The fight to survive: Sour economy is problem for small business

Eric Bradlow, a marketing professor at the University of Pennsylvania's Wharton School of Business, said that in the best of times, 90 percent of businesses shut down in the first year. The Small Business Administration notes that one-third close within two years and only 44 percent survive four.

"Anecdotally, you hear that this is a very difficult period because of higher gas prices and higher component prices ... definitely in the past 10 to 15 years," says Bradlow, who is also a director in Wharton's Small Business Development Center.

It's an environment that also makes it difficult for small businesses to raise prices to cover their costs.

The Pittsburgh Popcorn Company is feeling that pain. It opened on March 1; since then, the price of packaging tins has tripled. Other food costs have risen between 5 percent and 30 percent, the hardest hit being canola oil and chocolate.

The company's owners, Janelle and Rob Day, are reluctant to raise prices, though. The enterprise is new and they are afraid of driving away patrons.

"I want to attract customers, that's my primary goal," Rob Day said.

Only when it is certain people will keep buying, will Day raise prices. "Whether that's a month, or two months or three months, I don't know," he says.

Not all small businesses are feeling the pinch, however. Those that cater to the wealthy or have niche products may be having a less hard time right now than food or apparel stores.

"Business has actually been steady for us. We haven't seen a large drop-off," said Bradley Bodart, who owns Daly's Pen Shop in Milwaukee. "Our customers tend to be more well-to-do, people who don't shy away from a $600 pen, so they're not too affected by gas prices."

Bodart understands that people are surprised by his success.

"I see people walk by the store and they whisper, 'How does that place stay in business?"' he said. "It's because it's a niche business. There aren't too many people about to start up a pen shop."