With more than 130,000 layoffs and a steadily increasing bankruptcy rate, according to an ADP Small Business Report, the Past 12 months have been trying times for the more than 25 million small-business owners throughout the nation. And in the coming year, an industry expert predicts that entrepreneurs will have to be even more diligent if they want to keep their doors open.
Rob Wilson, a small-business expert and president of Employco, an HR-outsourcing firm, lists five main challenges that small-business owners must consider in order to be successful.
Limited funds. The first is dealing with the limited funds available to help their businesses grow. Wilson says entrepreneurs are finding it more difficult to secure financing, despite provisions for small-business owners outlined in the federal stimulus package.
“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,” he says. “As soon as credit becomes available, we may see a more rapid rate of recovery.”
Because of the unstable economy, loans backed by the U.S. Small Business Administration are no longer commonplace. In addition, bank lending is down, and credit-card interest rates are up.
Healthcare. Small-business owners may have few options when it comes to healthcare. Wilson says the best thing that entrepreneurs can do is keep up with the continuing debate and keep their employees as informed as possible about potential changes. Sweeping revisions, specifically linked to cost, he says, “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.”
Growth. A third challenge that small-business owners should consider tackling in the new year is how to get their company to experience growth during a stagnant economy.
“Throughout the economic downfall, a majority of small businesses have had to reorganize their business model in order to remain steady,” Wilson says. “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.”
In order to see their companies prosper, owners in 2010 are going to have to be creative, he adds. Sitting behind a desk and tapping into the same old sources for revenue won’t work.
Balance sheet. Another challenge facing small-business owners is their difficulty in reconciling their balance sheets. Although this year was tough, Wilson says owners should plan to make even deeper cuts to their spending plans next year.
“Economic experts have reported that the economy may not rebound until Q1 of next year,” he says. “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.”
Payroll-cutback options. The final issue that small-business owners must consider is weighing furloughs against layoffs and hours reduction.
According to the Bureau of Labor Statistics, the number of people working fewer than 35 hours a week because of slack business conditions has more than doubled in 12 months, Wilson says. Many employers are mandating shorter hours as a way to save costs and reduce layoffs.
“There are real costs associated with layoffs, and in some cases they may actually cost employers more money in the long run,” he explains. However, "hours-reduction for all can also potentially reduce the trauma of unemployment and help retain morale and skill levels.”
Employco provides human-resources, benefits-administration, payroll-processing and workers'-compensation services to more than 400 small and midsize businesses across the country.