said, ``Well, they are taking the check, and they
are working under-the-table side jobs.'' And he can't get
anybody to take a job there locally in his community. That is
what he claims.
Does anybody want to add on to that? Or is it just one
incident? Because I just had this come up recently. Or do you
think that is pretty widespread in your communities?
Mr. Norman. Well, I think, coming from the staffing side,
with my staffing hat, there is a consistent message each and
every week, probably two out of 15 people that we interview or
we offer jobs to, that--around our area Caterpillar is a main
supplier or a manufacturer in Peoria, and so there is a lot of
labor that was laid off there. A lot of it was union labor.
But the unemployment benefits are about break-even to what
they could be making otherwise, and a lot of them are just
saying, ``I have got about six weeks left. I am just going to
coast for the next six weeks, and give me a call back then.''
Mr. Buchanan. Thank you, Mr. Norman. I yield back.
Chairwoman Velazquez. Time has expired. Mr.--Ms.
Kirkpatrick. Sorry.
Ms. Kirkpatrick. Thank you, Madam Speaker, and thank you,
panel. I represent a very large rural district in Arizona, and
most of the businesses are small business. And by ``small
business'' I mean Mom and Pop to less than 50 employees. And
one of the things that--we know the survival rate is low, as
Mr. Buchanan said. One of the things that we experienced
overnight, lines of credit just disappeared.
And I want to hear from you if you had similar experiences.
So it didn't seem to matter whether it was a large bank or a
community bank. The lines of credit just disappeared. So I
would question the entire panel. If you would just give me an
idea of your experience with that. Ms. Nelson.
Ms. Nelson. Yes, thank you. We bank at a large bank and had
a history with that bank. It was not a community bank, and they
immediately came in and took away a good portion of that. We
also had a credit line on our home that we used when we needed
to, hadn't tapped into it, actually was in the process of doing
a few things to our home when we realized--we got notice that
they had taken out a number of the funds while we were under
construction.
Same thing--you know, as small business owners, there is
times we tap into our corporate credit cards and personal
credit cards. The interest rates on those changed. So it was a
quick shock to realize there was actions we needed to take in
order to secure keeping the availability of the funds that we
need in order to deliver the supplies and the goods to our
clients.
So it was not a local bank, it was a large bank for the
most part, that we had that struggle with.
Ms. Kirkpatrick. Has that been restored? Has your line of
credit been restored?
Ms. Nelson. We actually went--we called them and negotiated
pretty heavily. It did not go away, but it was significantly
reduced. And keep in mind, we rarely tapped into them. So they
should have--you know, we anticipated that they would always be
there.
Probably the biggest place where we got the resources was
from major suppliers, Dell being one of them for instance. When
we went back to them and said, ``Look, we have been a major
provider of equipment for you in this area, and we need help,''
they stepped up and actually significantly increased our credit
line. It was things like that. It was those industries that
really came to bat and said, ``We are just going to have to
band together and get this taken care of.''
Ms. Kirkpatrick. So it was business, not the banks, that
came to your rescue.
Ms. Nelson. Yes. For the most part, yes.
Ms. Kirkpatrick. Anyone else have experience with that?
Mr. Gay. I think what Mr. Eiffert said earlier about
relationships is the key to our future going forward, because
we--as we went through our renewal process, a big part of our
business is government contracting. We get paid every 28 days
by the government, which is pretty good.
And their comment back to us is, ``Well, we don't think we
can perfect the receivable, the guarantee on the receivable,''
which to me is absolutely ludicrous. The smaller banks, the
community banks, the folks that take the time to get to know
you, to really understand what your business looks like, what
your cashflow needs are, and the like, I think are going to be
the ones that are going to help us go forward.
Ms. Kirkpatrick. Now, there is--did you want to speak to
it? Go ahead, please.
Mr. Dippold. Just quickly, on the small bank side, we
utilize the small banks. And there were conversations about
negotiations of tailoring back our lines of credit. We have
some new opportunities coming through--convince them that we
needed that line of credit, because we had new business we were
launching. And as a result, we were successful in keeping that
line of credit, and only had to negotiate a floor on the
percentage rate.
Ms. Kirkpatrick. Now, in the SBA loan package, there is a
provision for a small line of credit. We wanted it to be easily
accessible to small businesses. Have any of you tapped into
that?
Ms. Nelson. No.
Mr. Dippold. No.
Ms. Kirkpatrick. Okay. So you are sticking with your
existing banking. Well, I applaud your survival, your efforts.
You know, I agree--I am a former small business owner myself,
and through the hard times is when you--you know, you really
look at those efficiencies, and, if you can survive, you come
out that much stronger. So, again, thank you very much for
being here today.
I yield back.
Chairwoman Velazquez. Thank you. Mr. King.
Mr. King. Thank you, Madam Chairman. Madam Chair, I
appreciate you holding this hearing today, and this is
fascinating, to hear the panel talk. I really am having a hard
time deciding where to start.
But one of the things that I think wasn't developed to its
fullest extent was the questions that were being asked by Mr.
Buchanan with regard to how difficult it is to hire someone who
is being paid not to work. And is there anybody on the panel
that has actually hired somebody that was drawing unemployment
and known that they have gone off of unemployment to go to
work? Have you experienced that in the last year or two or
three, anyone?
Mr. Gay. Very rare.
Mr. King. But has it actually happened to any of you?
Mr. Dippold. It has not happened to me.
Ms. Nelson. No, we have hired a number, and they all went
off unemployment. They were very--I had one employee walk in
with his first paycheck crying, saying, ``You have no idea what
this does for me.'' So I have not had the experience of them,
you know, trying to do otherwise at all.
Mr. King. So I hear you clearly that people that were
drawing unemployment, it hadn't expired yet but you hired them
while--
Ms. Nelson. Yes.
Mr. King. --and they took the job rather than the
unemployment check.
Ms. Nelson. Yes.
Mr. King. Thank you.
Ms. Nelson. Absolutely.
Mr. King. Anyone else have that experience?
Mr. Eiffert. No, sir.
Mr. King. So I think Mr. Buchanan has illustrated that in a
way that we need to think about, is he said some need it and
some don't. Some game the system, and some don't.
Ms. Nelson. Yes.
Mr. King. It is hard to have a universal approach to this I
just think I have had people in the wintertime in my
construction office open the door, stick their head in, and
say, ``You don't need any help, do you?'' and they close the
door and walk away. And I realize that they are going to put me
down as somebody they applied for a job with, and so now I say,
``Yes, here is the application. Come on in, sit down.'' And
they don't come back if they are not looking for work. But that
is an interesting observation.
And I noticed that Mr. Norman has an employee base that
goes up to roughly 200 additional, that you are concerned about
how that might be affected by the health care program. But I
would ask you: is there anybody on the panel that uses eVerify
to verify legal employees?
Mr. Norman. Yes.
Mr. King. Two of you do? Mr. Gay?
Mr. Gay. Yes, sir.
Mr. King. And Mr. Norman?
Mr. Norman. Yes.
Mr. King. Do you find it a system that works well for you,
Mr. Gay?
Mr. Gay. I think the system works well. The thing that is
difficult with eVerify is you have to hire the employee first
before you do eVerify. So if they kick out, now you have
essentially hired that person, and they go back into the
unemployment ranks. And I know there are some discrimination
issues around that, but--
Mr. King. What do you--I mean, I am going to put it in a
little bit of a way--I would characterize it this way, that you
have to hire someone who is working illegally, you have to
break the law in order to find out if they are breaking the
law. And then, if you find out that they aren't legal, then you
have to let them go.
Mr. Gay. Yes, I think that is a fair statement. And being a
federal contractor, that is something that we have to take very
seriously.
Mr. King. As a federal contractor, do you ever see a
contract that requires you to certify a drug-free workplace?
Mr. Gay. Yes.
Mr. King. How do you comply with that in your state? Can
you do that within your state laws?
Mr. Gay. Yes, we do. We do drug pre-screening before
everybody is hired, and then random drug tests over the
lifetime of their employment.
Mr. King. That is good business. Thank you.
Mr. Norman?
Mr. Norman. We do the same. Our people go through drug
tests, drug screening. A lot of times, too, when you get into
the volume staffing, it is part of the deal that you have to
show proof of citizenship. You have to show proof of no drug
use and everything else. So it is a--it is just part of the
process.
Mr. King. And you would be happy if we amended eVerify so
that it can be with a bona fide job offer as opposed to having
to actually put them on the payroll and then find out?
Mr. Norman. Right. You know, and there is always--what we
do, too, is we put an employment--basically, an offer letter
together that makes it contingent upon passing the drug
screening and all of the citizenship stuff.
Mr. King. I hope that line is fine enough.
Mr. Eiffert, you were the one that actually spoke to me in
a way when you talked about how you had to pinch pennies and
squeeze things down and get rid of the clean rug service and
Ryan mows the lawn. If he was the son of one of your employees,
could he do that for you?
Mr. Eiffert. No, sir.
Mr. King. And I bring that up because I think they would
have to be 18 years old to ride the riding lawnmower around to
cut the grass around your place, but they would have the keys
to the car two years earlier. That seems like a child labor law
that we ought to take a look at.
But you also have--you have 34 employees and four part-
time, as I read in your testimony. And have you given thought
to what you might do with an employee base if you are bumping
up against the 50-person cap that would put mandated health
insurance on you? Has that crossed your mind, that a 50-
employee threshold might be something you would want to back
away from, if you reach that point?
Mr. Eiffert. I expect that we would become multiple
entities. Instead of just two locations, we will be two
companies.
Mr. King. I expect that is the case with all of the
witnesses. Thank you, Madam Chair. I would like to find the
answer to that question.
Chairwoman Velazquez. Mr. Altmire.
Mr. Altmire. Thank you, Madam Chair. I wanted to I think
close out this first panel by just getting some clarification
on the issue that has come up multiple times about
unemployment, because you are here at a very important time. As
you know, the Congress is debating that very issue, maybe as
soon as today, on whether or not to extend unemployment
benefits. And Mr. Gay and Ms. Nelson both addressed this.
But I wanted to ask the question in a little bit different
way and just start at Mr. Eiffert and go across. Two things. Do
you--have you seen specific examples--I am not asking you to
name names, but just, you know, have you seen a person who you
believe could work, there is a job available for that person,
but because they are on unemployment they choose not to, they
choose to stay on unemployment rather than take a job? I know,
rhetorically, we hear that is what happens, and there are
people who do that. But have each of you seen a specific person
who has done that?
Mr. Eiffert. No, sir. I am not available--I am not aware of
anyone that has specifically done that.
Mr. Altmire. Well, thank you. The second question was--and
then you can go down--is if we were taking up this vote about
whether or not to extend unemployment, if you had that vote,
what would you recommend that we do? Given where we are in the
economy, given what you see in your regions, the impacts that
the recession has had on your businesses and those around you,
do you think it is an appropriate action to take?
Mr. Eiffert. Again, I am not aware of anyone specifically
in that circumstance. And I think it is going to be a difficult
vote, because I know it is a difficult economy. But, overall, I
think that--you know, I was always kind of raised under the
mantra that there are jobs out there for people that, you know,
are productive. And I know that might be naive in some
economies, but I would probably go with the unemployment system
that we have now, thinking that it provides the cushion and the
time that it should to be able to provide someone a chance to
find employment.
Mr. Altmire. Thanks.
Mr. Norman. I can give you a list. You know, it is--I think
it is--if you are hiring, you will run into it. Or if you have
got accelerated growth, you will run into it. If you are not
hiring, I don't think you will see it, but the fact is that I
have seen the people, I have spoken to the people, and our
people have spoken to the people, and it happens weekly. And I
would vote to repeal it.
Mr. Altmire. Okay.
Ms. Nelson. Wow, it is tough. We have had a lot of growth,
so we have not run into a lot of that, or we haven't run into
any of that for the most part. The people--when we have hired--
we have made a good probably half a dozen hires this year, and
have had no problem finding the people we need and have had no
problem in them accepting the jobs. So that has not been an
issue.
What my vote would be, that is tough. It is hard to sit in
this position and be employed and to make that decision, to
make that call. I will tell you that, from a philosophical
perspective, I think that we need to push people to start
working, to move past their comfort zones, to take whatever
they can. So I can understand both arguments.
Mr. Altmire. Okay. Mr. Gay?
Mr. Gay. Yes, sir. I think we are now approaching I believe
it is 99 weeks that unemployment has been extended, coming up
on two years. That is a long time. And, clearly, we have been
through some challenging times in the economy, and I think
people need to know that there is a safety net.
I think what we see is we had a Volvo manufacturer close in
our area. These people were making, you know, $35, $40 an hour
perhaps, and they don't want to come take the $15 or $20 an
hour job. But what they will do is come in, apply, and then go
back to the Employment Security Commission and say, ``We went
and tried. We didn't get the job.'' And then, that just allows
them to continue to stay on there.
So somewhere at the Employment Security Commission level
things I think also need to be broken, because it seems like
they are enabling a lot of that to continue to go on.
Mr. Altmire. Okay. Thank you.
Mr. Dippold. Thank you. I have not personally had the
experience. We hired only three people in the past six months,
none of which were in that situation. So I can't comment there.
