It's been a challenging year for small businesses, but we seem to have ended on a good note, with signs that the small business economy is starting to rebound.
But is the worst really over? Let's take a look at the December 2009 hiring and salary numbers to find out.

According to the SurePayroll Small Business Scorecard, our economic indicator that aggregates data from tens of thousands of small businesses, hiring is up 0.8 percent month over month -- that's the greatest month-over-month hiring increase we've seen since February '08. That brings us to a year-to-date increase of 3.4 percent.

Now, if you've followed the Scorecard throughout 2009, you know that hiring has been up for much of the year, but it's been driven by small businesses playing it safe and hiring temporary workers versus full-time employees. That has shifted. This month, we see the contractor index increasing at a much lower rate, meaning more of the month-over-month hiring increase is made up of employees and not contractors.

And some more good news. Salaries are declining at a decelerating rate. The month-over-month decrease was only 0.4 percent, bringing us to a year-over-year decrease of 8.3 percent. While salaries are still declining, this is the second month they did so at a lesser rate.

So, I see some trends telling us we're finally starting to bounce off the bottom and that the worst is behind us. And many small business owners agree.

In a late December survey, two-thirds of SurePayroll customers indicated that they predict their revenues will be up in 2010, and the same number feel good enough to say they believe the economy will get better in the new year. It makes sense. After all, with the continual and drastic declining salaries of 2009, small businesses couldn't count on increased revenues -- no one had the money to spend. Now that we're seeing more hiring, we should see more spending, and so an upward cycle can begin.

That's not to say business owners won't have tough challenges in the year ahead. A rebound doesn't happen in just a month or two. But if trends continue -- along with small business owner optimism -- I predict we'll be reporting on some kind of a recovery by summer 2010.

As we saw in the post-Thanksgiving retail reports, more holiday shoppers came out this year than last. Unfortunately, they spent less, giving us the "More Shoppers, Less Spending" mantra seen all over the news. The latest SurePayroll Scorecard headline has a similar ring. Replace "shoppers" with "hiring" and "spending" with "pay" and you have this month's small business hiring and pay summary.

Small employers are more actively hiring than they were last year, but like the holiday shoppers, they are being much more careful with cash.

According to the November Scorecard, which aggregates data from more than 25,000 small businesses nationwide, hiring is up in November from October, bringing us to a 2.6 percent increase year-to-date. But don't get too optimistic. Like the past few months, we can thank a continued reliance on independent contractors for the majority of the increase.

Small business salaries continue to decline, with a national year-to-date drop of 8 percent. It's no wonder holiday shoppers are spending less. On average, the small business employee earned 9 percent less year-to-date in 2009 than during the same time period in 2008.

I agree with all you business owners who continue to play it safe, hiring temporary staff and conserving cash while waiting for solid signs that the worst of the recession is coming to a close. Tightening your purse strings isn't fun, especially around the holidays when employees may be used to gifts, bonuses, or other holiday extras that just can't be given this year. You'll have to get creative and come up with non-monetary ways to bring holiday joy to the office, such as giving your employees extra comp days or hosting an in-office holiday lunch. Get through this tough time with as much cash in hand and you'll be happy you put yourself in the best possible position to grow when the economy turns.

For a broader picture of the small business economy, check www.SurePayroll.com for the full SurePayroll Small Business Scorecard data for November, including regional and key-states result.

Bring up the topic of hiring mistakes in a group of business owners and you’re bound to hear quite a few horror stories. The manager who fudged his qualifications during the interview process and turned out to be completely incapable of performing. The accountant whose history of taking liberties with company money stayed under the radar until damage was already done. Any business owner who has made these types of hiring slip-ups can tell you just how costly they can be.

At SurePayroll, we recently surveyed our customers and discovered that three out of four admit to making hiring mistakes, many of which cost as much as $10,000. In today’s extremely competitive job market, employers have to be much savvier to avoid getting burned by candidates who stretch the truth to land a job.

How can you make sure you don’t get duped by a bad hire? Use proven methods -- not your intuition -- to check out their background, skills, and personality traits. Gut instinct is important, but it isn’t foolproof. Employers often hire candidates only to find out they aren’t really that friendly, talented, or qualified. They were simply great actors.

