Small businesses fight to survive in tough economy

"In a good economy, you can makes mistakes. But in a bad economy ... you can't afford to make a mistake," said Larry Lagattuta.

"I am three very bad decisions away from bankruptcy at any given time," said Lagattuta, who has been running Enrico Biscotti Co. on the Pittsburgh Strip for 15 years.

Over Christmas, he made hundreds of shipments; 2007 was his best year ever.

The last quarter was his worst.

A National Small Business Association survey of 500 small business owners in February found that sales and profits had dropped and job growth was at the lowest point in 15 years, problems that could have a significant impact on an already shaky U.S. economy.

The survey also found that 71 percent of business owners have a "negative outlook" on the economy compared to 43 percent a year ago; confidence in their business' success dropped from a high of 81 percent a year ago to 70 percent now.

A separate survey done by the National Federation of Independent Business found that for the first time in 25 years, small business owners cited inflation as their single biggest concern, rising from 4 percent a year ago to 14 percent in April.

The survey of more than 1,765 businesses showed that for the first time in a decade, skyrocketing insurance costs were not the No. 1 concern.

As gas and food prices climb, consumers are bypassing small businesses and seeking out bargains in places like Costco Wholesale Corp., which reported a 32 percent jump in its fiscal third-quarter profit, surpassing Wall Street expectations.

"The bad thing that's happening to us, is the economy is driving people to shop at the big-box stores ... They can buy their staples and pick other things up so they don't have to use gasoline," said Cindy Baker, who has been a gift shop owner for 20 years, half at her current location, Collage, in Pittsburgh's bustling Strip District.