Small Businesses In a Struggling Economy
It is no secret that the recent downturn of the economy has sent ripples through the business world, as well as most people’s lives. But one can argue that one of the entities hardest hit by the current economic climate is small business sector. Often referred to as the epitome of the American dream, and perhaps the key building block of the business world, small businesses have been endangered by the faltering economy, leaving many wondering just how much damage small businesses around the country are enduring and what, if anything can be done to help their survival.
Small businesses are one of the most important sources of innovation and new jobs. A start up business requires someone to have the job of maintaining it, running it, and performing day to day duties. Depending on the nature of the business, this could range from a few new jobs to hundreds. With personnel in place, the business can operate and grow, raising their revenue, which will allow for expansion of the business, an act which in turn requires more jobs.
The economic downturn has at the best restricted progress small businesses and at worst caused them to close down. While the effects vary, one thing remains for sure: without the growth and prosperity of small businesses, the chances of the economy surging again are not good.
Most small business owners have found their own methods of coping with the economy. As the cost of doing business have gone up, many have had to decrease expectations of profit intake, while at the same time trying to “trim the fat” in order to deal with rising energy costs. Another risky, but sometimes crucial move is the raising of prices on the products or services distributed by the business. Raising the prices could turn away potential customers, arguably the worst fate that a struggling small business may face, but at times, a necessary evil in order to keep the business afloat and alive, awaiting an economic upturn.
Small business owners would potentially need to increase their hours, especially those in the retail sector. This strategy would allow more customers to have an opportunity to visit the business and increases the chances of more potential revenue. However, this brings with some difficult aspects. The longer the hours are, the greater the utility bills become. Therefore the owners find themselves evaluating the pros and cons of keeping extended hours, by weighing the potential revenue intake against the rising costs of doing so.
An especially struggling business will be forced to reduce their workforce in order sustain their ability to stay open. This of course, is of no help to a struggling economy, as this adds to an already increasing unemployment rate. The cutting of health care benefits available to employees is another approach small business may be forced to take. Next to lay offs of personnel, this is arguably the toughest decision an owner can make as it drastically affects the financial livelihood of the business’s employees. While the coverage may not necessarily be completely stripped away, a cheaper alternative may be sought, which may prove to be insufficient for the employees who are put in the difficult position of considering the few options they have. They will either risk receiving minimal, or no coverage, or be forced to seek opportunities from other employers who may not be cutting benefits. This hurts the business they currently work for, but that’s what makes cutting benefits a greater risk than reward situation.
Most owners are also forced to reduce investments in the future of the business. This can also be a risky move as there is a lot of potential risk involved for the future survival of the business.
Most small business owners try to diversify their business, and look for new, more affordable ways to promote their business’s name. They also try very hard to build up a good brand name in order to acquire new consumers and retain loyal ones. Risk plays a big factor in their survival as well, as some owners are willing to take a financial risk now, in hopes of a soon improved economy, which should pay off in the long run.
Owners will also look to the government for some assistance in the form of tax credits and help in the realm of health benefits. With the necessary help, small business owners will have some additional leverage that should allow them to channel their financial assets and investments more easily and help in securing employment for the business’s staff.