Here are four affordable screening tools you can use to help you avoid costly mistakes:

Background checks. Background checks will ensure you’re not risking your business by hiring a violent criminal, white-collar criminal, or illegal alien. With nearly half of all small business job applicants submitting resumes with false information, going the extra mile to have professionals check for red flags is a must to keep your business out of harm’s way.

Drug screening tests. Experts in toxicology say that 75 percent of illegal drug users are employed, and most work for small and midsize businesses. If you’re in a business that uses drivers, people performing physical labor, or other positions that require alert, sober employees in place to avoid serious accidents, drug tests are an absolute necessity.

Skills testing. Just because a candidate looks good on paper doesn’t mean he or she will be able to follow through with excellent work. Whether you’re hiring a copywriter who must have an excellent grasp on grammar or a programmer who needs to be well versed in C++, skills testing will provide a detailed look into how a candidate is truly capable of performing.

Personality tests. A professional personality assessment can reveal aspects of a candidate’s character and potential that an interview can’t. Will the salesperson you’re thinking of hiring be a good fit in your highly competitive business? A personality test lets you find out before ever sending an offer letter.

By putting these pre-hiring safeguards in place, business owners can stop losing sleep over bad hiring decisions and focus on what really matters -- growing their companies.

According to SurePayroll’s monthly Small Business Scorecard survey, which aggregates data from more than 25,000 small businesses nationwide, small-business hiring is up slightly in October from the month of September, bringing us to a 2.2 percent increase year-to-date. Unfortunately, small-business salaries are headed in the opposite direction, with a year-to-date decline of 7.3 percent.

Likewise, optimism among business owners is also continuing to decline, dropping to 50 percent -- one of the lowest levels of the year. With hiring increasing, the cost of labor declining, and the government’s recent measures to open up credit for small businesses, you’d think small business optimism would be higher. But here’s the thing: When we look a little closer, we see that most of that hiring was driven by independent contractors, not employees. And because of continually decreasing wages, less and less money is being pumped into our economy.

Finally, as many of SurePayroll’s customers responded in a recent survey on the government’s small-business rescue plan, the opportunity for increased credit may take too long to make a difference for some business owners who are already struggling to keep their heads above the water.

So, while Wall Street is telling us we’re starting to recover, it seems that half of the business owners out there adamantly disagree. And if you ask me, no one is more in touch with the economy and how it affects their business than entrepreneurs. You are playing it safe by opting to hire independent contractors instead of employees -- and you should continue to hedge your bets. Now is the time to forget about shooting for huge growth and instead conserve cash.

Only time will tell which way we’re going. But one thing’s always certain to me -- as business owners, you are part of the most resilient group out there. So play it smart, keep doing without the extras, and know that this too shall pass.

The full SurePayroll Small Business Scorecard data for October including national and regional data will be available at www.surepayroll.com starting Friday, November 6.

At SurePayroll, we have always lived by the philosophy that employees should feel empowered to handle hard customer service situations without having to consult a superior. As long as we select and train the right employees, they should be able to walk away from an interaction knowing they "did right by the customer." It's crucial to our success.

I had the opportunity to validate this thinking after reading Jan Carlzon's book Moments of Truth, where the former CEO of Scandinavian Airlines System details how he grew the business by encouraging risk-taking and trusting employees with authority.

It comes down to the fact that employees should feel comfortable and knowledgeable enough to deal with delicate customer situations on the spot.

We make it a point to give our employees the tools they need to make the right decisions, and then step back and let them follow through. When a customer emergency comes up, we have to trust that we've empowered our team to think fast and handle it in a way that delights the customer.

A customer's interaction with an employee is so important, I can't stress it enough. It frequently comes down to these little moments of truth playing a large role in the customer's perception of your business. Sometimes, the customer service will be even more important to the customer than the quality of your products or services. You don't want to lose a customer just because your employee didn't have the knowledge and assurance to appropriately respond to the situation without checking with superiors. They should always know how to respond. You can't anticipate or control moments of truth. They just happen.

Instead of trying to prepare your employees for moments of truth through a specific plan or process, the best thing you can do is simply trust them to make good decisions on the fly. As long as you hire the best people, you don't have to hold their hands or guide them.

