SmallButMighty Guesstimate: 1M jobs are imperiled

Thousands of small companies with federal contracts are watching to see whether Congress stops a mandatory $109 billion in budget cuts set to take effect Jan. 2 in what's being called sequestration - cuts triggered by the failure to strike a budget deal chipping away at the U.S. deficit.

Unless Congress acts to stop the sequester, it is estimated that 9.4 percent of non-essential defense spending and 8.2 percent of non-essential spending in other parts of the budget will be reduced.

According to one study, the cuts could mean the loss of nearly one million small-business jobs. In the meantime, small-company owners are trying to soften possible losses by prospecting for new business, cutting back on hiring, and slashing spending.

Laura Schoppe's Raleigh, N.C., company, Fuentek, is at risk of losing about half its revenue. It helps federal laboratories license their technology innovations so they can be sold to companies for use in their own research and development. Most of its government contracts are with NASA and the Pentagon; it also works with universities.

"Our funding has a very real possibility of big cuts," Schoppe said. She has spoken with officials at NASA and met with her senator and congressional staffers to try to get a sense of how deep the cuts will be.

"The answer we're getting is, 'We're working hard not to make it happen,' " she said.

One snag for her is that U.S. universities also face the possibility of big cuts in the money they get from the government. That could make them less able to develop and sell their own technologies. So Schoppe is soliciting business from overseas schools.

If she isn't able to bring in enough revenue to replace money lost to budget cuts, Schoppe said, some of her 30 staffers would be furloughed.

Congress is not expected to debate or vote on sequestration until after the election. It's a thorny issue for small-business owners because the planned cuts would coincide with tax increases scheduled to go into effect in January.

Small businesses would have to eliminate more than 956,000 jobs if all the cuts were implemented, according to researchers at George Mason University and the economic-forecasting firm Chmura Economics and Analytics.

Their findings are based on what they believed would be the most vulnerable federal agencies. But it goes beyond the job losses likely to be suffered by companies with government contracts, to businesses that benefit indirectly.

For example, a firm that provides cleaning or catering services to a government contractor might be one of the casualties when that contractor has to cut costs.

"A lot of these companies don't know they're dependent on federal contracts," said Stephen Fuller, a professor of public policy at George Mason.

Barbara Kasof, of Women Impacting Public Policy, said, "The uncertainty in general is very hard to cope with. How do you make your business plans? How do you hire?"

Amber Peebles' company, Athena Construction Group, has been a contractor and subcontractor on federal construction projects since 2009. She gets 85 percent of her revenue from the government doing everything from carpentry work to helping build hospitals for the Veterans Administration.

She and her co-owner, Melissa Schneider, founded the Dumfries, Virginia-based company nine years ago. The former Marine was injured in a service-related accident in the U.S. after the end of Operation Desert Storm in 1991, giving her company a special status that gives it preference in winning government contracts. It's also reducing her anxiety over sequestration.

Even if Peebles loses some contracts, she expects that competitive advantage to position her company to win others.

"I could go crazy trying to second-guess and prepare for what we don't know."