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Small biz owners cutting their own pay

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KAI RYSSDAL: Staving in business at all is no easy feat now, especially if you work for yourself. A survey from American Express recently found that 30 percent of small business owners have stopped paying themselves a salary. In better times entrepreneurs could tap their home equity or use credit cards to keep their businesses afloat, but now a lot of them are simply tapped out. Marketplace’s John Dimsdale reports.

John Dimsdale: Paul Langseth, a tree-trimmer in rural Minnesota, says his customers are taking a little longer to pay their bills these days, making it tougher for him to cover his expenses. He says small business owners are used to making personal sacrifices when credit is less available.

Paul Langseth: That’s the way small business runs. If you don’t make money, then you generally cut yourself first, and then reduce the business. Because you want to maintain the asset of the business as long as possible.

The fact that small business owners can stop paying themselves a salary for a while shows they have some flexibility to weather the downturn, says Alice Bredin, the small business adviser for American Express, which conducted the survey.

Alice Bredin: The same with we see 27 percent of them have a family member working for free. That’s also something that you can start doing quickly and then when you can afford to pay someone, you can say to your wife, husband, etc., thanks for the help, now I can start building up my staff.

Giovanni Coratolo, vice president for small business at the U.S. Chamber of Commerce says small businesses create 60-80 percent of all new jobs.

Giovanni Coratolo: During a downturn we really expect small business sector to lead the way in providing us with the economic necessity we need to bring us out of this recession.

Alice Bredin says with their flexibility and innovation, small businesses will be the first to start hiring new workers when the economy recovers.

In Washington, I’m John Dimsdale for Marketplace.

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