But I personally believe it is time to push those individuals
out into the marketplace. What we are seeing when people are
interviewing and are coming through the system, we are seeing
much younger people. We are not seeing the 30-, 40-year-old
people that are coming in for those interviews. So that tells
me, at least in my situation, that there are people taking
advantage of the system.
Mr. Altmire. Thank you, all. No further questions, Madam
Chair.
Chairwoman Velazquez. Thank you. We are finished here,
right? Yes. Let me take this opportunity to thank all of you,
and I hope that--well, it is important that in order to get
this economy growing again we need to create jobs. We lost 11
million jobs. So it is hard to believe that people are--when
you are hiring, that people do not want to get back to work. In
fact, we have only been creating 250,000 in the last month, and
previous to that 159,000.
So, but the intent of this hearing is to listen to the
stories, to see what is working in terms of small businesses,
getting your businesses growing, and hiring again. Thank you
for the contributions that you make to our economy, and for
your ingenuity. You have been able to adapt and make the
changes necessary to be able to come here to us--to the
Committee and talk to your successes and the positive stories
that you all represent.
So with that, I want to thank all of you on behalf of this
Committee. And you are all excused. Thank you.
I will ask the second panel to please come forward and take
your seats.
[Recess.]
Chairwoman Velazquez. The Committee will come to order, and
the chair recognizes Ms. Kirkpatrick for the purpose of
introducing our first witness.
Ms. Kirkpatrick. Thank you, Madam Chairwoman, and thank you
for adjusting the order of the witnesses.
I am very pleased to introduce Chris Kuknyo of Patriot
Disposal in Prescott Valley, Arizona. Chris helped found
Patriot Disposal 10 years ago, fighting the odds to build a
business that now serves thousands of residential and
commercial customers throughout Yavapai County.
Patriot is a local company serving local communities, and
the business gives back by contributing to local organizations
and events, including the local food bank, Little League, the
Prescott Valley Team Up to Clean Up, and the company was the
first to bring recycling services to the area.
Chris is equally involved serving as Vice Chair of the
Prescott Valley Chamber of Commerce, as well as on the Board of
Directors for the Prescott Valley Economic Development
Foundation.
Chris, welcome to our committee.
STATEMENT OF CHRIS KUKNYO
Mr. Kuknyo. Thank you very much. Thank you, Madam Chair,
for allowing me to speak with you on behalf of the small
business folks of Arizona's 1st congressional district. And I
also want to thank Representative Kirkpatrick for the
invitation to do the same.
My name is Chris Kuknyo, and I am one of the co-founders of
Patriot Disposal. We are a small trash and recycling company
that just celebrated our tenth anniversary. You see, 10 years
ago, I and another gentleman took hold of the American dream.
We knew that the dream wasn't entitlement, but opportunity,
that if we believed in ourselves and worked hard there was
nothing we couldn't accomplish.
My partner knew the trash business and was a whiz at
financing and administration. I knew how to fix trucks, and I
had a knack for marketing. We developed a rock solid business
plan and took it to the service corps of retired executives in
the Small Business Administration. They said, ``Don't do it.
You will never make it. Waste Management will crush you.'' We
took our plan to the banks where one loan officer laughed and
said, ``Come back when you don't need the money.''
So we did what so many small business people do, we went
all in, we put everything we owned and worked for on the table.
I took out a mortgage on my home, we purchased a garbage truck
and 300 garbage cans. Today the banks visit us on a regular
basis wanting to help us manage the cashflow of our 16,000
residential and 800 commercial accounts.
The journey from zero employees to 29 employees has not
been without its challenges, as represented by my graying hair.
I looked at a photo the other day of these two young guys
standing so proudly in front of their first garbage truck, and
the guy on the right does not resemble what I see in the mirror
in the morning.
We had to swim with the sharks to get the capital to keep
us up with the growth that we had. I am talking about non-
traditional lenders that charge 14 to 21 percent. I have to
compete with the largest disposal company in the world, who
happens to own the only landfill in the county that accepts
household trash. They charge over double the rate that is
offered in Phoenix, because they are the only game in town.
We have to contend with our own government that seems bent
on our destruction. I remember the first quarter of 2006. We
only had so much money, and it was two weeks until our billing
was going to be coming in. We had a choice to make. We could
miss payroll and lose our employees, not make a fuel payment
and have our gas pumps turned off, not pay the landfill bill
and have Waste Management put us out of business, or miss a tax
bill and take a hit from the IRS.
The tax we missed for the quarter was $44,000, but after
penalties, fines, and interest, it is now $88,000. I know that
figure is not much to you folks, but for a small business that
could be just devastating. If I was to open a business that
charged that much, and acted in that manner, I would be
arrested and tossed in prison for loan sharking.
The frustration is amplified when you open up the paper and
you see the same government that is holding your feet to the
fire for thousands is giving billions to help the foreign
nation of Haiti, or giving out gigantic loans to huge
corporations because they are too big to fail.
We have been under attack from the big box stores and giant
corporations, who can weather this economy and use it to
further gain market share by eliminating the pesky small
businessman.
As small business people, we are so busy getting the kids
to ball practice or helping at the school that we don't have
the time or energy at the end of the day to lobby Congress to
let you folks know what needs to be done. That is why I am so
honored, and I truly am thankful for this opportunity to share
with you folks today.
When I found out I was making this trip, I went to the
Chamber members and small storefronts around my town and asked
a simple question. Is there anything you would like me to
convey on your behalf? They didn't take long to answer. ``Tell
them the banks still aren't lending. Stop trying to be my
partner. No more spending. And they are taxing us to death.''
I am sure you hear that last one a lot, but do you ever
take into consideration the big picture? It is not just the
Feds that want to profit from any success we may have, but the
state, county, and city are also lined up.
Let me give you a quick example of Patriot's purchase of a
used trash truck we bought in California. After paying
California sales tax, we had to pay a temporary tax to drive it
home to Arizona where we were informed that, because we did not
pay city sales tax in California, we owed sales tax to the town
of Prescott Valley, Arizona.
Filling the tank with diesel, we also paid more taxes to
get the fuel to get it home, and then we were taxed to license
the truck and transfer the title, and the county wants to tax
you to inspect the truck. And if over a specific gross vehicle
weight, the IRS wants a form filled out and more federal tax
paid. Now the truck can go to work picking up trash for $16.75
a month.
When you consider any future legislation, please consider
that even the smallest impact has an effect on small business.
In this town, it seems like a million dollars is hardly ever
mentioned anymore unless it is $5-, $6-, or $700 million. For
the most part, you seem to speak in billions and now even
trillions. These are unfathomable amounts. To a small
businessman in this economy, $1,000 is a lot of money. A
thousand dollars is what it will take to cover rent on the
store. A thousand dollars will allow me to keep my home and
make the car payment this month. A thousand dollars separates
me from bankruptcy.
I have never seen so many dreams shattered as I have in the
past year. Folks that had been doing their best to hang on
until the economy improves have lost their businesses, their
homes, their savings, their dignity. If you don't believe in
God, you have never been in business, because over this last
year I guarantee we have all been hitting our knees and asking,
``Lord, please keep the wolves at bay for just one more day.''
And should you survive the attacks from the big box stores,
and get out from under the mountain of taxation, if the clouds
part and God looks down and smiles on your business, and what
do you hear from your national leaders? You hear, ``You are a
fat cat, you are the rich, you need to spread the wealth
around.''
I tell you, that is not the way to start a bonding session.
But my message is a message of hope. Small business really is
the backbone of this country, and proof of that is that we have
not failed completely. I know it is not a popular thing to say,
but I really am proud of this country, and I still believe in
her and the way we do business.
Folks from around the world are knocking our door down to
get in, because we are, and always have been, the land of
opportunity. I think to summarize what the folks back home
wanted me to express is that we really don't need you to do
anything for us, just don't do anything to harm us, consider
the impact of any legislation.''
Thank you.
[The prepared statement of Mr. Kuknyo is included in the
appendix.]
Chairwoman Velazquez. Thank you. And the chair recognizes
now Mr. King. The chair recognizes Mr. King.
Mr. King. Sorry, Madam Chair. Thank you. I was focused on
the witness' testimony. It was so interesting, I was writing a
quote down. I will be reviewing that. This is very fascinating
to me, and that is so much packed into five minutes. Thank you.
I have the privilege to introduce the next witness, who is
Rob Hach. And he and his wife Tara are the owners of a company
called Anemometry Specialists, Incorporated, that is
established in Alta, Iowa, a small community.
They set the business up in 2002, and they have seen
expansion since that period of time. What it is, anemometry is
the study of wind. And they set up sensing devices to determine
if a wind-generating field can be an effective producing field.
They consult on that and establish and install and construct
the small wind generators that we see around places here in
this capital, as a matter of fact. And that kind of growth has
set up a branch in Texas as well.
I am quite impressed with what they have done as--and they
are the Iowa Small Business Persons of the Year Award winners,
but also it doesn't take very long to find out that Rob is not
alone in this partnership, that if you visit their business and
make only eye contact with Rob, you will soon find that Tara,
who is seated behind him, is as much a partner as Rob is.
I am very pleased to introduce him today, and I am looking
forward to Rob's testimony.
Thank you, Madam Chair. I yield back.
STATEMENT OF ROBERT HACH, II
Mr. Hach. Madam Chairman, Ranking Member Luet--Luet--thank
you, and Congressman King, thank you.
[Laughter.]
Thank you for the invitation to address this Committee
today. My name is Rob Hach. Behind me, the good-looking lady
behind me is my wife and business partner, Tara. We own and
operate Anemometry Specialists, Inc., in a rural northwest Iowa
town.
For eight years, our company has been powered by the winds
that sweep across the plains of the Midwest and throughout the
United States. This wind turns thousands of wind turbines
across the landscape today. In recent years, we have been able
to travel to other countries, to several South American
countries, as well as South Africa, to capture the winds in the
other countries.
It is an honor to present the--that our company resides in
the 5th district of Iowa represented by Congressman King. Our
district has a larger number of wind turbines than any district
in the United States. This means our district is a leader in
renewable energy and renewable fuels.
Our clients in the wind industry understand our name, and
it defines what we do. Anemometry means the study of wind. What
we do for our clients is specialize in the study of wind. We
study to determine the feasibility and the success of a wind
farm. We install what is called a meteorological tower. It is a
200-foot tower with sensors up and down that measure the wind
speeds and wind direction.
The data is transmitted back to our office. A meteorologist
analyzes and processes the data, and then provides a report to
our developers and our clients. These reports are then used to
finance a wind farm.
Recently, our company, as Congressman King said, received
an award from the United States Small Business Administration
for the Business Persons of the Year for the State of Iowa.
From 2004 through 2008, we have doubled our revenues and our
employees each consecutive year. Even in the tough economy of
2009, we were able to show a profit and expand the company.
We have been able to add an office in Texas, an office in
New Mexico. We have been able to bring on four more employees
during 2009, and we continue to hire. It brings our total to
30. We were able to avoid layoffs, maintain benefits, and we
have been able to take care of the families that made our
company successful and grow.
We continue our growth in 2010. We are looking to add two
more regional offices and an additional 10 more employees. We
have added a new division to our company which installs and
services small wind turbines like the ones that you see on
the--in the Botanical Center here in D.C.
Today, I would like to highlight some of the programs that
are in place that we have been able to take advantage of at
Anemometry Specialists, despite today's economy.
The Business Association--the Small Business Association
has been the best program that we have seen to be able to help
our company. Tara and I started our company in our twenties,
and, as you have heard numerous times today, getting credit has
been difficult. We did not have the cash or the assets the
banks needed in order to secure a loan.
We were able to access an SBA 504 loan, and be able to
get--receive a $150,000 line of credit from the SBA. We were
able to work hard and build our company during our early years
when we weren't able to secure funds through conventional
banking or fund-raising.
We paid our debt off early, and just recently secured
another note with the SBA for the purchase of our building.
Last year we were able to secure a $184,000 loan to purchase a
17,000 square foot building, backed by the SBA. The SBA is
offering small businesses confidence in an uncertain economy.
Through the SBA, we have been able to work with programs
like SCORE, Counselors of American Small Business, and the
Small Business Development Centers, where we are able to access
experience through support services and business advice.
Business guidance and mentoring is just as important as
company finance. It is vital for a new business owner to know
how to manage the company and its growth, especially with the
changing regulations and global competition.
A state loan--I am going to skip that one.
The funds that allowed Tara and me to work continuously
with a CEO coach over the last two years has been vitally
important. We have been able to work with a CEO coach, and it
has been able to take our management team even higher and grow
our company even more, and, especially with our five years of
growth, we have been needing that CEO coach.
It is kindly that I ask the Committee to continue to
support the Small Business Administration and its
revitalization of the small business workforce. As business
owners, we would like to see more offered in training funds, so
that our workforce might be able to continue to change and
adapt in an ever-changing world economy.
Business incubators and low-income housing type of office
and warehouse spaces will be also nice for consideration.
Thank you again for the opportunity to address the
Committee and testify on the small business heroes. I would be
pleased to accept any questions.
[The prepared statement of Mr. Hach is included in the
appendix.]
Chairwoman Velazquez. Thank you, Mr. Hach.
And the chair recognizes Mr. Schock.
Mr. Schock. Thank you, Chairwoman Velazquez. Appreciate you
having this Committee hearing and allowing us to bring members
from our districts back home with relevant experience.
