The Guardian Life Small Business Research Institute of New York City released this week a list of six trends small businesses are likely to encounter in 2012 along with suggestions on how to deal with them. Most of the institute’s assessments were derived from field work in October 2011, in which researchers surveyed almost 1,100 business owners.
John Krubski, the institute’s research advisor said, “The ongoing uncertainty of the economy, increased competition and the impression of negativity surrounding election-campaign rhetoric will greatly affect small businesses in 2012. Anticipation of these issues, coupled with guidance on how to tackle them, will help small business owners maintain and potentially grow their businesses in the new year.” Krubski, along with teammates Dr. Patricia Greene and Ernie Guerriero, advises that small business owners will need to focus on improving productivity and differentiating their businesses to overcome ongoing economic challenges and to compete with larger companies.
On the other hand, Guerriero, head of qualified plan marketing for the Business Resource Center for Advanced Markets at Guardian,notes that “with many large companies downsizing, small business owners have a unique opportunity to be creative in the way they attract talent from organizations by offering competitive benefit structures.” Greene, a special academic advisor to the institute emphasizes that “small business owners have to be highly motivated and learn to be creative and resilient to succeed in difficult economic times.”
Here is a summary of those trends along with a recommendation for addressing each trend head-on.
Continued economic volatility in 2012. The institute’s research found that 44% of small business owners believe that the economy is the one thing standing between where they are today and their desire to grow their company. Recommended action: Develop and deploy integrated action plans. A dynamic and flexible short-term plan makes it possible for a business to deal with immediate challenges; and a short-term plan is most likely to succeed if it is part of a comprehensive, proactive long-term planning process.
Access to capital will continue to be tight, and lending practices even tighter. 2012 is likely to see a drop in business spending and continued sluggish GDP growth. Neither of these factors bodes well for loosening the supply of capital flowing to small businesses. Recommended action: Consider where borrowed money can do the most for your business. In considering the cost of debt, business owners surveyed offered the following priorities relative to borrowing money to fund their operations: upgrading equipment (91.2 percent); short-term cash flow (81.3 percent); investing in marketing (78 percent); and adding people (60.7 percent).
Significant numbers of marginally successful businesses will be pushed to the brink. One in seven small business owners surveyed said they would probably close down their companies were revenues to drop drastically over the next 12 to 24 months. For sole proprietors, that figure was almost one in four. Recommended action: Improve productivity. A difficult economy presents an opportunity to right-size a company for long-term success. Small business owners should ensure they have the right people in the right positions so they can focus on growing the business – especially at a time when competitors’ market share may be vulnerable.
Larger companies will aggressively market to prospects considered “too small” in the past. Larger companies with which small businesses compete will be more likely to “poach” customers they have traditionally considered to be outside of their target market segment. Recommended action: Look for ways to meaningfully differentiate. Small business owners should seek ways to demonstrate how their company is more responsive to customers or able to provide more customized, localized or cost-efficient service. They can also consider partnering with complementary businesses to offer a broader range of resources to customers that traditionally prefer dealing with larger companies.
Election-year campaign rhetoric will create an atmosphere of tension and negativity. Small business owners should expect that presidential candidates and members of the media will devote a great deal of time and attention to how “bad” things are, or how “bad things might be.” This negativity can further dishearten the customers, salespeople, and workforce of small businesses – not to mention small business owners themselves. Recommended action: Be optimistic! If small business owners exude a sense of confidence, optimism, and focus, their customers and employees will feel it and respond accordingly. More than in most years, attitude in 2012 will be extremely important to success. Further, when it comes to future legislation, small business owners should not get distracted, but rather stay on their path.
Trade-offs and deal-making will characterize 2012. Vendors and service providers will be more willing than ever to trade a degree of their profitability for the certainty of doing business. Recommended action: Cut deals that create certainty for vendors, customers, and the business. Small business owners should sit down with vendors and larger customers and offer to make commitments in return for price reductions or better payment terms. This includes meeting with staff, advisors (accountant, attorney, financial planner), and key customers to do a “start from scratch” review of everything that costs – and makes – the company money.
The Guardian Life Small Business Research Institute is an organization focused on better understanding America’s small businesses and small business owners. It combines research the company commissions with the expertise of people within the Guardian Life network to yield deeper insights into contemporary issues in small business. Guardian is a mutual insurer founded in 1860.