Small businesses starting to hire
11/08/2009 - Author: Tom Abate, Chronicle Staff Writer

In April, San Francisco startup made enough money to allow the firm's founders to hire employees so they could expand their online marketplace that enables people in 93 countries to rent spare rooms to travelers.

Since then, the startup has created seven jobs - a tiny step in the right direction at a time when the U.S. unemployment rate has risen to a 26-year high of 10.2 percent.


Chief Executive Officer Brian Chesky says that hiring came only after he and the other co-founders, Joe Gebbia and Nathan Blecharczyk, invested about 18 months of sweat equity to build the site and collect enough commissions to expand their matchmaking service without venture capital.


"That's the new way that a lot of Web companies are getting started," Chesky said, contrasting the self-funded growth of today's startups to the heavily bankrolled style that characterized the dot-com era.


Airbnb is part of the small-business sector that is leading U.S. job creation, and its gradual takeoff is an example of why employment may be slow to recover.


The U.S. Small Business Administration says small firms - those with fewer than 500 employees - created nearly two-thirds of all new jobs in the economy over the last 15 years.


Although Chesky says Airbnb is on a growth curve that will lead to more hiring, rising unemployment rates suggest that the small-business job engine is still running in reverse - although the layoffs seem to be slowing.


The New Jersey payroll firm ADP, which tracks job gain or loss by firms of different sizes, recently said companies with fewer than 50 employees shed jobs again in October, but the losses were the smallest since July 2008.


A complementary report by Intuit, the bookkeeping and payroll firm in Mountain View, says 44 percent of the small businesses surveyed plan to hire in the next 12 months.


Interviews with small Bay Area companies reveal different stages in the job engine's slow shift into forward gear.


Jeff Roberts, owner of San Francisco Drywall Systems, said this may be the toughest conditions he's faced in nearly 30 years in the business. He has gone from about 10 employees before the recession to six. But he can only keep that smaller crew working a little over half time.


Roberts said business seems to be picking up, but that he can't start hiring until he brings his current crew up to full time, which does not seem imminent.


Hours cut


Gary Abrojena, who runs Evergreen Tree Care in Contra Costa County, said he had to cut his employees' hours earlier in the year when work slowed, but he didn't lay anyone off at his nine-person company, which is staffed mainly by family members. He says business is better now and work is pretty much back to full time, but he is in no rush to add jobs.


"If an upturn comes within the next year or two, I could probably go out there and hire," Abrojena said. "But I'd have to see my sales go up quite a bit."


Lafayette entrepreneur Chris Strausser would like to hire several people in the coming months to help him expand a Web-based business that he has spent the last year developing with his own labor, capital and the occasional contract worker. All he needs to do is raise money.


Strausser is the founder of, an information service that sells $80 subscriptions to help serious high school athletes get recruited by collegiate programs.


Like the Airbnb founders, Strausser built his Web site with sweat equity, interviewing leading coaches to get tips to help young athletes get noticed and signing up subscribers to pay for the service. Now, after months of self-funded work, he's ready to share his business model with potential investors so he can raise funds to hire key people in sales, marketing, technology and customer service.


"I've built the Web site and the scalable engine," Strausser said. "I'm just at the stage of looking to raise money to hire employees and more aggressively market the business."


It's a far cry from the heady days of the dot-com era when startups used venture capital to hire in anticipation of growth. This same cautious style of job creation percolates down to entrepreneurs at every level.


Bianca Kaplan recently opened a tiny boutique in San Francisco's Mission District to sell used designer clothing. The shop, called Bianca Starr, is her second business. She and her husband previously owned a small nightclub with half a dozen employees.


Kaplan said managing people was always a struggle, and as a mother with young children she is glad to have a business with daytime hours. She plans to run Bianca Starr mostly by herself, with part-time help to get started.


"It would be a great goal to have a full-time person, but it will be a while," she said.


The collective caution that seems evident in the small business community helps explain why unemployment could remain stubbornly high even if the economy continues to produce more goods and services, which is one signal of the end of a recession.


Not enough


At Airbnb, whose founders hope they have hit the inflection point of rapid growth, Chesky said there are surely other young companies that are expanding - but there aren't yet enough of them to bring the supply of labor and jobs back into balance.


"Part of me feels very proud we can create seven jobs, but for every job there are 500 resumes," he said. "It puts things in perspective."

Source: - Tom Abate, Chronicle Staff Writer


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