Profits shrinking at small businesses

One in five small businesses are reporting that profits are plummeting by more than 25 percent compared to last year, says a new survey.

Two thirds of small and medium-size businesses said the slump had affected business, with 37 percent saying business was "much worse" or "a little worse," says the latest Office Depot Small Business Index, a monthly survey of 1,000 small and medium-size businesses. Over 40 percent experienced drops in profit, with 20 percent losing 10 percent or more and 21 percent seeing drops of more than a quarter.

As a result, 79 percent of small businesses have stopped hiring – which fits with a July report from the Ewing Marion Kauffman Foundation for Entrepreneurship, showing that surviving start-ups aren't adding jobs at the rate they did in previous decades.

Half of businesses surveyed plan to alter their business strategy in response to economics. The most cited adjustment: marketing strategy (30 percent). This was followed by changes in clientele (23 percent); new business philosophy (15 percent); and products and services (15 percent).

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