The Top 5 Concerns for Small Business Owners in 2013

As 2012 comes to a close and the new year looms ahead, small business owners have a got a lot on their minds, and it isn’t just their holiday sales. According to the Bank of America Small Business Owner Report put out last Thursday, the majority of the nation’s small business owners are wary about the economic outlook in 2013.

Which issues were the most pressing according to the report? Here is a rundown:

1. The Effectiveness of the U.S. Government Leadership. A total of 68% of respondents reported that the ability of our leadership to, well… lead!, is a major concern heading into 2013. With all the posturing and finger pointing that we have witnessed over the past two years in particular, this is not surprising. It underscores a rising tide of apathy and a collective vote of no confidence that many Americans are holding, even across party lines.

2. The Cost of Commodities. Another major concern that affects businesses of all stripes is an impending rise of commodity prices. The commodity price charts, for products such as oil, wheat, and corn, h like a roller coaster ride this whole year. A current business owner who was in business in 2008, when the cost of commodities skyrocketed upward, would understandably be uneasy. Indeed, 66% of small business owners listed in as a primary concern in 2013.

3. The Cost of Healthcare. Even with the Making Healthcare Affordable Act set to go into affect in 2014, many owners of small companies ( a full 65% of those surveyed) are still very worried about the rising cost of healthcare, and it’s little wonder why. The cost of healthcare continues to outpace wages and inflation going into 2013.

4. Consumer Spending. Whether we like it or not, in America consumer spending drives the nation’s economic growth. So when consumers start restraining their spending it doesn’t bode well for the businesses they frequent, nor the economy at large. According to the NFIB Small Business Optimism Survey, weak sales is still the reported as the number one business problem for 22% of owners surveyed. According to the Bank of America survey, 64% of small business owners are concerned about consumer spending, and it’s a trend that will likely continue well into 2013.

5. The Strength of the Dollar. The fallout of doing business in a global economy is that profits are strongly tied to international currency exchange rates. The strength of the U.S. dollar rounds out the top five small business concerns at 63%. This is likely do to the fact that all the uncertainty surrounding the U.S. economy as well as other major global economies, such as the European Union, create volatility. For some, a weak dollar means more expensive global purchasing and outsourcing relationships. For a few businesses, a strong dollar may be a problem- especially if they rely on foreign customers ave looked.

Deciphering the Economic Schizophrenia: What Do the Mixed Signals Mean?

A seemingly contradictory line up of recent economic indicators has been drawing a lot of attention as of late, leaving in its wake a population of economists and economic analysts who have suddenly been struck dumbfounded. They are, after all, dealing with an economy that just refuses to stick to their models and predictions.

 

 

Here is a run-down of some of the more “perplexing” measures of the past month:

  • The US Bureau of Labor Statistics released its April Employment Situation Report in which it indicated that non-farm payroll employment rose by 244,000 in April (an unexpected gain that far over-reached even the most optimistic of predictions). According to the BLS these job gains occurred in several service sector industries, as well as manufacturing, and mining. But this good news was tempered by the announcement within the same report that the unemployment rate has also increased to 9.0 percent, up from 8.8 percent in March.

 

  • The National Federation of independent Business (NFIB) reported that its small business optimism index fell for the second straight month in April to 91.2 from 91.9 in March.

 

  • The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose more than foretasted in May to 72.4, a three-month high, from a final reading of 69.8 in April. The index was projected to rise to 70, according to the median forecast of 62 economists surveyed by Bloomberg News.

 

  • The Commerce Department reported that the economy grew at a 1.8 percent annual rate in the January-March quarter, a decrease from the 3.1 percent growth recorded in the last quarter of 2010.
  • According to the U.S. Commerce Department, retail sales (as well as consumer spending overall) has increased overall during the past few months. But the extent of the increase is mixed across different sectors and studies, as this AP article suggests.

 

Add to this the fact that trading on Wall Street has never been better; the stock market been trending upward since September 2010. Here’s what the Dow Jones Industrial Average looks like, and here’s NASDAQ.

What does this all mean?

Perhaps a hint to the answer lies with a one of the conclusions put forth in the NFIB survey:

While reports of net jobs created by small firms stayed positive, the numbers posted did not match the surprising gains cited in last week’s Labor Department report. This suggests that the bulk of new hiring is happening in larger firms and the smaller counterparts on Main Street—the ones traditionally responsible for leading the country out of recessions, are still struggling to hire.

Underlying the contradictory economic reports and measurements is perhaps a simple matter of perspective. Economic growth and recovery may indeed be happening, but it’s almost exclusive to those bigger companies that can use economies of scale to help off-set the rising cost of commodities and weaker consumer demand as well as to those investors who are using the weak dollar and cheap financing to their advantage. Moreover, this tentative “recovery” is not being felt equally across industries.

On the other end of the spectrum are the majority of small business owners and their employees who are feeling the pinch of rising commodity prices and the subsequent inflationary push, yet are struggling with sluggish sales, increasing health care costs, and a whole lot of uncertainty. I would also add to this group a hard to identify population of under-employed and a growing portion of middle-class America that is struggling to get by.

In the middle of this growing divide stands the consumer. These days, the majority of consumers may be in a tug of war between the not so pretty economic reality of unemployment (or under-employment), less disposable income, less available credit, inflationary pressures, and economic uncertainty on one side, and the pent up desire to consume coupled with an innate need to push away all the gloom and doom with a dose of optimism, on the other side.

Who doesn’t want to believe that, yes, the economy is improving- especially among those who are struggling?

In short, the seemingly contradictory economic indicators that have recently been grabbing headlines may be an indication of the vastly different experiences to be had in this topsy-turvy American economy. America has become schizophrenic, a country characterized by a growing divide between those who have and those who are struggling to have, and the remedy to this ailment seems far off indeed.

Increased Consumer Spending: Better Times Ahead?

Reports from Thanksgiving weekend carried good news: promotions and special deals persuaded consumers to open their wallets on Black Friday and Cyber Monday. Americans’ willingness to buy could indicate a subtle turn-around among recession-weary consumers- a trend that could translate to better economic conditions down the road.

 

On Thanksgiving Day and Black Friday, online shoppers spent 15% more than they had a year earlier. On Cyber Monday, they spent 20% more than the previous year’s figures.

Free shipping offers and deep discounts are credited with spurring consumers to shop. Online merchants, who account for 8-10% of retail sales, are steadily improving sales tactics that encourage impulse buys, such as time-limited offers. They have also been taking advantage of social media sites, like Twitter, to advertise their specials.

Online retailers are hopeful that consumers will continue spending until Christmas arrives. As shipping deadlines for Christmas delivery near, there is usually a sharp boost in shopping activity.

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