Ranking Member Graves, fellow Committee members, I am
honored to welcome today Ms. Wendy Martin, who is the Corporate
Officer for Martin Publishing in Havana, Illinois. Wendy, along
with her husband Bob, who joins her here today, own two local
newspapers, a printing company, and a basement dewatering
business.
The Mason County Democrat is Mason County's oldest
established business, having observed its 160th year in 2009.
Their other newspaper, The Fulton Democrat, recently celebrated
its 155th anniversary, and is the oldest established business
in Fulton County.
Wendy's family newspaper history can be traced to her
grandfather, Dr. Morris Fishbean, who was editor of The Journal
of American Medical Association for 25 years, and was the
author of the first syndicated column that we have all come to
know, ``Ask the Doctor.''
Wendy has seen a lot of changes to the newspaper industry
is her 25-plus years with the company. And as the former
President of the Havana Chamber of Commerce, Wendy has helped
to revitalize a depressed community in her county.
I am pleased to introduce Ms. Wendy Martin of Morton
Publishing--of Martin Publishing from Havana, Illinois.
Welcome, Wendy.
STATEMENT OF WENDY MARTIN
Ms. Martin. Thank you. Madam Chairwoman, Ranking Member
Graves, and Congressman Schock, thank you so much for the
opportunity to talk to you here today.
Our company, Martin Publishing of Havana, has two
newspapers and a printing company, as he said. And I guess I am
repeating myself, but we are--both of them are over 150 years
old, and we are very excited. The paper that is 155 years old
has always been in my husband's family.
My husband Bob here, he and I have been working together
for 36 years, although he has got a few more years' seniority
on me. He started at the newspaper when he was seven sweeping
floors. He says that is indentured servitude. When I started,
we had a linotype operator, and we cast the headlines in hot
lead.
In 1974, who could have imagined personal home computers,
Google, Yahoo, and news aggregators? For those reasons, and a
variety of others, the newspaper industry has changed
dramatically. For once, it is to our advantage to be the small
hometown newspaper. Our news is all local, and our readers
depend on us to cover the schools, the city councils, 4H clubs,
and the things that matter to them.
Industry-wide, circulation has taken a nosedive, but we are
kind of holding our own. Bob says we are kind of like you. You
get elected every two years, and our readers vote on us every
year when we send out the subscription renewal forms.
To stay competitive, it is always critical to keep your
equipment and processes up to date. In the next few weeks, we
will complete the launch of new Internet editions of our
newspapers. Our mission is to provide the best local news
coverage that we can, but the success of our business really
depends on other small businesses. The majority of our
customers are just like us--small, local entrepreneurs catering
to the local communities that we serve.
Thanks to a federal USDA RCDI grant, we were able to be
part of a program called Shop Havana that supports our
community of 3,800. The goal was to raise community awareness
regarding the difference people could make by doing just a
little more shopping at home.
We calculated that if each resident spent just $12 a week
more in town that they could make a million dollar difference
in Havana at the end of a year. This wasn't spend $12 more,
just spend $12 that they might have spent out of town at home.
In addition to promoting it in the newspaper, our printing
company helped by designing decals for the doors of every
business in town, and table tents that were placed by the cash
registers, and they were there to remind shoppers that the best
reasons to shop Havana were that local businesses were there to
serve them with personal service, high-quality goods. They
created local jobs, and it kept tax dollars at home.
While we are only six months into the program, we know
already that the benefits have been incalculable. Members of
our community have become keenly aware of the difference that
they can make and of the importance of shopping locally. I
think that is why my successor at the Chamber of Commerce
opened up a new business in town this year, and why the owner
of a restaurant that burned to the ground last year reinvested
all of his money back in the community and has reopened. He
named the bar The Phoenix. We have another business downtown
that has expanded, and we even attracted a new restaurant.
I have talked mostly about the newspaper side of our
business and what we have done to try to ensure that the
tradition of local news continues. Our printing company
weathered the storm of desktop publishing, but the overall
crash of the newspaper industry has taken its toll.
At one time, we had 50 employees, and we printed more than
two dozen different newspapers. Today, we do about half that.
In the past year, we have taken a sideway step, and we
diversified by opening a new business, Basement Rescue, which
provides solutions to wet basements. We have five employees,
and we were able to launch this company with the help of a low-
interest USDA loan.
It has been especially rainy in our neck of the woods, so
the timing was really good for this. And we are hoping that
maybe by the time things start to dry out that the economy will
have gained back its strength.
In my roles as one-time chairman of a group we call Hav-A-
Vision, which is an ac hoc economic and community development
organization, my work with the Chamber, and as a local
newspaper reporter, I am probably more aware than most people
about the many different programs that are available, the
federally-funded programs that can benefit or have benefitted
the businesses in our area.
The Small Business Administration has a fellow who helps
folks write business plans. He helped us with ours. In addition
to Shop Havana, we have a brand-spanking new national scenic
byway, and it is expected to open new vistas as--for businesses
as well as tourists. Congress' continued support for these
programs and others like them is essential.
We are very excited about our proposal, the proposal by
Congressman Schock, and Representative Walt Minnick, to provide
payroll tax relief. Talk about stimulus. Employees will have
more money in their pocket, and employers will have a much-
needed revenue source to invest in their businesses. We love
it.
Thank you for your attention today. I am humbled and
honored to have had this opportunity to address you, and we are
grateful that we live in a country where freedom of the press
is cherished, and where small businesses are valued.
Thank you very much.
[The prepared statement of Ms. Martin is included in the
appendix.]
Chairwoman Velazquez. Thank you, Ms. Martin.
Our next witness is Maria Martinez. She is the President
and CEO of Naturally Green Products, headquartered in Orlando,
Florida. Naturally Green Products manufactures and distributes
cleaning and maintenance products. Ms. Martinez previously
owned a janitorial company for 20 years before she started
Naturally Green Products.
Welcome.
STATEMENT OF MARIA E. MARTINEZ
Ms. Martinez. Thank you. Chairwoman Velazquez, Ranking
Member Graves, and members of the Committee, I am here today as
a member of the U.S. Women's Chamber of Commerce, representing
our 500,000 members, three-quarters of whom are American small
business leaders and heroes.
I am Maria Martinez, founder of Naturally Green Products. I
have three decades of entrepreneurial experience. Naturally
Green Products manufactures and distributes the most
comprehensive line of DfE, designed for the environment, green
formulated cleaning products, and EPA-registered disinfectants
for all cleaning requirements, facilities, and industries in
the commercial marketplace.
In 1993, with an SBA-backed loan, I purchased a commercial
janitorial company. I certified my business as a woman minority
business enterprise, with the National Minority Supplier
Development Council, which made it possible to network with
prime contractors to the government, and large corporations
with minority initiatives.
My company possessed a Secret clearance, which allowed me
to bid on projects of the caliber I desired. Within a few
years, my company had grown to employ 400-plus individuals and
a varied customer base. During the growth years, I purchased a
small office building with a 7(a)--SBA 7(a) program loan.
In 2003, I was 8(a) and SDB certified through the SBA. I
also became HUB zone certified, which, when added to the
already existing certifications, I became an asset of great
value to my customers. What distressed me in business was that
a woman business owner received no consideration unless they
were a minority. The SBA didn't have any programs for women,
unless you were within the acceptable minority categories.
Needless to say, I am grateful that I am a minority woman.
After the disaster of September 11, 2001, my business took
a downturn. I applied and was granted an SBA disaster relief
loan, which helped stabilize my company. From 1999 to 2006, my
company serviced the janitorial, relocation, and CAD design
needs of Northrup Grumman in Florida.
During the hurricane disasters of 2003 and 2004, their
facility was devastated. My company relocated all furniture,
equipment, and files to a dry facility, and dried out their
building. Our rapid response saved important files, and the
staff was able to return to their offices within two weeks.
In 2004, I was honored with two prestigious awards from
Northrup Grumman, which opened doors for my company. In 2005, I
was invited to bid on a janitorial contract worth $17 million
per year. I partnered with a larger firm. Out of 11 bidders, we
were chosen for the final three. Although the incumbent won
that award, it was a milestone for my company.
Talk had begun on cleaning for a healthier environment. I
searched for cleaning products and equipment that would help in
this effort, but to no avail. In late 2007, I experienced a
Leadership in Energy and Environmental Design green building,
which had indoor air quality sensors and alarms. These sensors
picked up volatile organic compounds in the air and set off an
alarm.
Again, I searched for products that would meet such
cleaning and indoor air quality requirements. I used various
products that laid claim to being green, as well as those that
were certified with a popular third party certifier, but all of
them set off the alarms.
Out of sheer frustration, I found a chemical engineer that
could help me create a line of cleaning products that could be
used in these buildings, products that were truly green. The
process of creating, formulating, testing, and certifying these
products took two years. We chose the EPA's program for green
chemistry, the DfE, because we found that they have the
strictest requirements with regard to solvents.
I formed a new company with new challenges to face and
overcome, such as the EPA's DfE program for green chemistry is
not recognized within the U.S. as a viable certifying entity
among large institutions, including government agencies.
The nonprofit organization, Green Seal, has a significant
market share among large institutional purchasers and
government agencies. Green Seal has a strong marketing arm that
is actively promoting their certifications. Green Seal is not
small business friendly. Their fees are $3,500 per product for
the entry-level pricing.
The economic crisis has made it impossible to obtain
banking support, even with an SBA backing. Companies claiming
to be green, but aren't--we call that green-washing.
This adventure of Naturally Green Products is a blessing in
my life, and I am grateful to have these challenges to address.
Thank you, ladies and gentlemen, for allowing me to speak.
[The prepared statement of Ms. Martinez is included in the
appendix.]
Chairwoman Velazquez. Thank you, Ms. Martinez.
The chair recognizes Mr. Sestak.
Mr. Sestak. Good morning, Madam Chairwoman, and the rest of
my colleagues on the Committee. It is an honor to introduce my
constituent today, Mr. Brian Biddulph-Krentar, President of HIT
Consulting Services & Application Solutions of West Chester,
Pennsylvania.
HIT is a small business, Madam Chair, dedicated to helping
the health care community reduce cost and medical errors,
improving patient outcomes through technology. In 2008, HIT was
ranked 21st on the Philadelphia 100, the list of the 100
fastest-growing, privately-held companies in the greater
Philadelphia region.
When Mr. Biddulph-Krentar contacted my office in March of
2009, HIT had 25 employees and was looking for additional
capital to help launch two new health care information
technology software programs. With the tightening of the credit
market, especially to small businesses, he was faced with the
difficult choice of either laying off eight to 10 employees or
dipping into his personal savings to avoid any job cuts.
My office connected Mr. Biddulph-Krentar with the Small
Business Administration's Philadelphia Regional Office, which
provided him with the information about the SBA loan programs
available for small businesses. On the one-year anniversary of
the passage of the American Recovery and Reinvestment Act, he
contacted my office to announce that HIT had closed on a 7(a)
loan backed by the SBA, with a community bank that participated
in its lending programs.
Knowing the success of HIT and the jobs of employees were
at stake, Mr. Biddulph-Krentar worked hard to find a bank that
partnered with him and the SBA to meet the company's needs. As
a result of his perseverance, and the continued efforts of
Congress and this administration, to support America's small
businesses, he now reports that HIT will hire additional
supporters.
Their SBA guaranteed 7(a) loan has given them the
confidence of knowing that they can continue to grow. And at
the same time, the SBA's lending volume has dropped to less
than half of what it was prior to the recession setting in. At
the end of 2007 this occurred.
Moreover, small businesses are finding affordable credit
difficult to come by. More than 40 percent of small businesses
have credit limits put on their company credit cards, and 60
percent have experienced an interest rate increase on their
card.
I believe we have to do more to remove the barriers to
success our nation's small businesses face. We should either
ensure--we should ensure continued access to capital for these
vitally important entrepreneurs by increasing SBA lending
limits and improving terms for community banks to encourage
investment in small businesses.
And, in closing, I think it is important to note, Madam
Chair, that over the past decade small businesses create as
much as 80 percent of new American jobs.
And I wish you, sir, continued success, and thank you for
being part of the great entrepreneurial engine that powers this
wonderful nation.
Thank you.
STATEMENT OF BRIAN BIDDULPH-KRENTAR
Mr. Biddulph-Krentar. Thank you. Thank you to the Committee
as well for this opportunity, and to the other panelists for
sharing their stories. They are familiar and comforting as
well.
I started HIT about six years ago. I was the only employee.
I did all the work, managed, went to the hospitals. What we do
at HIT in both companies is we go in the hospitals, and we help
them implement software, improve patient workflow, and redesign
their departments.
I wanted to start a company that was dedicated to improving
health care through the use of information technology, started
out doing only services, so that did not require a lot of
initial startup capital. So we were lucky in that aspect.
I was able to fund the company with a little bit of my
savings and just continue to grow as we received more business.
It did require an enormous risk, because I left a stable job
and a well-paying job, and the patience of my wife, while, like
a lot of other people have said, I was working 20-hour days, so
she was taking care of the kids and the house and all the
errands and all that stuff.
We had to work very hard to attract our clients, build a
solid reputation, and we had to find the right employees. We
had to find employees who wanted to share in our vision, and
also who could accept the risk of working for a small startup
company. So we got lucky and found a good group of employees,
and we have continued to be able to do that.
