In many areas, eateries, bars, entertainment centers, and so many other forms of commercial business are either being forced to close up or switch to delivery and takeout only. Some, unfortunately, have already shut down completely, prior to government orders. Now, in light of the current economic situation, it appears that many small businesses might soon have to permanently close their doors. This is especially true in the face of recent news that many large restaurant chains have decided to downsize in an effort to conserve capital and focus on the more important, but profitable, consumer.
The problems this small business creates in the credit markets are also being felt all around the country. Small business owners are often reluctant to spend money on expansion because they don’t want to be perceived as making a bad financial decision. While it’s true that business cycles tend to be cyclical rather than linear, small business owners should be prepared for a tough three-year period ahead. During that time, they’ll have to deal with customers’ frustrations over higher prices, fewer services, and less selection.
In order to avoid such difficulties, many small business owners will have to develop a solid business plan. Without such a plan, you may find yourself at the mercy of whatever business plans are in force at the time. A business plan should be written from the point of view of the business owner. It should include a description of your business goals and how you intend to meet them, a detailed budget, a marketing plan, and a strategy to foster sales growth and new customers.
One of the biggest threats facing small businesses right now comes from the global recession and the outbreak of the so-called “pandemic.” A pandemic is a special type of outbreak that appears in a geographic area and affects a wide variety of people. For example, a disease that appears in Mexico, Japan, China, or other Asian countries and kills a large percentage of its victims will almost surely have an impact on businesses in the United States. The problem is that a pandemic is unexpected. Few business owners expect the phenomenon, so when it appears they scramble to make purchases and cut staff.
A new study from the Natural Resources Defense Council (NRDC) looks into ways that consumers, businesses, and governments can respond more quickly and effectively to crisis situations. According to the study, consumers, whether they’re families or businesses, spend about 25 percent of their disposable income on purchasing “emergency supplies” such as blankets and food. This emergency buying habit costs U.S. consumers about $25 billion a year. Using this figure, the NRDC suggests that investing in disaster preparedness could save many small businesses and households from financial loss and provide long-term job security to many working-age adults.
Emergency supplies are not just for disasters. They are also for non-disaster emergencies, such as a computer problem that forces the owner to shut down a website. The report recommends that consumers and small business owners to store food in “vault storage rooms,” which are climate-controlled containers that keep foods cool at elevated temperatures. Another recommendation of the report is that businesses provide employees with water purification tablets upon request.
In an effort to improve the stability of the housing market, many lenders have implemented a program that offers cash advances to borrowers at risk of losing their homes. This program has helped to stabilize the financial institutions that finance many small businesses and homebuyers, but it doesn’t appear to be having much effect on the home prices of neighborhoods throughout the country. This may be because there is no real crisis in the market to begin with. While homebuyers need to be more careful with lending money, the majority of homeowners should still be able to afford their current property.
If you own or manage a small business, you need to take stock of your company during these tough economic times. Do you plan to increase your headcount, or downsize? Is the business you currently operate primarily as a work place, or is it more of a home-based venture? Does the current crisis have any impact on your ability to operate as smoothly as possible? While there is no real crisis, the current trends do suggest that small businesses will continue to go under during this economic recovery, as the unemployment rate is rising for all sectors of the job industry. As a result, business owners should think carefully about the options they have available to them.