Small Business Owners Invests in Their Business Now
Small businesses throughout the nation are facing an existential crisis. Small businesses with fewer than 500 employees accounted for 48 percent of American employment and 43.5 percent of total GDP. Yet despite their importance, these companies are often financially unstable, with very little cash on hand to buffer a major financial setback or credit negative, and little credit or collateral to rely upon in case of default. Home based business owners can help protect their own finances, but it is important to understand the economics of small business in this context.
The U.S. has enjoyed a strong economy, with average annual economic growth of about 3%, above the average of about two percent in the last two decades. Because of this and other factors, the unemployment rate is low, profit margins are high, and banks have recovered their bad mortgage loans with government funds, resulting in increased lending to businesses and higher demand for business loans. In short, there is a positive economic picture out there for small businesses in every region across the country. But these businesses face certain specific challenges that can cause them to underachieve and fail.
One of the reasons that so many small businesses are failing is that they frequently operate with weak financial footing. Many entrepreneurs start out with limited means, relying on personal savings, family members, or good luck. As these businesses grow, so do their needs. They may need additional office space, better equipment, and more staff. When times are tough, these businesses are forced to cut back on some of their operations in order to survive.
Another reason that many small businesses are not as successful as they could be is that they don’t have access to credit that would allow them to expand when they need to. In a weak economy, banks will often shy away from lending money to small business owners unless they offer up a substantial equity stake. Without such security, small businesses may have trouble getting additional financing from other sources. As such, a major obstacle for many business owners in this down economy is a lack of access to credit.
In today’s tough economic environment, the last thing a small business owner needs is to find that he or she can’t get a loan to expand their business. Fortunately, there are several solutions available that can help protect small business owners from having to go through such a situation. In fact, even in the midst of this current crisis, there are several steps that business owners can take to ensure that they are able to stay in business in a healthy economy.
One of the most important things that small business owners can do right now is to invest in their business. Even during a period of a slow economy, there are many small businesses that are still thriving. Many small businesses are actually creating jobs and bringing in revenue during a slow economy. As such, it is important to ensure that you are not leaving your business in jeopardy just because your budget is limited. Investing in your business now will ensure that it will not be facing bankruptcy in the near future.
Another way that many business owners are choosing to invest their money is through saving. While the economy has slowed down significantly, saving for the future is something that every business owner should be doing. Most small business owners will find that they are in a good position to do so because they have already invested in their company. However, if you have not done so, it is important to make sure that you are setting aside a portion of your pay check each month for investments. This will ensure that you can afford to live without your business in a slow economy.
Finally, many business owners are finding that it is important to develop a business plan when an economy makes an economic downturn feel like it’s going to hit. The truth is that even during good economic times, there are going to be challenges that businesses face. That being said, having a business plan will allow you to look at those challenges realistically and make sure that your business can continue to move forward even with a bad economy. In fact, if you are prepared for the problems that your business may face, it may even be possible to weather even worse circumstances.