Not long after we started the services industry, services
company, we actually became a leading partner of Siemens, which
is the number--which is one of the top three largest global
health care companies in the world. And three years after
inception, like Congressman Sestak said, we became the 21st
fastest-growing company in the Philadelphia region as ranked by
Philly 100, which is part of the Wharton School. And then, in
2009, we were the 42nd company.
Through our work in hospitals, in the United States and
Canada, we saw a need for better communication of critical test
results, so that kind of led us to a new path. We started to
develop our own software. That requires a very different type
of funding. You need a lot of upfront capital with the hope
that you have some revenue coming in down the road.
So I liquidated a lot of my retirement savings, which I am
sure is not uncommon, and we have partnered with a small
community bank, after some failures with large banks. That got
us to a certain point, and then, as Congressman Sestak said, we
tapped into the SBA program. That was a pretty long process for
us until we found the right bank, and I think it was a long
process, because the banks that we looked at initially weren't
well educated on the SBA program.
Once we found the right bank, Conestoga Bank, who had an
SBA team, including Morgan Johns, the program worked really
well for us. We had to provide a lot of initial paperwork, but
they, the bank, and Morgan and his team, took care of most of
the process, and that got us to where we are today, which is on
the precipice of a lot of work coming in, and also with that
the need for more capital.
So we find it important to balance equity and debt, so we
will probably look to get a little bit more investment. We also
have received some investment from friends and family, about
$1.5 million to this point. So we are at the point where we
need to grow, we can grow, we have the work, we need employees.
We just need to find the capital and the funding to support our
growth.
Thank you.
[The prepared statement of Mr. Biddulph-Krentar is included
in the appendix.]
Chairwoman Velazquez. Thank you. And I know that most of
you were sitting here when the previous witnesses were
testifying, and the members posed basically one of--the
question about access to capital. And I know that you either
faced that obstacle or you have heard from other small
businesses that they are facing difficult times in terms of
accessing capital. Can you talk about your own experience
regarding that?
I hear what you are saying, that some of the SBA programs
have been instrumental, have been good to you. So do you see a
role for the Federal Government in providing access to capital
facilitating? Because the loans that you get you get it through
the local banks, they are guaranteed by the Federal Government.
In fact, we increased the loan guarantee from 75 to 90 percent.
And through the economic stimulus package, we lowered the fees
that you pay to the Federal Government.
So we incentivize borrowers by reducing the fee, and we
incentive the banks to lend by reducing the fees that they pay.
So do you feel that in the very difficult economic times that
we are in that there is a role for the Federal Government to
help small businesses access capital? Yes, Ms. Martin, you can
start.
Ms. Martin. Well, I know that my point of view is going to
be a little different than everyone else's, but I think it is
spot-on for this particular Committee. The loan that we got,
one of the things that is important is, besides that it gave us
capital to get ours going, when it gets paid back, it will go
back into our community, and they will be able to loan it again
to other businesses. And we think there is a lot of value in
that. You know, we know it was good for us, but we are glad
that it is going to be good for our whole community.
Mr. Hach. As far as stimulus funds that are available out
there, I would say that the SBA funding would be the best way
to get people back to work. So I am in favor of continuing to
support the SBA with the President's support of the $30 billion
that he is earmarking for the SBA. And maybe ``earmark'' is not
the right word, but that he is proposing for the SBA.
I see that as a tremendous amount of stimulus for the
economy, helping the small businesses continue to hire more
employees.
Mr. Kuknyo. We have been kind of insulated from it, because
the nature of our business of trash isn't stopping, and it is
something people still want to pay for. We have actually caught
up on a lot of bills, because we haven't had to pay for this
massive growth that we have had for the last eight years. But
at the same time, the recurring monthly revenue keeps coming
in, so we have actually caught up. But I am ready for it to
start again, though.
Chairwoman Velazquez. Very good. Ms. Martinez.
Ms. Martinez. I had a little different experience in the
last business, the janitorial company. As you heard in my
statement, I was able to acquire four separate SBA loans, and
they were rather easy to get. I was using a small community
bank, which they had a wonderful person there who was very
knowledgeable about the SBA, and she was able to move things
quickly.
But in this new company that I have, and with the times
being as difficult as they are, I have been to three separate
banks with an SBA backing to get loans, and haven't been able
to acquire one. So I see it so differently now than it was for
me back 10 years ago.
Mr. Biddulph-Krentar. And I think we shared a similar story
earlier where the reason you didn't get past the banks, you
didn't get to the SBA, so I think I had the same issue. It took
me a year to get an SBA loan, because I was going to the wrong
banks that weren't well educated about the SBA program. So I
think the Small Business Administration playing a role in
educating banks and helping them to facilitate the program
would help people like us.
Chairwoman Velazquez. Mr. Kuknyo, I know that you compete
against one of the largest, if not the largest, waste--
Mr. Kuknyo. Biggest in the world.
Chairwoman Velazquez. Right. So what are some of the
challenges that you face in competing against such a large
firm? And what benefits are you able to offer your customers
that large firms cannot?
Mr. Kuknyo. We put into the community like no other garbage
company I have seen. You know, we sponsor the Boy Scouts, the
food bank, not only with our money but with our time. And, you
know, we get totally involved in the community, the community I
have lived in since 1978, so it is something that we are all
about.
This biggest garbage company in the world just--they are
trying to use these economically troubling times, in my
personal opinion, to crush the small buys, because they are
offering my residential customers three free months of garbage
disposal if they make a switch from my service to theirs. A
small businessman, I cannot work for free for three months.
They can do that.
Oddly enough, they didn't offer that to their customers;
they offered that to my customers. So that is--I hope that
answers your question.
Chairwoman Velazquez. Thank you. Mr. Luetkemeyer.
Mr. Luetkemeyer. Thank you, Madam Chair. I know two of you
mentioned SCORE, that you had worked with SCORE. We have a very
active SCORE chapter in my district, and I was just curious
about your experiences, and if you could elaborate on it just a
little bit, make sure everybody understands what SCORE is and
how they were able to impact your businesses.
Mr. Hach. Score, for our company, was beneficial. The
mentoring and the training was helpful, and we did get a point
that we were--exceeded the level of experience of our SCORE
members. And we have been in a conference for the last three
days with the SBA and learning about the opportunities that the
SBA offers. And so there is a SCORE online, and you can go
online and be able to access more SCORE counselors.
And we have a new SCORE chapter president, and he has been
able to talk us into becoming SCORE members. So we are going to
be able to go out and counsel other small businesses, my wife
and I.
Mr. Luetkemeyer. Very good.
Mr. Kuknyo. They were a nice asset to have to ask questions
about. But like I said, they told us not to go into business.
And, by the way, they were right. There is a couple of times
where, you know, we were not in the good shape like we should
have been. But they are a good resource that way, but we didn't
have much luck, they told us not to do that.
Mr. Luetkemeyer. Have you checked back with them since
then? Are you using--
Mr. Kuknyo. No, sir. You know what we have done? We have
kind of developed our own SCORE. We found other guys that have
retired from the business, and we asked them questions, and we
take from--we have a huge retired population in my city, and
there is so much knowledge, so much experience that you can get
from these people. And they would love to share it with you,
too.
Mr. Luetkemeyer. Fantastic. Ms. Martin, I asked this
question of one of the other panelists a while ago with regards
to the new 1099 requirement on vendors that you have $600 worth
or more of expenses with. Is that going to be a problem for
you? Because I know in your business you have lots and lots of
people you deal with.
Ms. Martin. No.
Mr. Luetkemeyer. No?
Ms. Martin. No.
Mr. Luetkemeyer. Your bookkeeper said it is not a problem,
the 1099s?
Ms. Martin. No.
Mr. Luetkemeyer. I know it is one of the concerns I get. I
get tons of mail on this from my constituents, my small
business folks. They just really--it is just another layer of
regulation, another layer of cost that is being put on these
folks.
Ms. Martinez, I see you shaking your head. You are familiar
with the situation. Is it a problem?
Ms. Martinez. Well, in the janitorial company that I had, I
had a lot of small contractors that would come in to do a small
job, you know, that maybe it would be $5-, $6-, $7-, $800, less
than $1,000 let us say. So, in my case, it probably would
have--with such a turnover of employees when you are just
hiring them for one job here or one job there, it would be
pretty burdensome.
Mr. Luetkemeyer. Very good. I just want to thank all of you
for being here this morning. I will wind up my questions here,
and allow somebody else some extra time. But thank you for all
that you do. You are anchors in your communities. You are
anchors not just from the standpoint of employment, an economic
generation of activity that you produce there, but also for the
support you give to the local folks. Thank you for all that you
do.
Ms. Martinez. Thank you.
Ms. Martin. Thank you.
Mr. Luetkemeyer. Madam Chair, I yield back.
Chairwoman Velazquez. Thank you. Mr. King.
Mr. King. Thank you, Madam Chair. Yes, first, I want to go
back to Mr. Kuknyo. Your testimony is fascinating to me,
because you came up with a business plan, and people advised
you that it wasn't a very good business plan, come back when
you don't need the money, your banker said.
I listened to Mr.--Congressman Hall from Texas say one day
that he--he said his banker said to him, ``I have listened to
your idiotic idea with an open mind,'' and you went ahead and
defied that anyway, and you made this work in the face of the
toughest competition that you could ask for. And now they are
working to push a monopoly by providing a free service until
they can squeeze you out, 14 to 21 percent interest.
And then, getting down to the really interesting stuff
where you said, ``Stop trying to be my partner, government. We
really don't need you to do anything for us, just don't do
anything to harm us.''
I will give you just an opportunity to embellish that a
little bit. That is a pretty powerful statement, and it
resonates with me.
Mr. Kuknyo. Well, you know, I think when it comes--like the
legislation we were just talking about, if we have to do more
paperwork, we have to pay somebody to do that paperwork. We
have to do that--the accounting.
Take the taxation off. When I was testifying about the
stuff that we go--the county wants to inspect my trucks to make
sure that they are flight tight. None of them are. There isn't
a garbage truck in this country that is. But you have to say,
yes, it is, and then they write their little slip, they get
their check for $88, and they are happy. You know, take that
stuff away. It is just taxation to generate revenue. Let us
handle that money. We will bring this economy back.
Mr. King. What do you think would happen if you or any
other business in America would put a notice up on their
website that said, ``We are here to announce that we are in
compliance with all government regulations''?
Mr. Kuknyo. I don't even understand that question.
Mr. King. Okay. Do you believe that there is a business in
America that is complying--there is a--let us see, there is a
website called Constitution Daily that posted a couple of years
ago that there are 682 federal agencies. Now, I counted 43 that
regulated my business, but 682.
Do you believe that there is a business in America that is
in compliance with all federal regulations that could open
their doors and be inspected and pass the test?
Mr. Kuknyo. No.
Mr. King. Is there anybody on the panel that believes that
there is a business in America that could be in compliance with
all of the federal regulations? Mr. Hach?
Mr. Hach. I am sorry. DOT was one that loves us, and we are
on the road all the time. And we inspect all of the trucks
before they leave our shop, and we can go 16 miles down the
road to Early, Iowa, and the DOT weigh scale can find something
that needed to be addressed. And we inspect all of our trucks,
and we are a very safe and secure company. But they can find
something.
Mr. King. And that is just one state regulatory agency that
you couldn't--well, I suppose it is possible that you could be
in compliance with that. I want to make this statement and ask
if the rest of you might agree with me. When I started a
business in 1975, my biggest concern was that I didn't know all
these regulators were, I didn't know how I could find out what
the regulations were, and I feared that I could not be in
compliance and I couldn't meet all of the government
regulations.
I thought I can do the work, I can fix the trucks, I can
sell the business, or sell the service of the business, but I
didn't believe that I could figure out how to comply with all
of the regulations that are there. Did that fear exist in Mr.
Hach and on down the line when you established your business?
Mr. Hach. Absolutely. And we found with--again, back to the
DOT, great friends with them, or at least our checkbook. We
found out through--oops, we missed a scale coming in through
Walcott, Iowa, and we didn't know we had to pull in. And they
flagged us down and said, ``You need to go through a scale.''
We did not know we needed to go through a scale. We had been--I
had been doing this work for 12 years prior, previous, before
getting pulled over. And so, yes, we were not in compliance and
not notified that there were these new regulations that we
needed to follow.
Mr. King. Mr. Kuknyo.
Mr. Kuknyo. And I reflect that with his DOT statement as
well, because they can find something wrong with a brand-new
truck, you know? And it seems like when they want to generate
revenue that stop checkpoints go up more and more. But, yes,
anything you can do to back out would help.
Mr. King. Why don't you open your own landfill?
Mr. Kuknyo. Would you write the check to help me do that? I
would love to do that. Like as you remember, the banks aren't
talking to me, and that is many millions of dollars. Matter of
fact, Waste Management has the only landfill in my county. That
is why we pay double what they do 100 miles away in Phoenix.
Mr. King. I thought you might tell me it would be the
regulations that keep you from doing that.
Madam Chair, I appreciate the attention. And if that is a
yes, I would be happy to hear that. I saw a nod. And I yield
back the balance of my time.
Chairwoman Velazquez. Mr. Schock.
