Monday, May 10, 2010

Small Business Outlook for 2010

clip_image001This article was written by John Lafare, SCORE Orange County Management Counselor

Forbes and CIT jointly sponsored a study just published that makes the case for greater optimism as small business owners emerge from the ordeal of 2009.

Indeed, of 220 businesses surveyed, with revenues ranging from $1 million to $15 million, 59% experienced revenue declines, sometime by as much as 40 or 50%, and only 6% reported significant growth. Falling incomes led to additional pressure on liquidity, and nearly 2/3 found it much more challenging to manage their companies’ cash flows.

Even those who did well in 2009 reported significant challenges in 2009, due to tight credit. Shmaltz Brewing grew revenues grew by 30%, actually prospering in a down economy. In spite of that, after 5 years of profitability, and an almost perfect credit score, the company saw its $40,000 credit line revoked on 3-day notice, thereby cutting the operating budget in half.

Sadly, the economic stimulus programs coming out of Washington appear to have had little to no effect, though small business owners remain hopeful that recent proposals to raise the SBA lending limits may provide some benefit during the coming year.

After working a lot harder and longer in 2009, and for a lot less, companies are nevertheless looking ahead to 2010, though nearly 50% of business owners still think that we have yet to reach the bottom of the financial and economic crisis. Most do not envision solid growth until 2012 or later (the Federal Reserve Bank of San Francisco does not see the economy humming until 2013, at the earliest).

There is general agreement that the old ways of doing business won’t work and that success will require finding ways to explore and take advantage of new market opportunities. There is a broadly stated commitment to run businesses more aggressively, conserving cash while spending more on marketing and advertising, investing in growth or expansion, and pursuing new revenue streams.

The business owners in the survey recognize the importance of planning, though they rarely do it. It seems to be a bit like working or flossing your teeth regularly: it’s hard to get around to doing it regularly enough. This in part reflects the uncertainty with which companies view 2010.

In spite of the fear and uncertainty, the business owners in the survey staunchly believe that they will lead the country out of the recession, sometimes in spite of rather than with the support of the government. Their greatest hope is that access to financing will ease up as the Small Business Job Creation and Access to Capital Act gets enacted, especially the part that raises the SBA loan limits.