SmallBizResource Blog -- Business Know-How

Small Business Outlook For 2009

Posted by Janet Attard, Courtesy of Business Know-How Thursday, Apr 9, 2009, 09:25 AM ET

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 life is like for small and microsize businesses. To gain better insight into the effects of the recession on small and home businesses, Business Know-How ran a survey last month to find out how those business owners think they will do this year compared to last year. We also asked what changes, if any, they've made to get through the recession, what their biggest problems are, and what, if anything, they think the government should do to help. The results of the survey are summarized below.

Profitability Expectations
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, and 14.8% thought business would be about the same. On the other end, 16% said their businesses would be a little less profitable this year, and 20.5% said their businesses would be a lot less profitable.

Optimism about 2009 was more prevalent among business owners with sales volumes less than $500,000. That said, 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
According 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% said they expected their businesses 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 participated in 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 Recession Effects
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 rates 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 and not making discretionary purchases, inventory turnover is slow, and that businesses aren't spending.

What Small Businesses Are Doing To Get Through The Recession
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, while 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 multilocation business.

Many of the comments, however, indicated that the owners were increasing their marketing and sales efforts rather than cutting back. Increased networking 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 Small Businesses Want The Government To Do
We 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 majority of business owners, however, indicated that access to capital and/or tax reductions were most needed to help small businesses through the recession. Quite a few also indicated in various ways that they thought bailout funds given to big businesses were wasteful, and that instead the U.S. 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, and one respondent suggested a program in which 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 on 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 it's thing and stop driving us further in debt."

Where do you stand?

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