Still basking in the rewards of what had been a prolonged economic upturn, many small business owners will be caught unaware by the economic slowdown, possibly too late for them to recover, a Washington-based consultant asserts.
“Many of them (small business owners) are in denial,” said George Cloutier of the Washington, D.C. based American Management Services, Inc., a consulting firm that serves as the small business arm of the United States Conference of Mayors.
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“It’s been such good times for so long, they’ve forgotten it could be tough. Many of the business owners of today weren’t around 10 years ago, or they weren’t business owners at that time,” Cloutier said in an interview with Providence Business News.
“They don’t see it coming until it is too late,” he said.
Cloutier made his comments based on a survey his management services group completed among small businesses, a survey that he said had some surprising results.
“I was most surprised at the unbridled optimism,” he said. While “49 percent of the people in the survey thought the national economy was on the wrong track, they were optimistic about their own businesses, so wrapped up in their own businesses that they don’t see the thunderclouds.”
Cloutier said he sees the economy continuing to slow over the next six months, increasingly felt by small businesses which will face tighter lending practices, the continued threat from large super-stores, and an employee shortage.
He suggests that many small businesses are concentrating too much on expanding facilities and their workforce, instead of focusing on areas that build profitability.
“It’s heartening to see that the majority of small businesses are optimistic, but that optimism should be grounded on sound management,” he said. “I’m concerned that too many small-business owners are ignoring the economic warning flags and forging ahead to build sales and expand their facilities when they should be focusing on profitability. If the downturn continues, companies that focus on building profitability are the ones that will weather the storm best and be in the strongest position to exploit the next upturn.”
Cloutier’s survey found that 27 percent of the companies polled plan to add employees and only 4 percent are planning to cut staff.
He also says that government pays too little attention to small businesses and needs to play a greater role in providing support for skills training, and other small business resources. Cloutier said the 23 million small businesses represent 99 percent of all employers throughout the country, 53 percent of payroll dollars, and 53 percent of all employees. He said 65 percent of the 2.5 million new jobs that have been created are in small business.
Yet, he said, “small business is the forgotten majority. We’re trying to get mayors, state and federal government to recognize that.” Part of that, he said, is an initiative to get mayors to lobby for more federal funding, e-commerce and job training support for small businesses.
Here are some of the challenges Cloutier feels small businesses are facing:
Lending practices. “A tighter lending market could create a major liquidity crisis for them. Many are operating slightly profitable, but on a cash basis they are even. It is not a crisis yet, but you can see that bank tightening could affect the liquidity of these businesses. Banks are definitely tightening.”
Super stores. “I think the Wal-Marts, CVS, Home Depots have all affected these industry sectors. They are causing people to quietly disappear. Some will survive based on some unique quality. Most will just fade, quietly disappear.”
Technology. “Take an average million or two million dollar small business, they don’t have the information available. It is still circumstantial, by chance where they can find out about current technology – how to use the Internet successfully for your business. It is a long slow process.
The small businessperson seems to go one way or the other. Clearly (technology) is here to stay. I think they (small businesses) have to work overtime to find the best way to deal with the Internet and other technologies.”
Employee shortage. “Most small businessmen and women don’t like government intervention. But most thought the federal government should be stepping in on that issue. I don’t think the administration is thinking along those lines. The biggest complaint is they can’t find qualified workers.”
“This is a very tricky time,” Courtier said. “Small businesses should spend more time thinking and planning, than doing. And less time on the golf course. Golf is the enemy of small businessmen.”
