Record low outlook for small business
It's getting ugly out there for small- and medium-sized businesses.
According to a semi-annual economic report by PNC Financial Services Group, "the outlook for the nation's small and mid-sized business owners is at a new all-time low."
Here are some of the report's key findings:
*Nearly one in three (29 percent) of business owners are pessimistic about their own company's prospects during the next six months, compared to 21 percent in the spring and 10 percent in last fall's edition of this semi-annual survey.
*Three out of four business owners (74 percent) say the possibility of higher energy prices will have a negative effect on their company during the next six months. The possibility of recession is second (71 percent) and the possibility of higher inflation is third (65 percent).
"These results support our view that the U.S. economy has entered into a recession and the economy is likely to remain weak through the middle of next year and beyond if the federal economic stabilization plan is not enacted," reports Stuart Hoffman, chief economist for PNC.
I figured now is an opportune moment for some advice on dealing with this crummy economy.
"This is a time when business owners need to re-examine what they're doing in today's economy while also preparing plans for tomorrow's rebound," said Beth Wood, assistant vice president of Business Owner Advocacy for MassMutual. "While this is no doubt a difficult market we face, it also can be a time of opportunity for business owners who act strategically."
Here are some of Wood's tips:
1. Identify sources of cash by reviewing expenses and trimming fat. Revisit the operating line of your income statement. Which overhead expenses can be reduced or eliminated? For example, this could be a great time to renegotiate overhead costs such as credit card fees, payroll processing fees, office supplies and other vendor services.
2. Hire better. Revisit your approach to hiring talent. Typically, there is higher-quality talent available to small businesses during slower economic times, particularly in light of the many layoffs and business closures we've seen recently. Take the time to find and hire strong talent, not just warm bodies.
3. Evaluate unproductive staff. Make sure you and your staff understands the difference between productivity and activity. To optimize productivity, make sure you have the right people in the right jobs.
4. Explore new income streams. A bad economy often causes business owners to retreat into their core business, but in doing so they might be missing a chance to leverage their existing infrastructure. Is there a complementary business that might bring in more profits or that might boost the visibility of the company overall?
5. Reward talent with new employee benefits, often at no cost. Although many might think this is a time to trim benefits, it's actually a great time to reward employees with benefits that keep them happy and productive, especially when salary increases might not be possible. One way to do this cost-effectively is to offer voluntary benefits that will provide all employees with access to coverage at no or little cost to the company.
6. Create a financial and succession plan that lets you act on your terms in a down market. This is particularly important if you are approaching retirement and counting on the sale of your business for retirement income. In an economic downturn, you need to have these plans in place and be ready to execute any of several planned options, such as selling the business outright, taking on a partner until the economy rebounds, transferring the business, or liquidating it.
7. Build a network of unpaid business advisors. By building an unpaid board of directors from among non-competing, small business owners, you can tap into a wealth of knowledge, creative thinking, and shared experiences.
Do you have any good tips for dealing with a difficult economy?
