Small businesses fight to survive in tough economy

Costs are rising, profits are shrinking and the ability of the big guys to keep prices relatively lower is drawing away customers.

Things are so bad that many small enterprises, which account for about 99 percent of the country's businesses, say they are hanging by a thread that may soon snap.

"We are basically losing money every month, about $1,000 a month. It's been about two, three months now," said Tom Weisbecker.

Weisbecker owns Isaly's in western Pennsylvania where patrons sit on green barstools at a Formica countertop and gobble the legendary Slammer, a sandwich stuffed with a half-pound of chipped ham and smothered in onions and cheese. Prices for many of those ingredients have skyrocketed in the past year.

"We know our customers are already feeling the pinch with the gas prices and when they go to the grocery store. We're trying to hold out, but we can't go on much longer," said Weisbecker.

In barely a year, the cost of pork has jumped by 50 cents a pound, while beef is up 20 percent; a five-gallon jug of canola oil that used to cost $15 is at $40; a 50-pound bag of flour jumped from $7 to between $20 and $25.

And then there are fuel surcharges of between $5 and $9 that have been added to nearly all deliveries during the past six months.

In the meantime, wages haven't grown and the job market is tepid, at best. On Friday, the Labor Department said the nation's unemployment rate jumped to 5.5 percent in May--the biggest monthly rise since 1986--as wary employers cut 49,000 jobs. Average hourly earnings for jobholders rose to $17.94 in May, up 0.3 percent from the previous month.

The feeble employment market may be making consumers less willing to spend. Also, paychecks aren't going as far as they did before food and fuel costs rose.