After years of recession, the economy and the marketplace for small business owners have not looked brighter than it does today. But small business owners beware; there are challenges lurking at every corner waiting to turn your lifelong dreams into a financial nightmare. 2017 seems destined to be the new dawn for small businesses after so many devastating years of hash business failures, bankruptcies, and consumer spending drops, due to the slow recovery of the great recession. Many challenges still threaten small businesses and startups today, just as before, even though the business community has started to embrace the Trump era as a new age of pro-business values. The main problem facing small business owners in 2017 according to the U.S. Small Business Association is finding adequate and available credit lines from lenders. Below are some of the common modern challenges that all small business owners are still facing, post-election, and some of their solutions.
#1 – The Hardball Lending Market
Even years after the crash and the following recession, the banking community is still very wary, and the liberal loaning policies of the past that got our nation into serious financial trouble before is hopefully less likely to be repeated by reputable bankers anytime soon.
In today’s lending market, though, profit margins look great on paper but they are meaningless if your businesses capital expenditures and receivable collections start draining your cash reserves. Also, doing your own books is fine if you are adept at it, but hiring a professional looks much more professional to lenders.
If expenses and collections become a burden or are killing your business, you may certainly find some challenges getting lenders to bail you out, or even just help you expand, due to the current lending mentality of “Better safe than sorry, so sorry Charlie,” – especially when it comes to lending to a small business.
The Solution
Businesses need to be sufficiently capitalized. Their cash reserves also need to thoroughly live up to their responsibilities. When business sales decrease or start to take a downward spiral, a business owner should have prepared these economic trends with a substantial emergency fund to see them through – If they didn’t, then good luck and most likely goodbye to them. Thoroughly thought out business planning makes a bank lender much more inclined to feel sufficiently assured of a business’s future success.
#2 – Tight Consumer Purse-strings after Tight Times
Let’s face it, times have definitely been getting better as far as jobs and a thriving stock market is concerned under President Trump, but, the consumer spending climate is still guarded at best as middle-class families deal with so many skyrocketing daily expenses (Health Insurance being a major one). This fact causes the customer base to shrink, which then causes fierce competition over the average consumer’s dwindling expendable cash flows between struggling small business owners.
Businesses are spending more money fighting over customer bases as they bend over backward in order to keep the customers they already have, not to mention stealing yours. Cost efficient and effective means of marketing in order to reach new customers is a must. Unfortunately, once again, the old adage rings true in marketing as well, “Cash is King “. Advertising campaigns are very expensive with sometimes less than thrilling results for the small business owner.
Integrity is its own form of advertising for a small business. The perception of the lack of integrity in a small business can spell disaster if it travels by word of mouth – Reputation can absolutely “Make you, or break you” in a local community.
It‘s tempting for a small business to cut corners, I know, or to look the other way when employees pull a fast one in your favor, but, any business that has endured and persevered the tough times over the years in order to prosper in the good times to come, will tell you that impeccable business integrity and consumer trust in your business is what keeps loyal customers coming back in any economy, good or bad.
The Solution
The first thing in any entrepreneur’s or small business owner’s agenda should always be finding out what the consumer truly wants and needs at any given moment. Then, they need to figure out how to “Make that better widget” first before the next guy does.
Small business owners must figure out how to cost-effectively bring that product or service to the targeted consumer. One cannot rely on doing this on just low pricing alone. One must search out their target markets like a hungry lion and then continue to constantly explore how to bring in new fresh customers into their businesses market base.
#3 – Increasingly High Employee Wages
Seattle, for example, has been in the news with its aggressive minimum wage laws in the downtown Seattle area, following their neighboring Sea-Tac Airport area’s $15 dollar minimum wage law in 2013 for hospitality and transportation workers.
The Seattle City Council did the same for all workers in the downtown area in 2016, raising the minimum to eventually $15 also. The whole state of Washington then followed suit by raising its state minimum wage from $9.19 per hour to $10.75 dollars per hour, soon to be $11.75 in November.
This higher minimum wage trend has also entered New York City’s politics and has equally sent panic waves through the small business community with the threat of a $15 dollar minimum wage, where business expenses are astronomical compared to Seattle’s.
Now, in 2017, New York City’s $10.50 to $11.00 per hour minimum wage is still a strain on some small local New York City small business owners, whom will soon have to again deal with another minimum wage increase in December of $13.50 per hour, and then the ultimate NYC minimum wage goal of $13.50 for businesses with 10 or under employees, and $15.00 in 2018 for businesses with 11 or more employees.
The Solution
The only solution available to small businesses affected by these up-swings of minimum wage increases is to simply hire smarter. One good employee is worth three mediocre employees. With the higher wage comes a worker with higher education seeking employment. Choosing the college student or the fresh out of college worker over the high school graduate is a no-brainer in the small business world.
Hiring smarter while simultaneously offering decent wages to deserving employees will drastically reduce your turnover, produce happier employees with better customer service skills, which will, in turn, bring back return customers, giving the New York City small business owner the advantage of higher productivity from better employees.
The Conclusion
Better economic times are certainly not a guarantee of better small business profits. The three major common business challenges listed in this article are just a drop in the bucket compared to the many remaining small business challenges facing New York City’s entrepreneurs, start-ups, and small business owners. One thing is guaranteed though for small business owners, tackle and overcome these three main small business challenges and the many other unforeseen challenges that always seem to come at the most inopportune moments will be much easier to overcome – Knowledge is always going to be power in the business world when it’s applied properly. May 2017 and beyond bring your small business the prosperity and success that your hard work truly deserves.
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