Small businesses across our nation are facing an eternal threat. Small businesses with fewer than 500 workers account for almost 48 percent of all American jobs and nearly 43.5 percent of total GDP. Yet even though these small businesses are a vital component of our nation’s economy, they are frequently financially unstable, with very little liquid capital on hand or other resources to cushion even a minor hit to profits. Consequently, they are more vulnerable to business cycles and recessions. When a small business owner fails to weather a storm, his financial position quickly deteriorates.
In the current economic climate, business cycles appear to be in a state of “changability,” meaning that a business’ standing can be either stronger or weaker depending on external factors. Recent trends suggest that this trend may continue to result in a continued rise in the number of small businesses along with a corresponding increase in their rate of decline. It is likely that as a result the number of “Pandemic Business Disorders” will increase over the next few years. Small business news outlets continue to report that many of these small businesses were adversely hit by the recent economic downturn. To address future risks, business owners need to understand how pandemic risks affect the current global economy.
Many small businesses, especially those in the service industry, face unique threats due to the current crisis. Unfortunately, most business owners don’t recognize that a service business, which traditionally serves the public, can also fall victim to an economic downturn. For example, small business networks have been extremely effective in assisting business owners in northern and Midwestern U.S. communities that have both lost manufacturing and industrial employment in the recent recession. In these areas, business owners have realized that when they invest in high-paying jobs, provide training to local workers and expand health care coverage to their employees, their businesses will succeed. However, without the necessary infrastructure, growth and development, the local economy suffers.
Another important area facing small businesses today is debt and credit risk management. Because many small businesses depend on small consumer loans, outstanding debt has reached record levels. Unfortunately, even when these loans are repaid, some small businesses have difficulty meeting payroll requirements. Because these organizations are unable to meet payroll demands, cash flow problems can erode business sales and employee productivity. As more small businesses to seek assistance from outside sources in order to obtain essential financing, the risk of operating without proper financing and access to credit diminishes.
The global financial crisis has also had a significant impact on many new and small businesses. Many entrepreneurs who received investment capital from friends and family are now experiencing difficulties paying back loans and re-investing the profits they received. Entrepreneurs are increasingly leery of raising capital from only family and friends. In response, more entrepreneurs are creating business corporations, LLCs, and other entity names that shield their personal assets from their business operations. For these entrepreneurs, the ability to separate business and personal financial interests greatly enhances their business success.
While entrepreneurs face unique business challenges, there are many others that face the same challenges due to state and federal regulations. Because these entrepreneurs operate in both state and federal markets, state and federal regulations can be a substantial and deterrent to starting or growing small businesses. In addition to having excessive paperwork, these regulations can also limit the company options available to small businesses. In some instances, state laws prohibit a business from operating within the boundaries of the state if the business would make too much money.
For these entrepreneurs, the option to start a business from home is an attractive one. Starting a business from home allows these entrepreneurs greater freedom in managing the business. Not only can they work from the comfort of their home, but many businesses are able to bypass traditional business obstacles such as excessive taxation. Many home based businesses are exempt from payroll taxes, while larger home based businesses may have to pay state and/or federal income taxes. By starting a business from home, small businesses can avoid the additional burden imposed by state and federal laws.
Home-based businesses provide the same benefits and flexibility as other established businesses. Entrepreneurs often save a great deal of money in the long run by starting a business from home. For these individuals, saving money and avoiding paperwork are key benefits. Home businesses can help these entrepreneurs achieve these goals. As business owners, entrepreneurs, and small business owners, it is important to consider how starting a business from home can benefit you and your family.