Mr. Schock. Thank you, Madam Chairwoman, and, again, I
appreciate the testimony, and so many good questions have
already been asked. So I won't be repetitive.
First, to my witness, Ms. Martin, you talked about some of
the creativity you have had to enlist. Havana has had very high
unemployment. Your county especially, in my congressional
district, has one of the highest unemployment rates, or
actually has the highest unemployment rate of the 20 counties
that I represent.
Maybe you could talk a little bit about how the above
average unemployment rate in that area has affected your
company, and specifically the customers, obviously, who
ultimately buy your publications. You mentioned you do sheet
fed printing. Maybe you can talk a little bit about how that
benefits your customers and how you have had to become stronger
or more creative, given the tough economic times we are all
facing, but especially in your part of the world.
Ms. Martin. Thank you. Well, you have asked a couple of
different questions. One of them was about, you know, our low
unemployment and how that has affected us, and--
Mr. Schock. High unemployment.
Ms. Martin. I am sorry, the high unemployment, yes. You
know, I mentioned about newspaper circulation taking a
nosedive. And, you know, we have tried to hold our own, but
what happens is, as far as our circulation is concerned, is
people find ways to cut costs and share newspapers. So that
cuts into our circulation. But, you know, we understand that
that is what people have to do until they can get back to work
again.
And, of course, Havana has worked on--the different
organizations that I have been involved in, we have worked on
lots of different programs trying to shore up businesses, so
that there can be continued employment. You know, there was a
federal grant that helped us go to Fairfield, Iowa, to see what
they are doing with small business incubators, you know,
because you have got to get--I mean, I believe the gentleman
over here had said 80 percent of the--as many as 80 percent of
the jobs are created by small businesses.
So we have done a lot to try and work on that. With us
personally, with our business, with our sheet fed--we have
newspaper presses and we have what they call sheet fed presses.
So what we were able to do is show some of our customers how
they could do their products more economically by marrying both
newspaper and sheet fed work together.
So we will do a real nice, fancy cover for a magazine, for
example, and we will have a little less expensive printing
process for the inside paper. You can still have nice paper and
still do it on a newspaper press. So that is one of the things
we have done.
Thank you.
Mr. Schock. I just give the opportunity to any of the panel
members--you know, we obviously asked you all to come here to
highlight your respective businesses and how successful you
have been, in spite of the storm. But are there any specific
things, other than not hurting you--I am reminded of the
Hippocratic Oath in medicine, ``Do no harm,'' which seems
pretty simple to ask of your representatives in Congress.
But perhaps there are things that we could be doing
proactively that you would like to see if you were sitting in
Congress or if you were the Speaker of the House. What
legislation or what initiatives would you like to see us
advance here in the nation's capital that you think would be
most beneficial to entrepreneurs and small business people in
America? Any of you.
Ms. Martinez. Well, I would like to address the EPA, which
is something that I have come across recently. You know, the
EPA is government, and their design for the environment program
is sponsored, you know, by the government.
And it is amazing to me that government entities cite prime
contracts to the government, etcetera, like the Northrup
Grummans and the Lockheeds and the Boeings, etcetera, don't
recognize the EPA's program. You would think that that would be
the first program they would want to support, because they get
their funding, they get contracts from the government,
etcetera.
But what I have found out lately is that the EPA has not
been marketing themselves at all, and they have made a
statement just recently about that. What would be wonderful to
see, and I don't know if this has to do with legislation,
giving more money to the EPA for the Design for the Environment
Program, whatever, but the green issue is supposed to be big.
The Federal Government is pushing green. Everyone is trying
their best to do the green thing. And I am a green company,
completely, with my products. But not only does the EPA not get
any support, and that is who I have got my product certified
by, but there is also no help, no funding, nothing, even though
I am spending all of this money and time in producing something
that I know the Federal Government wants to see.
So that might be an issue there that might have to be
discussed in Congress. I don't know. But these are two very
important aspects that I deal with on a day-in and day-out
basis right now.
Mr. Schock. Well, certainly the EPA is one of the favorite
agencies that gets a lot of attention from business people in
my district as being more of a hindrance than a help.
But my time is expired. I thank the panel again, and Madam
Chairwoman, for your indulgence.
Chairwoman Velazquez. Sure. Mr. King.
Mr. King. Thank you, Madam Chair. I appreciate being
recognized. I want to keep it really brief, but I saw something
that was very, very ironic, that I wanted to make sure I could
express to the Committee. And that is Mr. Kuknyo's testimony
that shows the tax billing he missed for that quarter was
$44,000, but after the interest and the penalties and fines
that is now $88,000.
It happens to be an ironic coincidence that a baby born in
America today's share of the national debt is $44,000. And by
the time they start fifth grade it will be $88,000. I hope that
makes you feel better. You are like a newborn, so start again.
Thank you, Madam Chair, and I yield back.
Chairwoman Velazquez. Thank you. Any other member that
wishes to make--any other questions? If not--yes, Mr. Hach.
Mr. Hach. Yes, I am sorry. The question was asked to the
previous panel, and Mr. Schock had led to legislation that
would have an impact on small business. And one of the ones
that would significantly have an impact on our company, that
could benefit our company, is a non-renewal of the blanket
unemployment funding in six weeks or when it comes up again. In
northwest Iowa, it is very difficult to find employees, and so
we were actually, I would have to admit, kind of excited about
the recession. And that would mean that we would have more
employees to draw from.
We have gone to a number of different job fairs where the
people will walk through, and we are interested, and they will
not take an application, because their unemployment hasn't run
out. We had a tenant that I offered--actually helped him find a
job and he said, ``I have $16,000 worth of unemployment coming
to me. I don't need to go and apply for this job.''
So the unemployment, I think you, by not renewing it with a
blanket renewal, would be beneficial to small business owners.
I think everyone who sat on the panel stated that, that
unemployment is hurting the unemployment rate in America. And
by--if we can hold off for a month before renewing it, some
other plan besides just a blanket renewal is going to be
hindering--is hindering companies, and we need employees. We
need employees.
Chairwoman Velazquez. Time has expired.
Mr. Hach. Thank you.
Chairwoman Velazquez. Mr. Coffman, the chair will recognize
you at this point.
Mr. Coffman. Thank you, Madam Chairman. I apologize for not
being here earlier. I came from another committee that was
talking about the oil spill in the Gulf of Mexico.
I am just wondering if you could just maybe individually
just tell me what you see going forward, just in a nutshell.
Are you optimistic or pessimistic about the next six months?
Mr. Hach. I am optimistic. I am absolutely optimistic. I
was able to hear a comment last night from a recitation of Sam
Walton's comment that he refuses to participate in a recession.
And we feel the same way; we are not going to participate in
the recession.
Mr. Kuknyo. One thing that has been good is it has forced
us to get our processes down pat. It has forced us to run
smooth and to run lean, and I think that is going to benefit us
coming out of this thing, where when things were growing so
fast we just got lazy on a lot of things, where we could have
trimmed budgets or what not. And this has made us become sharp
again.
Ms. Martin. I am always optimistic, so, you know,
everything that we do--we try to do is to help our community
and help the businesses in it, because they are our customers.
And so I am--if it is not working, then we look for something
else to do.
Ms. Martinez. I am very optimistic, and in the State of
Florida where I live the State is doing--they have a lot of
programs to try to help small business either exporting or
improve their importing or their services and all. And I am
taking part in a few of those opportunities, so I am very
optimistic.
Mr. Biddulph-Krentar. I am optimistic as well. With a
little more certainty around health care reform, it is evident
that hospitals are starting to spend more money, which is a big
help to our business.
Mr. Coffman. Thank you, Madam Chairman. I yield back.
Chairwoman Velazquez. Thank you. And let me thank all of
the witnesses for your participation here today. We are really
very, very grateful, and we wish you all the best. We need you
more than ever. Thank you.
[Recess.]
Ms. Dahlkemper. [presiding] The hearing now resumes.
I am very pleased today to introduce Dan Wallace of Wallace
and Pancher, Incorporated, from Hermitage, Pennsylvania. Mr.
Wallace, a civil engineer, is here today with his business
partner, biologist Brian Pancher, to share the story of their
environmental, engineering, and construction firm.
Dan and Brian's story is an incredible small business
success. They have built their company from the ground up,
literally. Their business, which they started in October of
2001, expanded from the two partners working out of Mr.
Wallace's basement to 80 employees among three separate offices
in 2010.
They built their company from scratch, working year after
year to develop a strong client base and refine their business
to one that could weather the current recession and turn 2008
into a breakout year--or 2009 into a breakout year. Wallace and
Pancher demonstrate the strong work ethic and can-do attitude
that makes western Pennsylvania a great place to do business.
I am very proud to have Dan and Brian here to represent our
region's small businesses before this Committee. And I
appreciate, Mr. Wallace, your being here today. You now have
five minutes for your testimony.
STATEMENT OF DANIEL WALLACE
Mr. Wallace. Representative Dahlkemper, other members of
Congress, thank you very much for giving us a chance to be here
today and tell you the story of our company. It is at times
like this that we get to reflect back--Brian and I get to
reflect back and think about all of the things or the path that
has taken--that we have had to take to get to where we are
today. And it doesn't happen too often, because we are too busy
trying to manage the business and manage the growth, but it is,
nevertheless, a fun story to tell.
Well, Brian and I are a fairly unlikely pair to get
together, let alone to start a new business. And Brian being a
wildlife and fisheries biologist, and myself a civil engineer,
often those two disciplines within the industry of consulting
engineering butt heads, and they don't really work together so
well a lot of times.
But Brian and I became good friends. We met at a big
engineering firm where I was already working. Brian was coming
into that company, coming in from working for environmental
agencies around the country as a biologist, and he and I just
became friends. And, you know, after a few years we decided
that, you know, it was time, we want to do this for ourselves.
So we decided to incorporate our business just two weeks
before September 11, 2001. And as everybody knows, that was,
you know, a day that has changed our country and changed the
world. And, you know, a lot of people told us that we were
crazy for starting our business. We had good jobs at this big
engineering firm, and, you know, we really could have had our
life pretty much set at that company doing projects all over
the country for, you know, large and small projects.
But we didn't listen to them. We went ahead and we gave our
notice at that company, and we left, we stepped out on our own.
Well, we had nowhere to step to, so we went into my basement.
And we had one old computer and two desks, kind of makeshift
desks, and we had a big idea. And from there it becomes a
pretty interesting story.
Through our network of contacts that we had at this big
engineering firm, we thought that we were going to be able to,
you know, contact them, get work, that type of thing. And so we
started making those phone calls, and one by one they told us
that they didn't have any work for us. So our strategy had to
change pretty quickly.
And so we had to start putting ourselves out in front of
anybody we could to get our name out, and what we could do for
clients. Our company started off doing environmental
consulting, stream and wetland issues, getting projects through
that process to get the permits to fill in wetlands. We
designed new stream corridors and wetland replacement or
mitigation sites.
And, you know, one by one we got the chance, the
opportunity, to do work for different clients, and they loved
that we were able to do that for them. And they started telling
other people, and soon the word of mouth really started to
spread, but we still kept doing presentations at conferences,
any place we can go to get our name out. We have done free
work. We have done all kinds of things.
But, you know, so we kept--we got to the point at the end
of 2003--now, this is our second full year in business, and we
realized that we couldn't do any more work than humanly
possible, and so we hired our first employee November 3, 2003.
By the end of 2004, we had to hire one more person, and we
knew that we were quickly running out of room in my basement,
and we had to make some move to get out to a bigger space. So
we purchased a small home, and we remodeled it into an office.
We moved into that place in August of 2005, and at that
point, again, we only had four people. So just about I guess it
is four and a half years ago that we moved out of my basement,
and now we have about 80 people. And as of this week, we may
have more because we continue to keep hiring to meet the needs
of our clients.
During those years, we have added a construction division,
and it really started off with myself renting a little mini-
excavator, because I couldn't get across to the contractors to
build those natural environments the way we knew they needed to
be built. So we now have full service construction crews, and
we have been very blessed to experience the growth.
Last year we hired about 31 people. This year already we
have hired over 20 people. And we see a continuing demand for
the services we provide to our clients, and we will continue to
hire people to meet that demand and give those clients more
than what they expect. And that is our belief.
Thank you very much.
[The prepared statement of Mr. Wallace is included in the
appendix.]
Ms. Dahlkemper. Thank you, Mr. Wallace.
I would now like to yield to the gentleman from Colorado,
Mr. Coffman, to introduce the next witness.
Mr. Coffman. Thank you, Madam Chairman. It is a pleasure to
welcome a fellow Coloradan and constituent, Brian Greenley, to
the Committee.
Mr. Greenley is the President of Greenley Enterprises
Corporation, DBA Maaco Collision Repair and Auto Painting, in
Littleton, Colorado. He has established the most successfully--
the most successful Maaco franchise in history, growing his
business from a humble beginning of six employees in a 9,000
square foot location, with $400,000 in annual revenue, to his
current business of over 30 employees with 17,000 feet of work
space, and $4 million in revenues.
Mr. Greenley has received several industry awards,
including the International Franchise Association's Franchisee
of the Year Award. He became the first inductee of the Maaco
Hall of Fame Award, which was established in memory of Maaco's
founder, Anthony Martino.
