SurePayroll’s Interesting Small Business Scorecard

According to the most recent SurePayroll Small Business Scorecard, small business hiring was down slightly during the first eleven months of 2006, but paycheck amounts are up. 

SurePayroll, a payroll service with 18,000 small business clients around the United States, has been calculating its Small Business Scorecard since January 2004 based on actual payroll data.  The company calculates a Hiring Index number and a Pay Index number, and measures both every month, as this chart shows:

The Scorecard started in January 2004 and the baseline numbers were 10,000 for the Hiring Index and 1,000 for the Pay Index.

What does it all mean?  It means that small businesses are not adding to staff, but they are paying more to whatever staff they have.   According to Michael Alter, President of SurePayroll, it suggests things are not going so well for small businesses:

“The small business economy has been shrinking all year long, and the trend continued in November. If you need to ascribe a movie analogy to the small business economy, you might say it’s a bit like the protagonist in The Incredible Shrinking Man (1957).

As discussed in detail below, the data shows that small businesses are getting smaller on average, which suggests that business owners are not doing well enough to hire new employees.

For business owners, that’s just part of the bad news. Small business salaries have been increasing, exacerbating the problems of business owners. They have to pay more to hire and keep talent. That means they take less out of the business in profits or they raise prices to stay even. That puts inflationary pressure on an economy that is desperately trying to shake the doldrums.”

SurePayroll is a company that only recently came on my radar screen, but it’s one I am paying attention to.  The company serves the smaller end of the small business market (primarily under 10 employees), which  is where most of the small business action is.  I like the fact that the Scorecard uses actual payroll data, and not simply survey data.

I’ve written about the Small Business Scorecard at length over at Small Business Trends, including my own take on its meaning.  I’m not as pessimistic about the meaning of the Scorecard as Mr. Alter, although I respect his opinion.  After all, the Index numbers are still better than they were in January 2004, and I think we have to put it all in perspective.  Read:  Small Business Hiring Down, Paychecks Up — and the Meaning?