Small business leaders are dealing with a multitude of challenges to keep their businesses afloat as the economy turns.
According to Rob Wilson, President of HR Outsourcing firm Employco there top five challenges facing small business leaders going into 2010. Unlike many prophets, he offers some insight into how they should prepare themselves at this time:
Difficulty Receiving Loans and No Access to Capital:
Small businesses are finding credit impossible to come by, even with the help of federal stimulus money directed to help. Small Business Administration backed loans are being issued far more infrequently than during times when they economy was healthier; and the number of loans backed by the SBA this year is far below the number made in the first half of 2008. Overall, bank lending is down, credit card interest rates are up, and the country's largest small business lender CIT Group is in limbo of surviving.
"Several of our clients from various industries are feeling quite stuck in multiple situations as they aren’t able to move forward on various projects, honor contracts, or even grow their business because they aren’t able to secure loans to make things happen," says Rob Wilson. "As soon as credit becomes available, we may see a more rapid rate of recovery."
Healthcare Reform and Small Businesses:
There is a lot of uncertainty surrounding health care reform for small businesses. Several questions are swirling for small business owners as they try to prepare for the upcoming changes and make decisions that are best for their business. These questions include: With a federal plan what options will we have for our employees? If our company isn’t able to afford Obama’s proposed tax increases, what other options are there? There is no question that the cost of coverage could have a strong impact on the profits of some small businesses, forcing them to accept lower earnings, reduce wages, shed some jobs or raise prices. Small business owners can prepare best at this time by keeping up with the healthcare debate and keeping their employees as informed as possible on potential changes.
How to Grow A Small Business in the Current Climate:
Through out the economic downfall, a majority of small businesses have had to reorganize their business model in order to remain steady. They have also had to make tough choices that have had a big impact on their source of revenue, whether it’s been layoffs or making specific cuts in their business operations. Competition in the marketplace hasn’t been the culprit as in past years when revenue was down. The drop in revenue has actually been a result of clients purchasing less; and the demand for production continuously decreasing.
"As the economy begins to turn around in 2010 small business owners are going to have to be creative in order to grow their operations," says Wilson. "They will have to go after new sources of revenue and get out of the office to be proactive in order to generate business."
Wilson predicts the biggest challenge that will come with attempting to grow a business will be the lack of staff available to help generate sales. Due to increased layoffs, small business owners will have to handle the tasks of those that are no longer with their company on top of their own responsibilities to grow their business. Small business owners will be forced to manage the administration in the office; while at the same time will have to plan meetings with clients face to face to look out for new prospects.
Small Businesses and Budgeting for Next Year:
Small business owners are having a hard time right now getting their balance sheets in order heading into 2010. According to Wilson, "Small businesses that are putting together their financial plans for 2010 should prepare on reducing their budgets even lower than where they were in 2009 and the year before. Economic experts have reported that the economy may not rebound until Q1 of next year, so therefore small businesses should plan accordingly. If things do recover sooner than anticipated, it will be easier for companies to adjust upwards; and much harder to go the other way. A majority of the small businesses that we work with are forecasting staff reductions as well so we are letting our clients know to budget low in order to be safe."
Furlough Arrangements vs. Layoffs:
The unemployment rate is at an all time high, and while not all employers are considering layoffs, many employers have cut back in other ways, reducing employees’ hours, imposing furloughs and even sometimes trimming salaries. Heading into 2010 small business owners are going to continually struggle to make decisions about how best to save costs when it comes to their employees. According to Wilson, "There are real costs associated with layoffs and in some cases they may actually cost employers more money in the long run. Hours-reduction for all can also potentially reduce the trauma of unemployment and help retain morale and skill levels."