Outside of the workplace, Mr. Greenley enjoys traveling
with his wife and daughter, along with various recreational
activities, such as gardening and sports.
Welcome to the Committee, Mr. Greenley. We look forward to
hearing your testimony.
STATEMENT OF BRIAN GREENLEY
Mr. Greenley. Thank you, Mr. Coffman, and Ranking Member
Luetkemeyer, for inviting me here today. My name is Brian
Greenley, and I do own the Maaco Auto Painting and Collision
Repair in Littleton Colorado.
Maaco itself has 475 stores nationwide and is the largest
chain of its kind. My franchise provides an economical choice
to customers for auto painting and collision repair. When I
purchased my franchise in 1991, I was the young age of 21. I am
proud to say that my company has grown every year, except for
one, over the past 20 years.
I started my business with six employees, as Mr. Coffman
told you about. Today I do employ 31 full-time employees.
Nationwide there are 900,000 franchised small businesses
employing nearly 21 million workers. It is not my position
today to convince you of the importance of small business, but
to explain what makes my small business successful. It did not
take me long to understand that my service competes for
discretionary income. My customers have a choice of how and
where they spend their money. One key factor was to maintain a
cost-effective service that delivers quality, convenience, and,
most importantly, value.
Positioning value over the years has been difficult, with
rising labor costs, payroll taxes, costs of goods, utilities,
property and personal income taxes. One way I have overcome
these obstacles has been to increase productivity levels
through streamline production methods and a strong emphasis on
advertising and customer retention. I have always reinvested my
profits into my business for additional advertising, expansion,
and quality staffing.
Early in my career, I purchased a plot of land and
constructed a state-of-the-art facility. This was done with the
assistance of a SBA 504 in 1997. With this assistance, I was
able to achieve my goals to increase revenues, while expanding
my staff and adding new products and services, at this time
striving to control costs.
I believe the SBA is a crucial source of funds necessary in
maintaining, growing the small business community to continue
to add jobs, which is crucial to the economy, especially today.
As I have expanded my business, I have learned the importance
of positioning and leveraging my brand, personal relationships,
and buying power, to maintain costs.
One area of concern is the rising costs of labor, which has
more than doubled over the past 20 years. Along with labor
costs, higher payroll taxes and workers' comp insurance, it has
made it difficult to maintain healthy gross margins.
As a retailer of a most competitively priced product and
service, I have to lower my gross margins in order to increase
revenue. One example is maintaining the lowest advertised price
for an entry-level paint service. In 1991, this advertised
price was $199. Today, it is $249. That is only a 25 percent
increase.
Advertising and promoting my business is essential in the
success I have achieved year after year. I have increased my
advertising budget by more than 10 percent and managed to
increase gross sales by five percent following a record year in
2009. It is only through my ability to aggressively increase
customer count that I keep my business successful, but
constantly rising costs make it more difficult to provide value
for customers.
I would, therefore, respectively ask legislators to
understand the impact that any legislation has on the job-
creating small business community, for example, higher taxes,
national health care reform, and such legislation as the
Employee Free Act--or Free Act Choice--Free Choice Act.
Even with increased sales, profit margins remain a
challenge to maintain. With small businesses tax incentives, we
would able to invest in our own companies. I have made that
choice, to keep my employees who have invested many years of
their time. It is not my intention to reduce costs by cutting
jobs. Even during the economic slowdown, I have not had to
reduce my workforce by even one person.
I strive to be--I strive to find competitive advantages and
share ideas with employees, fellow franchise owners, and look
forward to continued growth. I ask Congress to embrace those of
us willing to invest everything that we have to make our
companies successful and grow our businesses.
I believe the administration has not placed enough focus on
making life a little easier for small business owners, such as
myself. A bailout or handout is not what we are looking for.
But policies recently enacted, still being debated, from health
care reform to climate change and financial reform, do not,
from my perspective, help small business.
Thank you, members of Congress, for allowing me to speak
today. And if you have any questions, I would like to answer
them, please.
[The prepared statement of Mr. Greenley is included in the
appendix.]
Ms. Dahlkemper. Thank you, Mr. Greenley.
I would now like to recognize Ms. Bean from Illinois to
introduce the next witness.
Ms. Bean. Thank you, Madam Chairwoman, for convening this
hearing to recognize National Small Business Week, and thank
you to all of our panelists for taking the time away from your
businesses. We know how demanding and costly it is for you to
separate yourself from the day to day, and we really appreciate
having you here today.
For you, and for so many small business owners, every week
is Small Business Week, and we understand that your success is
the key to our economic growth as a nation and the jobs that
you create as part of that growth. That is why we have been
very supportive in the stimulus that we did to make sure that
we addressed issues like access to capital, that we provided
bonus depreciation, the NOL carryback, and a variety of other
tax cuts as well.
The 7(a) and 504 loan programs--I don't know if all of you
have participated, but we have someone who is going to talk
about her own experience in a second, telling about how it has
helped her. But $25 billion has gone into the hands of small
businesses through the SBA lending program, after we increased
the guarantees and reduced the feeds in the stimulus package.
But we recognize that that alone isn't enough, and many
small businesses are still facing a credit crunch, and it will
be a top priority for when we return from the Memorial Day
weeks that we will be spending in our district.
But it is my privilege today to welcome Cindy Kottke from
McHenry, Illinois. She operates a successful chain of movie
theaters, including four indoor theaters, two of which she
owns, and one outdoor theater. C You at the Movies is an
example of how a dedicated and resourceful individual can
transform a dream into a profitable business.
You have joined me in the past at a federal forum that I
did for small businesses in the district, and you were very
well received by the other business owners, who heard your
story then, and I appreciate you being here in Washington to
share it with my colleagues.
STATEMENT OF CINDY KOTTKE
Ms. Kottke. Representative Dahlkemper and Ms. Bean, and
distinguished Committee members, thank you. I am honored and
humbled to be here today.
Ms. Dahlkemper. Can you turn on your mic, or get closer
maybe?
Ms. Kottke. Like many, I love the movies. At times my life
seems like a movie. In fact, I feel a strong kinship with
Forrest Gump, in that you never know what you are capable of
until you try.
At 14, I created a neighborhood carnival. It was a fun-
filled day of wheelbarrow rides, downhill barrel rolls, bucket
tosses, and more. My Dad watched as I worked as hard as I
could, and at the end of the day, and after I invested all of
my babysitting money, he asked how much money I had made. I was
embarrassed to tell him nothing, but I enthusiastically told
him how much fun it was, the kids loved the day, and that it
really didn't matter, everyone had fun.
He paused and looked as he pulled a $20 bill out of his
wall, and with his huge smile and a twinkle in his eye said,
``Cindy, there are times in life when business isn't only about
profits or yourself.'' I saw that day the importance of fun and
creating memories. I used that $20 to contribute to my next
venture.
I believe that is the first day I understood how business
could build a community. Like many small communities, McHenry's
downtown had been impacted by the new big box stores.
Storefronts were struggling and beginning to look rundown. Many
had closed. I saw an opportunity. My mothers, sisters, and I
became purveyors of resale home furnishing, opening our first
retail venture. This allowed me to purchase and renovate the
building, which sits proudly on the corner of Main Street and
Route 31 in McHenry.
Customers flocked. I received a facade grant towards the
improvements, and the building was featured on the city sticker
for the year. This is when I understood how a community could
help build a business. My entrepreneurial spirit got the best
of me once again when one day I saw a sign ``For Sale or
Lease'' on the closed downtown movie theater.
I drove the building owner crazy, but finally convinced him
to let us host an Oscar party at the theater. More importantly,
it would be an opportunity to possibly reopen the theater,
which could act as a linchpin to help bring families into the
downtown. Families downtown meant money spent in our downtown.
McHenry was ready, and I was willing.
Both the city and the community has supported me throughout
this journey. With the help of the SBA, we were able to
purchase the McHenry downtown theater, and then the Antioch
downtown theater. Today, C You at the Movies operates four
indoor locations and one of the 12 remaining drive-ins in
Illinois.
We may not have the newest equipment, or the latest
innovation, and 3-D at this time is just a dream, but our
customers are loyal. We have watched children grow. Families
come back because we offer a fun, safe, family-friendly and
affordable movie-going experience, affordable fun that builds
memories.
We offer the C Team, employees committed to exceptional
customer service. Our company is a growing family of over 50
employees from within our communities. These are the hardest
working, most loyal young men and women which I am proud to say
are part of our team. They are learning skills--public
speaking, cash handling, conflict resolution, and customer
service--that will serve them throughout their lives.
In recent years, I have faced a family health crisis, the
economic turn, and the steep learning curve of the movie
industry. Maneuvering through the challenges of operating a
small business in today's unique and different environment is
difficult. Banks are reluctant to lend, cashflow is growing
tighter.
Last year I realized I needed some help. Never one to shy
away from learning what I don't know, I went to the McHenry
County College's Small Business Development Center. I met with
the director, Mary Margaret Maule, who very politely but
directly told me I needed to improve my skills and put
processes in place in order to keep up with a growing company.
We have learned to improve our cashflow by reducing the
waste within our company and to make decisions using metrics
that mattered. My work with the ISBDC has helped me to
establish better business practices, processes to increase the
efficiency, and communication tools to work with my employees,
suppliers, and banks.
We have and will continue to attend several classes,
workshops, meet one on one with experts and mentors, and grow
our business. Today we are looking towards the next great
cinematic event for our company. We once again are entering a
growth phase, and hope to acquire another small downtown
theater, and are working with two communities on projects to
expand our properties and part of a larger downtown
revitalization.
Being a small business owner can often be a lonely role,
but I have found my success has been due to the help of many--
my husband Danny, my family, my friend, general operations
director, and partner, Scott Dean, the SBA, the economic
development teams of the communities we operate in, and the
resources of the SBDC.
My company is built on the premise that if you make things
fun, affordable, and from the heart, the customers will come.
And back to one of my favorite movies--life is like a box
of chocolate. But I say go for the popcorn, and I will see you
at the movies.
Thank you.
[The prepared statement of Ms. Kottke is included in the
appendix.]
Ms. Dahlkemper. Thank you, Ms. Kottke.
I would now like to yield to the gentleman from
Pennsylvania, Mr. Altmire, to introduce the next witness.
Mr. Altmire. Thank you, Madam Chair. I am pleased to
introduce Dan Flynn, my friend and constituent. Dan Flynn is
President, CEO, and Co-Founder of Accipiter Systems in Wexford,
Pennsylvania, and is truly a small business hero in my
district. He has 13 years of experience developing and
supporting commercial and military data communications. He has
successfully grown Accipiter Systems through contract
engineering and a focus on product development.
Among other accomplishments, Accipiter Systems has
developed unique approaches to signaling and security and
designed secure network and storage systems for the Joint
Strike Fighter Flight Trainers Program. Dan is a member of my
Small Business Advisory Board, and a valuable resource to me,
and I look forward to hear more about ways that he would
improve small business in western Pennsylvania.
Thank you, Dan, for making the trip to testify, and welcome
to the Committee.
STATEMENT OF DAN FLYNN
Mr. Flynn. Thank you, Congressman Altmire, Congresswoman
Dahlkemper, and the Committee. It is an honor to be here.
My name is Dan Flynn. I am President and CEO of Accipiter
Systems. Accipiter Systems is in its eighth year building
computer networking products for the networks of the future.
The products we build connect your computers to those of others
with greater energy efficiency than is possible today.
When I lost my job nearly eight years ago in 2002 during
the downturn in the telecom industry, I was the Director of
Engineering at Marconi Communications. I knew employment
opportunities were sparse, but I needed to find employment to
continue to provide for my wife and three children. But the
problem was bigger than just me becoming unemployed. As a
director, nearly my entire staff of 75 people was permanently
laid off.
This was not one family that was affected; it was many
families. I knew the people that worked for me were talented
and hard-working. Although I was confident that each
individually could find a job, even in a difficult market, the
layoff probably meant many families would be uprooted. I
thought there had to be a better way. Rather than solve the
employment problem as individuals, why not form ourselves into
a team, attract business, and create our own jobs?
The days of Edison where lone innovators created ideas and
associated wealth are in the past. Today, innovation and
incomes are the product of teams. If we were willing to form
ourselves into a team, this team with its talents could compete
nationally and even internationally. We have that kind of
talent in this country. The team is the catalyst.
Rather than uproot the families, let us uproot the revenues
and bring the revenues to this team and their families. This
was the thinking. This team became Accipiter Systems. But we
had to think even more creatively than this, as 2002 was not
like the years past.
Venture capital money was scarce. The founders were not
wealthy. How could we start a business without funding? Rather
than strike a product idea, attract venture capital, and
explode onto the center stage, we instead chose to build the
company one contract, one grant, at a time. We needed to first
sell ourselves based on our engineering skills and grow through
contract engineering services.
We wrote proposals to win grants. When our early proposals
were rejected, we regrouped and tried again until we were
successful. We augmented existing companies with our unique
expertise and helped them increase their revenues. Soon we were
helping Lockheed Martin, Ericsson, Marconi Communications, and
other large companies win $15 million and $22 million
contracts.
