Small Businesses not yet Buying into the Recovery

The economic recovery that some had been predicting over the past months may not be right around the corner, after all. While there are some indications of a strengthening economy, many experts are becoming more cautious about both the timing and the rate of the recovery.

And there is a growing chorus of those who believe that we may actually see a second downturn as part of this recession.

Recent surveys find that small- business owners also are not confident that good times will be returning anytime soon.

SurePayroll’s Small Business Scorecard for April found that optimism among small-business owners has shown some improvement during 2010. However, the authors caution that, “while some good things are happening, until more small businesses start hiring full-time workers — and those workers spend with confidence due to perceived job security — it is not time to declare a full recovery.”

Two specific results from the latest survey of small-business owners taken by the National Federation of Independent Business, a small-business lobby, found that the mood among entrepreneurs remains cautious.

First, job measures in the NFIB survey were very weak, which indicates that there is little hope of an employment recovery coming from America’s small business owners anytime soon. This is not good news as small businesses typically lead national recoveries by creating new jobs one by one.

Second, the survey found that small-business owners have very little intention of making capital investments in their businesses anytime soon. Plans to make capital expenditures over the next few months were unchanged and remained near the 35-year record low.

Only 4 percent of business owners characterized the current period as a good time to expand facilities.

I actually see this result as good news. Entrepreneurs are recognizing the need to be cautious right now. This economic crisis is far from over, so prudence is a virtue.

My advice to business owners is to remain conservative in spending, especially with fixed overhead. They should continue to build cash reserves and avoid taking on new debt whenever possible.

A strong financial position will help ensure a strong market position when the economy moves into a sustained recovery.
Top troubles: cash flow, sales

Author Barry Moltz recently conducted a survey of entrepreneurs to find out what struggles they face.

As expected during a recession, the biggest struggles Moltz identified from his survey were with cash flow (36.3 percent) and weak or declining sales (32.5 percent).

One of his more interesting findings was that even with so many small-business owners struggling to stay in business, only 8.5 percent said that they have lost their passion for being an entrepreneur. While the economy continues to show no clear signs of a recovery, entrepreneurs remain resilient.

This offers the hope that when better times do return, entrepreneurs will be ready to lead the way into a period of economic growth.

(This post was my column in today’s Tennessean).