The economy has been the focus of the news and most people's attention for months. Hardly a day goes by without news of new layoffs and cutbacks, and efforts to stimulate the sagging economy. Most of what hits the news – at least in major metropolitan areas – is related, as it should be, to the big picture -- to big corporations, to regions of the country hardest hit by layoffs, and to the woes of state and city governments as they try to cope with the recession.
But that big picture doesn't always reflect what things are like for small and micro-sized businesses. To gain better insight into the effects of the recession on small and home businesses, BusinessKnowHow.com ran a survey in March (2009) to find out how business owners think their businesses will do this year compared to last year. We also asked what changes, if any, they've made to get through the recession, what the biggest problems facing them are, and what, if anything they think the government should do to help. The results of the survey are summarized below.
Small and Home Business Profitability Expectations for 2009
Despite the economy, many small and home business owners think their businesses will be as profitable or more profitable this year compared to last year.
Of the 425 people who completed the survey, 22.1% thought their businesses would be much more profitable than last year, 26.6% thought their businesses would be a little more profitable than last year, 14.8% thought business would be about the same, 16% said their businesses would be a little less profitable this year, and 20.5% said their businesses would be a lot less profitable in 2009.
Optimism about 2009 was more prevalent among business owners with sales volumes under $500,000, however, than among those with higher sales volumes. When the responses were sorted to look at results by annual sales, we found that 53% of businesses reporting sales of $500,000 to $1 million and 52.7% of businesses with annual sales of more than $1 million said they expect their companies to be less profitable this year than last year.
The Internet Factor
Based on responses to the survey, use of the Internet in business appeared to influence profitability to some extent. Of those who indicated their businesses wouldn't exist without the Internet, 50.6% reported that they expected their business to be more profitable this year than last year. Among owners who reported that the Internet had made their businesses more profitable (but wasn't their sole source of business), 53.4% thought their businesses would be more profitable this year.
Somewhat ironically, 10% of business owners who visited the small business website BusinessKnowHow.com and clicked on the link to take our web-based survey reported that they do not use the Internet in business. Of that group, 45% said their business would be more profitable this year than last.
Other Effects of the Recession on Small and Home Businesses
When we asked what effects the recession has had on running their businesses this year, 28.8% of business owners indicated there had been no impact, 34.6% said customers are taking longer to pay, and 14.9% said they've had to take out loans for their businesses. Unfortunately 15.9% of the respondents said they were unable to get the loans or credit they sought, and 13.9% noted that the interest rate they are paying for credit has increased. Quite a few survey-takers added comments to the effect that sales are slowing because their customers are cutting back, that consumers aren't making discretionary purchases, inventory turnover is slow, and that businesses aren't spending.
What Small Businesses Are Doing To Get Through The Recession
As part of the survey, we asked small and home business owners to comment on what, if anything they were doing to get through the recession. The responses varied considerably, but many indicated in one way or another that they were cutting costs and/or were trying to boost sales by discounting their products and services. Pay reductions, cutbacks on the number of hours employees work, and layoffs were cited by some business owners, and some indicated they were cutting back on marketing. One respondent said he was closing a storefront studio and moving his business into his home to cut costs. Another mentioned closing several locations of a multi-location business.
Many of the comments, however, indicated that the owners were increasing their marketing and sales efforts rather than cutting back. Networking more was cited by a few survey takers, and several indicated they were adding or expanding their Internet presence to help get them through the recession.
The more creative among the respondents have found ways to repackage what they sell in some way so they can offer their customers a lower-priced option for acquiring their goods and services without cutting prices. Others were expanding their offerings, or targeting new niches with their products or services.
What Businesses Want The Government To Do
We also asked our survey takers to comment on what, if anything, the government should do to help small businesses get through the recession. A handful of the respondents indicated they thought the government should do nothing. "Leave us alone. That means don't increase anybody's taxes and quit spending money you don't have," wrote one respondent. "The government should stay out of it and everything will work itself out," wrote another.
But, the majority of business owners commenting on this question indicated that access to capital and/or tax reductions were what was most needed to help small businesses through the recession.
Here are a just a few of the comments we got about loans and access to capital:
"Require that some of the money given to shore up the banks be used to give out small business short term loans. Require the banks getting money from the government that hand out credit cards be required to reduce their credit card percentages to customers and business owners. If the fees and percentages drop, customers and business owners alike will have more liquid cash."
"Less talk and more action about small business loans. Actually make funds AVAILABLE to qualified borrowers because right now all it is, is talk and no action."
"Loan money or force the banks to loan money so I can hire someone!"
Here are some typical examples of the tax-related suggestions the respondents had for helping small businesses through the recession:
"Stop raising taxes!!!"
"Lower taxes or at least don't raise them."
"Decrease the regulatory environment. Cut corporate taxes."
"Give small businesses tax breaks, lower Worker's Comp and business insurance rates"
"More tax credits and incentives for capital investments."
Quite a few respondents indicated in various ways that they thought bailout funds given to big businesses were wasteful and that instead, the US government should be bailing out small businesses. "Stop giving money to the 'big 3' and to banks that are not doing anything to stave this [recession] off," wrote one respondent. "Start making that bailout money available to the very small businesses that make up two-thirds of the GDP."
Some, wanted bailout money to go to small business in the form of grants , either for startup businesses or for existing business, and one respondent suggested a loan program where a startup would receive a loan of up to $50,000 and not have to make the first payment on the loan for 90 days after receiving the money.
"Give us the stimulus money and we'll get the economy moving," wrote one business owner. "Big businesses and banks just use the money to clean up their balance sheets."
And another commented, "Stop handing out money to the people who caused the recession in the first place. For every beginning there is an end, even for big business. Let the backbone of the country, Small Business, do its thing, and stop driving us further in debt."
©2009 Attard Communications, Inc.