It was now their insight and their willingness to team with
small business that allowed them to win. But we were not done
growing by teaming yet. From the contract engineering services
business, we were able to discover new product ideas. Rather
than brainstorm product ideas in isolation at the often
referred to ``kitchen table,'' we worked with real customers
who had real problems that needed to be solved. Through this
process, the product ideas emerged. This was a different way of
thinking from the 1990s. We chose to go to the customer and
listen to their needs.
In 2006, with the Army, the Penn State Electro-Optics
Center, the government, and others working together, and each
performing their respective roles, we began the development of
a new technology that connects computers with much greater
efficiency than that which is possible today. This new
technology has attracted contracts from the Army, DARPA, and
NAVAIR.
In a difficult economy, we have doubled the number of
people we employ, and have a promising future as a team.
Accipiter Systems' employees have believed as a team, have
worked as a team, and are succeeding as a team. I am confident
that this team will grow, continue to add jobs, and will meet
tomorrow's challenges in building computer networking products
that will compete worldwide.
To conclude, I would like to thank the Committee and
Congressman Altmire for this opportunity to tell our story.
Thank you.
[The prepared statement of Mr. Flynn is included in the
appendix.]
Ms. Dahlkemper. Thank you, Flynn.
I would now like to yield to Mr. Luetkemeyer to introduce
our last witness.
Mr. Luetkemeyer. Thank you, Madam Chairwoman. It is my
pleasure to introduce Lea Bailes, Chief Executive officer of
Guier Fence in Blue Springs, Missouri. Lea began his career
practicing law in the areas of business and estate planning. He
joined Guier Fence in 2005. In 2009, he and his wife purchased
the company. They now employ 60 people with three company-owned
locations in the Kansas City area, and two franchise locations
in Omaha, Nebraska.
Lea is a graduate of Baylor University and the Baylor
University School of Law. We welcome him to the Committee as
one of our small business heroes of the week.
Lea?
STATEMENT OF LEA BAILES
Mr. Bailes. Thank you very much, and thank you, Committee,
for inviting me here to testify today.
As you said, my company, Guier Fence, is a 31-year-old
family-owned business. It specializes in fence installations in
the Kansas City area, and now we are offering franchise
opportunities based on what we think is a perfected business
model and our years of experience.
In our $10.1 billion fence industry, there is over 20,000
fence companies. Most of these companies are small with few
employees, but with revenues in the neighborhood of $10
million, and with us having 60 employees, that puts us in the
top one percent of fence companies in the United States.
Despite the economic downturn, and especially the hard
effect it has had on the construction industry, our company has
remained financially solid and profitable. Our success comes
directly through the individual effort, talent, and commitment
of each of our employees, who contributes to our reputation for
excellence not only in our market area but in our industry.
Unfortunately, last year our employee count dropped from 74
to 50. Many of these wonderful people, who no longer work for
us, worked for Guier Fence for over 20 years. I knew each of
them personally. I also knew that the decisions that we had to
make were going to affect their families, and I knew their
families as well.
But as a company, we had to make these decisions to allow
us to survive in turbulent times. Fortunately, this year we
have been able to hire additional people due to an increase in
welcomed demand. We received no government funding in order to
do this, but it was through our own marketing efforts and
financing alone.
There are many other exciting events that are happening at
Guier Fence. Our revenue is trending upward, and we just signed
our first franchisee in Omaha with several more on the way.
Although our company is stable, our employee count is
increasing, and we are growing again, our challenges remain.
Banking regulations have disabled the banking system's ability
to loan money toward commercial and industrial projects.
Without these projects, companies such as ours who have
relied on these streams of income as a strong percentage of our
revenue, and a large percentage of our revenue, are being hurt.
Without big commercial and industrial projects that are
privately funded and not government funded, we are unable to
employ additional workers.
In addition, the tightening of lending is making it more
and more difficult for our potential franchisees to start
businesses that would employ more people. In fact, Guier Fence
started providing financing for our franchisees in order to
assist them get started in their own business. The loosening of
these regulations as they relate to small businesses is
critical.
Additionally, per employee costs are rising that reduce our
margins. These costs include costs related to health insurance
benefits, worker's compensation, employment taxes, and other
compliance costs. Federal regulations continue to increase the
financial burden on small businesses, especially on small
businesses like us with greater than 50 employees.
The arbitrary number of 50 will do more harm than good when
it comes to employing people. By placing such standards on
businesses like ours, we will be forced to make decisions
unfairly on our head count. You are punishing us. If at under
50 employees our costs for employees substantially lower, we
will have to scale our business or change the way we do
business in order to continue to operate.
We cannot price our products higher and tell our customers
that our prices are higher because we have over 50 employees
when our competitor doesn't. If legislation continues down this
path, you will create a flux of 49-employee businesses.
I am unclear on what effect certain new laws will have on
my business. I do think our health care costs at this point are
going to rise. I have no idea whether our taxes are going up
and down. I do know that if you pass a value added tax it is
going to hurt the construction industry and a lot of other
industries.
But the biggest concern I have is that all of this
uncertainty affects us in our way we make decisions. It is hard
to make a decision when you are very uncertain on what the
impact of this legislation or potential legislation is going to
have. We don't know whether we should grow, we don't know if we
should grow, we don't know if we should shrink, and we don't
know what decisions to make at this point.
In order to assist small businesses, please do not increase
the number of rules and regulations, just enforce the ones you
already have. Work with us and inform us, educate us, help us
to comply with a lot of regulations that are out there. Don't
raise our taxes, don't impose a value added tax, and I would
also ask that you repeal the health care bill.
I am not asking for a handout. I am asking that you stop
creating additional obstacles for Guier Fence and other
companies like ours to be and remain successful.
Again, I thank you for this opportunity to testify today.
[The prepared statement of Mr. Bailes is included in the
appendix.]
Ms. Dahlkemper. Thank you, Mr. Bailes. Thank you to all of
the witnesses. I think the diversity of the businesses in front
of us is one of the great things about today and recognizing
small business heroes throughout the country.
I will now recognize myself for five minutes. Mr. Wallace,
thank you again. As a constituent--and all of you, really,
thank you for taking the time out of your busy schedule. As a
small business owner myself, my husband is now running it all
by himself and he misses me, but--and I do miss the business
often. There is many days when I miss being that small business
owner and the challenges and the excitement that goes along
with that.
One of the things I wanted to ask you, Mr. Wallace, as you
added--how many employees again last year?
Mr. Wallace. About 31.
Ms. Dahlkemper. And this year over 20?
Mr. Wallace. Yes, over 20.
Ms. Dahlkemper. What do you think has made that possible,
considering the economic times we are in right now and the deep
recession, has made it possible for your company to grow by
such large numbers? Because prior to 2009 you had less than--
Mr. Wallace. About 30 employees total.
Ms. Dahlkemper. Okay. That is pretty large increases.
Mr. Wallace. It was a big jump. Like I said, Brian and I,
we continue to put ourselves in front of the people that may
turn out to be new clients. And, you know, I guess our
philosophy is simple: give them more than what they expect,
meaning our clients. And we try to instill that within all of
our employees, and we have a great group of employees that feel
that passion also.
And diversification is a big part of what Brian and I talk
about all the time, because we know that as a small business
that you are always one step away from some kind of a major
setback in your company. And so we keep very focused, we keep
very attentive to our clients' needs, and they continue to come
at us and give us more work and more work, and we just continue
to hire the people to meet the needs.
Ms. Dahlkemper. Thank you. Appreciate that.
Mr. Flynn, you also added a number of employees during this
recession. Is that correct?
Mr. Flynn. Yes. We have grown from eight employees to 15
employees. And I think what has contributed to that growth is
having us think and work as a team. And it really goes down to
the individual. So when I am asking the individuals to act as a
team, what do I mean by that?
I need them, when they come to work, to not just bring all
of their skills and all of their tools and all of their
wherewithal, but all of the skills of people that they know to
bring to bear on what it is that we are doing. We need to get
leverage. We are a small company.
And for us to compete with large companies it requires us
to have a larger footprint, and we get that through leverage
and we get that through each person thinking of themselves as a
team and assembling the people that they know and asking those
people questions and how we could do better. That is how we are
adding those jobs.
Ms. Dahlkemper. Thank you. Did either of the other three
want to express anything about this particular time and whether
adding employees or not and what has been your success at this
particular point in the recession?
Mr. Bailes. For us, we have had to change the mixture of
our revenue more from commercial to residential, so we have
been able to hire employees on one side but decrease on the
other side. So we are kind of mixed on--
Ms. Dahlkemper. And your numbers are down, though?
Mr. Bailes. We are down overall, but we have been able to
hire some this year and hope to hire more.
Ms. Dahlkemper. Thank you. I guess I just wanted to ask
each of you what you think has been the one thing--if you could
pick one thing that has maybe been the best thing you have done
in your business to help you be successful today. And I will
start with Mr. Bailes.
Mr. Bailes. Unfortunately, it has been reducing our head
count, because we had some unprofitable divisions within our
company that, because of the way some of the market shifted, we
had to get rid of. But that--making those really tough
decisions that I really didn't want to make are what kept us
strong and stable and profitable. And so, unfortunately, that
is one of the better decisions, and then also starting the
franchise program has been very beneficial for us.
Ms. Dahlkemper. Thank you. Ms. Kottke.
Ms. Kottke. Mine would have to be going to the Small
Business Development Center, because I kind of outgrew my
skills, and they have been extremely helpful in showing me
different ways to improve myself.
Ms. Dahlkemper. Did you go to them in the beginning or--
Ms. Kottke. No.
Ms. Dahlkemper. How far into your business model?
Ms. Kottke. Oh, last year.
Ms. Dahlkemper. And you have been in business--
Ms. Kottke. Since 2003.
Ms. Dahlkemper. Okay. Thank you. Do you wish you had gone
to them earlier?
Ms. Kottke. Yes, I do.
[Laughter.]
Ms. Dahlkemper. Mr. Wallace.
Mr. Wallace. Well, I am trying to think of the one thing,
there are so many, but I would have to say, you know, moving
out of my basement.
[Laughter.]
And that sounds funny, but when you--Brian and I had a hard
time trying to figure out how to take that step, how to even
hire our first employee, because, you know, starting with
nothing, we literally had nothing, no money, nothing. And to
learn how to spend the money to help our company make money was
a difficult hurdle for us to jump.
And so we took that step and moved out of our--out of my
basement into a house, a small house, and within eight months
we were already planning our expansion of 4,800 square feet.
And, you know, we moved in in '08, and we are already out of
space. So, again, which is a good thing, and, you know, we have
two other locations now, and those are starting to fill up, and
it has been really interesting. But, again, moving out of our
basement was probably a key component.
Ms. Dahlkemper. Thank you. Mr. Greenley.
Mr. Greenley. Mine has just been the concentration on
reinvesting in my business and my employees, growing the
business constantly, never looking back, learning from my
mistakes of what works good and compounding that. That is just
my foundation.
Ms. Dahlkemper. Thank you. Mr. Flynn.
Mr. Flynn. I would answer that with the word
``relationships.'' We highly value the relationships we have
built in industry. That includes the Penn State Electro-Optics
Center, the Innovation Works Technology Collaborative, with our
customers, the Army, the large contractors like Lockheed. To
us, a very important part of our success has been our
relationships.
Ms. Dahlkemper. Thank you. And now I yield to Mr.
Luetkemeyer for five minutes.
Mr. Luetkemeyer. Thank you, Madam Chairman.
Mr. Greenley, in your testimony you indicated that you had
a 504 SBA loan. Can you--I assume you have been satisfied with
that? Can you see some places where we could streamline the
program, improve the program? What has your experience been?
Mr. Greenley. I originally took that loan out in 1997. I
was 27 years old, and it was difficult. I went to the bank and
needed to borrow a million dollars. I had only operated my
business at that time for seven years. It seemed very
cumbersome then. I did go to several banks.
One of the things I remember was the larger banks felt more
secure underwriting one of those loans. The smaller banks were
very fearful of those loans. Proudly, today I have paid that
loan off, and I am not in the situation where it is as
important to--or I would need the funding from SBA, but I have
taken personal funds out to secure my business and grow it
forward today. And it is just something I found you have to do.
Mr. Luetkemeyer. Very good. Mr. Bailes, you had a number of
comments with regards to some concerns you had with the
regulations, especially the health insurance one at 50, and the
VAT tax. Would you like to elaborate on that just a little bit?
Mr. Bailes. Sure.
Mr. Luetkemeyer. Because those are important things that
are out there right now that are affecting a lot of small
businesses we have heard about today as well.
Mr. Bailes. Well, with the health care bill, one of my
biggest concerns is the mandatory opt-in. Right now, we provide
health insurance coverage for our employees and pay for most of
it. With the mandatory opt-in, they automatically have to
enroll, and then de-enroll, and then we pay a penalty. And
there is nothing saying that once this is passed that you can
amend that and raise that penalty.
And so right now the way it looks is that it would actually
be less expensive for us to just pay the penalties and not
offer any health care coverage, which I don't really want to
do. I don't think that is the right thing to do. But we have to
do what makes economic sense.
And so from my, honestly, limited understanding of the
bill, I just don't think--I am concerned with what could happen
in the future with amendment to it or raising penalties or
changes that--like I said, amendments within the bill in the
future. It is easier to chance what is passed.
Mr. Luetkemeyer. How would the VAT tax affect your
business? Or what do you see as the problems are--the pluses or
minuses with it?
