2010: A New Decade and New Threats for Small Businesses

Although 2010 is poised to be a turnaround year for small businesses, and things may start to seem a bit rosier, business owners must anticipate emerging threats and always be on guard. The tides can turn at any moment. A new competitive force could emerge and knock you on your feet. New legislation and tax codes could prove harmful. Or, as is the fate with many small businesses, Google could decide to take over your industry sector – then you are in real trouble.

Below are the emerging threats as I see them for small businesses in 2010 and beyond.

The Uncertainty of the Tax Code – Nobody really knows what will happen with taxes in 2010 and beyond. With our biggest deficit ever and anticipated additional spending over the next few years, it is almost certain taxes will increase. In fact, the major provisions of the Bush tax cuts are scheduled to “sunset” as of the end of this year. As a result, this will give less incentive for an entrepreneur to grow a business, and give private equity less incentive to invest in speculative but higher rates of return.

Competition from the individual 1099 contractors -- Although 1099 contractors are somewhat entrepreneurial in nature, professional services firm will face major competition from individual contractors (in the US and overseas) in addition to other competing firms. Tom Freedman’s book “The World is Flat”, explains this challenge and the challenge is a threat now more than ever -- with so many out of work professionals.

Access to Capital -- Although the Obama stimulus has earmarked hundreds of millions of dollars for SBA loans, companies still are finding access to this money harder than expected. In addition, the Venture Capital funds and tolerance for risk simply does not exist going into 2010. Entrepreneurial companies must become profitable from the start and not count on debt or equity for help.

Surely this is just the tip of the iceberg in terms of threats. As always, I welcome all comments, feedback and insights.

2010 Small Business Tips: You Have Weathered The Storm; Now What?

For many small business owners, 2009 was a year of reckoning. We experienced the worst economic meltdown since the Great Depression and many industry pundits and economists are torn as to whether or not we are actually experiencing a recovery.
Regardless of what the economists are saying, small businesses need to operate with a completely new mindset – recovery or not. 2009 was all about survival and if approached correctly, 2010 can potentially be the year for small business to go beyond survival to prosperity mode.

So, small businesses have weathered the storm – so to speak. So, what to do now? Below are some key tips and lessons learned that will help speed the recovery process for small business owners.

Lesson Learned #1: Make Deep Cuts When Businesses Future is Uncertain. The key to business survival is to stay profitable. So, how does one do this? Simply put; you may need to lay off more employees to stabilize the business. It does no one any good to keep employees around if the company is then at risk months later. Companies tend to do the minimum amount of layoffs of employees but then put themselves and remaining employees at more risk shortly thereafter.

Lesson Learned #2: Take More Money than Necessary. Businesses tend to raise the minimum amount of equity or debt necessary based on a financial model that is usually not conservative. Before the Great Recession, companies should have taken as much money as possible during the period when capital was being easily distributed.

Lesson Learned #3: Get to Profitability As Soon As Possible. While venture-backed fund can certainly be the lifeblood for a start up – it is often like having golden handcuffs. These companies are at the mercy of the VCs. Their survival is solely dependent upon the next round of financing. There are many reasons for a VC to pull the plug and it may have nothing to do with the business viability. It could be caused by the VC’s own capital needs or the need to shut down the fund and start another fund. The key to not being dependent on a VC or the next round of funding is to have a self-sustained business.

Lesson Learned #4: Get The Upper Hand with a SBA Loan
Thanks to the American Recovery and Reinvestment Act, the Small Business Administration (SBA) is armed with $730 million for lending and investment programs. The maximum loan sizes have also been increased to $5 million (from $2 million). These loans are also reasonable in nature and achievable to obtain – take advantage of this.

Lesson Learned #5: Spend Money Now on Advertising
Now is the right time to spend money now of advertising for 2010. Simply put; the golden rule of spending money on advertising is a recession still applies. There is also a tax savings for 2009 for most small companies if the money is spent now (even if it is for advertising in 2010).

So, the big question is; what is your small business doing to make 2010 the year of business prosperity?