As an example, my friend Pete told me he used the same car rental service for his entire adult life, and then one day they didn't have a vehicle for him. So, he was forced to use another rental company. When he called the new company, he let an employee know he was a new customer. The employee told him how happy she was that he decided to try them out, and automatically upgraded him to a nicer rental for no extra charge. And, when he showed up at the company's location in January, in Minnesota, his rental car was waiting for him, turned on, warmed up, and ready to go. Pete's old rental company didn't give him that kind of service. I can assure you that the new company earned Pete's future business, and they may well receive the business of every person Pete tells the story to, including me.

So give your employees the power and confidence to make these types of decisions in the "moment of truth" and watch the result -- more loyal customers who just may tell their friends stories about how great your company is.

While we may be seeing a recovery on Wall Street, Main Street continues to struggle. Though the stock market is rising and the pace of job loss is easing, small-business optimism continues to decline, according to SurePayroll's monthly Small Business Scorecard survey.

In the survey, optimism levels in September dropped to 60 percent -- an 11 percent decline from optimism levels the prior month. Small business wages also continue to decline, down 6.5 percent year to date. At the root of these figures are tight credit restrictions and concerns over the cost burden small businesses may have to shoulder to support the proposed health-care legislation.

Surprisingly, despite those seemingly discouraging statistics, hiring on Main Street is up almost 2 percent year-to-date and independent-contractor hiring is up 14 percent year-to-date. This illustrates that any recovery for small businesses will include a catching-up period to move past the current state of "underemployment," where people are working less hours, or working for less money.

For small-business owners moving forward, here are a few tips as Main Street strives to recover:

1) Where applicable, leverage the growing number of independent contractors to provide immediate and efficient help.

2) Streamline budgets by reevaluating, and in some cases renegotiating existing expenditures. Even fixed costs can be variable over time.

3) Be creative and explore new ways to save money. Just because your grandfather had certain procedures for the family business doesn't mean it works best for you in modern times, in this challenging economy (and with today's technology at your fingertips!).

4) Be gracious with your employees. Everyone is doing more for less right now. Recognize their accomplishments, acknowledge their efforts, and thank them for working so hard.

More on these economic trends can be found in our Small Business Scorecard, which tracks hiring, salary, and other trends for U.S. small businesses. For more information, visit www.surepayroll.com.

Despite the gloomy economy, small businesses in the United States have grown the ranks of their employees and contractors by 1.9 percent this year on average. They grew by 0.2 percent in August 2009.

That's according to our latest SurePayroll Small Business Scorecard, which tracks hiring, salary, and other trends based on aggregated and anonymous payroll data for over 25,000 U.S. small businesses.

The legacy of this economy will be that while many small businesses have failed or suffered, a substantial number have done just fine -- and that's kept the overall small-business economy in decent shape.

Adding support to the idea that things are looking up, we saw a strong rebound in owner optimism in August. The percentage of small-business owners who were optimistic shot back to 71 percent, from a surprising low of 56 percent recorded in July.

Other noteworthy trends from the Scorecard are that small business labor costs dropped in August and that small businesses appear to be becoming more reliant on independent contractors. With respect to labor costs, we saw that small business salaries fell 0.9 percent in August. Salaries are down 6.0 percent year-to-date. That's good news for business owners -- but bad news for the unemployed who may be knocking on small business doors looking for a job.

For more information, visit www.surepayroll.com/scorecard.

I'm pleased to report that small-business optimism is on the rise. Based on a recent survey we conducted, 79 percent of business owners indicated they are optimistic about the economy, up from 73 percent in the prior month.

In another sign that bodes well for economic recovery, we are seeing increased hiring in the small-business economy. Small-business hiring was up 0.7 percent in the second quarter, a slight slowdown from the first quarter, when we saw a hiring increase of 0.8 percent.

Part of that continued hiring is fueled by increased reliance on independent contractors, which is evident in our payroll data. In addition, business owners are able to hire because salaries for workers have dropped. In fact, our data suggests that small-business salaries declined 2.5 percent in the second quarter.

For the full report, visit www.surepayroll.com/scorecard.