Mr. Bailes. Well, if you take a commercial construction
job, you have so many different layers of value added tax. You
have a raw material supplier, you have somebody who converts it
into another type of material, you have somebody who
distributes it, you have somebody who retails it, and you have
somebody who is, let us say, a general contractor.
And if there is a tax on every level of value that is added
in seven or eight steps, that is going to make the cost of a
commercial project outrageous, and probably not even a feasible
way of doing business. So if you are going to have commercial
construction in the future, you are going to either have to
completely change the way that you do business and vertically
integrate a business, or you are going to have to figure out
other ways to reduce costs, and take lower margins or whatever
it happens to be. But I think that would be detrimental to
large projects.
Mr. Luetkemeyer. Something that a lot of small business
people, especially farmers as well as small business folks,
have talked to me about concern with is extension of the estate
tax. And we haven't heard one question on that yet today.
You know, this year the estate tax fell off, but next year
it is supposed to go back, unless we extend it to a million and
55 percent of everything over that. Most of all of you are
young enough that it may not be something that you are
considering yet, but is that starting to enter into your plans
as you start getting down the road here and your company starts
building?
I know most of you don't look like you are as gray-headed
as I am, so it is probably not a problem for you yet. But I
know as we age a little bit, and we start looking a little bit
down the road, what our families may have to do or what our
business partners may have to do with this entity that we have
created here, this wonderful business that we have, have you
started looking at that? Is that a concern at all?
Mr. Bailes. Coming from an estate planning background, I
know it is a concern for a lot of people. I know it is a
concern for me. And being young, it is a good time to start
planning. Since I am out of practice, I can say that everybody
should do an estate plan. But it is something that, if you are
not concerned with, you should be concerned with, but, yes,
that would--the levels do concern me, because that affects how
you have to plan. So, yes, that has crossed my mind.
Mr. Luetkemeyer. Anybody else? Have you guys thought about
it at all, or you are still trying to figure out how to make a
buck and grow the company? And, you know, Mr. Greenley, he says
I am barely 40 years old here. He has still got a lot of years
ahead of him. But anybody else have any concerns about it, or
have you thought about it at all, or is it not something you
are working on?
Mr. Wallace. Well, maybe I could just jump in real quickly.
I just turned 46 last week, so I start to, as I get older and I
get more gray hair, when I look in the mirror I start to think
about those things.
And, specifically, on what you are talking about, the
estate planning part of it, I haven't really, because I have
been so focused on building our business and addressing the
needs from day to day. But I haven't really thought about it in
any great detail, but I know that is something I will need to
do shortly.
Mr. Luetkemeyer. Okay.
Ms. Kottke. Actually, I probably am your age. I have
grandchildren and children over 30. We are currently working on
it with our legal counsel, so yes.
Mr. Luetkemeyer. Okay. Mr. Greenley.
Mr. Greenley. I have. Currently, I have advisors, financial
guys, that work with me on that planning, and we have addressed
the issue of how that has changed over the past five years and
how it is an ongoing basis and we have to account for that in
the future.
Mr. Luetkemeyer. And you incur new attorney costs and new
accounting costs every year just to try and comply with and try
and make sure that you don't wind up getting, you know, caught
here with the law changing and--
Mr. Greenley. We do, yes.
Mr. Luetkemeyer. --certainty of it.
Mr. Greenley. I do.
Mr. Luetkemeyer. Mr. Flynn, any comment?
Mr. Flynn. We are concerned about these issues and other
issues like it, insurance in the event of an untimely death.
These are additional costs on the business where we have to
ensure an orderly transfer if something like that were to
happen. It is another impact of growing older is concerns along
those lines, to make sure that insurance is in place to cover
that should that happen.
But, yes, we are also very much focused on our current
situation, and we will look at that issue, along with other
issues, as we are advised to do so.
Mr. Luetkemeyer. Okay. Thank you. Thank you, Madam Chair.
Chairwoman Velazquez. [presiding] Ms. Bean.
Ms. Bean. Thank you, Madam Chair. I had a question for
Cindy. You had mentioned that you had an SBA loan to help you
buy your first theater. Had you applied for other loans before
the SBA loan? Or is that the first venue that you pursued?
Ms. Kottke. When I applied at a couple of banks, they
wouldn't even talk to me unless it was an SBA guaranteed loan.
But that was the only way I was able to acquire the first
location, and a year later the second location.
Ms. Bean. So it did make the difference on whether you--
Ms. Kottke. Absolutely.
Ms. Bean. --could start your business.
Ms. Kottke. Yes, it did.
Ms. Bean. And how many employees do you now have?
Ms. Kottke. We have 57 today. We have--about 20 of them are
seasonal, because of the drive-in. And the 30 throughout the
year then.
Ms. Bean. And you also mentioned that you had a positive
experience with the SBDC that provided other consulting
services. Have any of the other businesses participated in any
of the programs available through community colleges, SBDCs, or
some of the workforce development training that we provide
funding to at the community college level? Yes?
Mr. Flynn. We, in Pennsylvania, work with a number of
economic development entities. Some of these have been the
reason that we are--I am here today. So the technology
collaborative is in an early stage. They are very
deterministic. Their money is made available on a very
deterministic schedule. If it is not deterministic, we have to
treat that as a windfall.
There are other entities like Innovation Works that steps
in with larger dollar amounts that can help us grow our
business, so these have been some of the key reasons why we are
here. And as tax bases shrink, to see those organizations after
they have had such a big impact, are making small business
possible, that is disconcerting. So we value--and because we
can't afford to have CFOs and VPs of HR on our staff, these are
the people that we are turning to.
We still have the issues. So those are a very important
part of our success.
Ms. Bean. Have you worked with SCORE at all? Some of the
retired--
Mr. Flynn. We have been in touch with SCORE. Our business
is a high-tech business, so we looked for groups, development
centers, that are more attune to our--
Ms. Bean. The technology--
Mr. Flynn. --industry.
Ms. Bean. That makes sense. Anybody else who worked with
any workforce development training in their communities? No. It
is good to hear the feedback about some of the programs that we
have initiated, of where it is working and how many folks are
participating in it.
Access to capital--how much of a challenge is that for all
of you right now, particularly if you are working with
community banks? Many of them are overly exposed to commercial
real estate on their books, and that has constrained their
balance sheet and limited their ability to lend. Is that an
issue for any of you? No? All right. That is--
Ms. Kottke. Can I answer that?
Ms. Bean. Sure.
Ms. Kottke. I have been talking about expanding for the
last couple of years, and about a year and a half ago the banks
are telling me, ``You know what? Lay low right--just wait.''
And about three months ago, I was approached by one of my
community banks saying that there was this new program going to
be available through the SBA.
Ms. Bean. Good.
Ms. Kottke. And that they would definitely be interested in
looking at the project then.
Ms. Bean. Wonderful. That is good to hear.
Mr. Bailes. I would like to say one thing if I could.
Ms. Bean. Sure.
Mr. Bailes. Since we have two sides of our business, the
established Guier Fence side, we haven't had any problem
getting financing. But for our new franchisees, like I said in
my testimony, they are. And they are SBA-backed loans, but they
still--they can do an express loan program with our minimum
entry-level fee, but they are still difficult to get.
And I don't know really why that is. You would think that
those would be fairly straightforward, and these are even
people with good credit scores, with plenty of assets, even
cash to back a pretty simple $50,000 loan. I think the SBA is a
little--or the community banks are a little timid on giving
money to a new business.
Ms. Bean. Right.
Mr. Bailes. Because a lot of the franchise is still--you
are still investing in a little bit of blue sky there. You are
not buying--
Ms. Bean. Yes. Even though the model works, they have never
run it before.
Mr. Bailes. That is correct. And so, you know, you are
investing in intangible assets, and that is where we are seeing
a little trouble.
Ms. Bean. Absolutely. And someone else had a comment. Yes.
Mr. Flynn. Just real quick. One of the observations about
the loans is if they require a personal guarantee, and we are
talking millions of dollars, what we are asking the small
business owner to do is face down personal financial ruin in
the event that the business--the gamble it took did not work
out.
So those personal guarantees, we go through all of this
effort to incorporate these companies, so that they are an
entity unto themselves, but then we are asking the small
business owner to still back up the loan.
Ms. Bean. Okay. Thank you. I yield back.
Chairwoman Velazquez. Ms. Kottke, I read in your testimony
that you are in the process of acquiring another theater?
Ms. Kottke. Yes, ma'am.
Chairwoman Velazquez. And so I was wondering, every time
families in America are facing budgetary constraints, they cut
recreational money. So how is it that your business is doing so
well, that in a business like that that could be impacted by
the economic downturn you are succeeding to the point that you
will acquire another theater?
Ms. Kottke. Well, the movie industry is having record-
breaking years, and that is mostly because of the 3-D
technology, which we do not have. Our ticket prices are $4 and
$6 at our indoors, and they are like $8 and--it is $8 at the
drive-in because you get a double feature, and $4, again, for
children.
We just offer customer service, good, old-fashioned
customer service. And that is what brings our customers. In
order to obtain this next one, we are negotiating a rent with
option, and then we will see how well that takes off. The
expansion of the two projects, one in Zion, one in McHenry, are
in TIFF districts, and we are talking several million dollars.
Of course, we have got to do it controlled, because we know
what happens when I don't do that. And in order to get--
possibly even get the equipment, the 3-D equipment.
Chairwoman Velazquez. Mr. Flynn, if you go to a traditional
bank, financial institution, to apply for a loan, what
requirements will they ask of you in order to get that loan?
Mr. Flynn. So we have a line of credit through a major
bank. We also have credit cards for the employee, so they can
make small purchases to facilitate their day. To get that line
of credit, we had to show up with our personal tax statements
for the bank to review my tax statement, personal tax
statement, and my co-founder's tax statement.
Chairwoman Velazquez. But in a traditional loan that is not
guaranteed by the Federal Government, will the bank require
collateral?
Mr. Flynn. Yes, they--in our case, we may be purchasing
tools for the business, and those tools would be the
collateral. But, again, ultimately it could be your home that
is the collateral for that loan.
Chairwoman Velazquez. Yes. Well, the difference in terms of
those loans that are backed by the Federal Government is that
we incentivize financial institutions who are participating
with the SBA to provide or make those loans by reducing the
risk--
Mr. Flynn. Right.
Chairwoman Velazquez. --for the financial institutions that
are participating in those programs. The government will
guarantee we increase it from 75 to 90 percent, and then to
also get small businesses off the side lines and incentivize
for them to go to the bank and apply. We reduce the fees that
the borrowers have to pay.
So I guess that some of those programs have worked for some
of the small businesses that have been testifying here today,
and what we want to make sure is what else we can do in order
to facilitate access to capital for small businesses.
Mr. Flynn. One suggestion I would give there is education,
and there are a number of entities that help educate us what
the process is and what the tradeoffs are.
Chairwoman Velazquez. Okay. Yes, Mr. Greenley.
Mr. Greenley. One of the things that I am aware of is the
90 percent backing is due to expire today. Am I right? And it
is going to go back to the 70 percent backing.
Chairwoman Velazquez. No. Well, we are going to extend it.
Mr. Greenley. Okay.
Chairwoman Velazquez. Yes.
Mr. Greenley. I mean, that is one of the--you know, the
factors.
Chairwoman Velazquez. Sure.
Mr. Greenley. If banks are going to loan money, it is how
much their guaranteed portion is.
Chairwoman Velazquez. No, it has been 90 percent, and it
will continue to be 90 percent.
Mr. Greenley. You know, you talk about incentives for the
lending, I wish there was an incentive for us that are
investing in our own business. For those of us that, you know,
decide not to lay somebody off and to keep them on the payroll,
there is no incentive for that right now. There is a lot of
incentive. I mean, the one incentive to us is to minimize our
exposure, so that we stay in business, but over 20 years of
experience, every time I cut back I find myself--it is not
healthy for the business.
Mr. Wallace. Yes, I have a comment.
Chairwoman Velazquez. Mr. Wallace.
Mr. Wallace. Access to capital has been challenging for
Brian and I, and the need for personal collateral, that type of
thing, backing of the loans.
But one area that really bothers us every year is the fact
that when we have a good year, at December 31 our accountant
shows us that we made--we have so much of a profit, and we have
to pay tax on that profit as it gets split down to--and comes
to our personal income taxes.
We don't take that money in pay, but we still have to pay
tax on that money. And by the time, you know, April 15 rolls
around when we have to pay our tax bill, that money is long
gone, been used into the business. And just last year on the
amount of money that we had to pay tax on, that we never
personally received in distributions or pay or whatever, we
could have bought at least five vehicles and probably hired
three additional employees.
Chairwoman Velazquez. Well, that is why in the economic
recovery package we, the Federal Government, reduced taxes for
small businesses, especially in the manufacturing sector.
Mr. Wallace. Well, then, that will be great.
Chairwoman Velazquez. Any other questions? If not, I ask
unanimous--thank you. Thank you for all the witnesses who have
been able to be with us today. This has been an incredible
experience, and it is great to know the incredible
contributions that you are making to help get this economy back
on track.
I ask unanimous consent that members will have five days to
submit statements and supporting materials for the record.
Without objection, so ordered.
This hearing is now adjourned.
[Whereupon, at 1:36 p.m., the Committee was adjourned.]
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