Are you a business owner? Is your business thriving or struggling? Does it make a lot of money or relatively little? Is your business in jeopardy of going out of business? If so, read this article and learn some economic basics about business finance and the effect it has on your business.
The impact of an expanding economy on a small business can be two-fold: first, as business grows, so does the requirement for a business to maintain pace with demand through increased employment, adding more employees, investing in new merchandise lines or opening new storefront locations. While this might be viewed as an excellent advantage, the drawback is that when the economy starts to slump, many small businesses discover that they are overextended… and unable to meet customer demands. When businesses have to compete for consumers’ business, they often cut prices, lay off employees or cut hours. When this happens, customers are not satisfied with the products and services that are offered. Without a carefully crafted and monitored business plan, a company’s business can crumble.
A second impact of the growing economy on small business can be felt in the form of “credit markets.” As the number of small businesses rises, so does the number of credit markets. These include local lenders, regional banks and credit unions, which provide loans and financial services to small businesses. In addition, there are credit companies such as Capital One, Fleet Mortgage and Sun Trust Bank, which provide financing to thousands of small businesses each month.
Unfortunately, “credit markets” also tend to be highly competitive. This is due to the fact that when economies are growing, small business are expected to perform better than they did in previous recessions. For this reason, lenders may approve business loans more quickly, which leads to higher interest rates. Small businesses, therefore, tend to become “under-leveraged.” When under-leveraged, they are exposed to the risk of the lender defaulting on the loan, resulting in high interest rates and, of course, a loss of business.
In addition to being over-leveraged, small businesses are also strained by the sheer volume of regulations and rules that are related to doing business in the United States. Businesses are constantly required to comply with dozens of new rules and regulations. Even for those businesses that do not necessarily need to comply with these rules, compliance can be an added burden. On top of all of this, many of these rules and regulations result in a great deal of paperwork. Add all of these burdensome requirements to an already struggling economy and it is no wonder why many small businesses feel the stress.
Even small business owners face some problems as they try to navigate the complex world of American business. Often, they have no idea how to prepare a business plan. Many business plan books are heavy and hard to read. Worse yet, many business plan books advocate taking on more debt to finance a business. As a result, a great number of business owners feel they can’t survive in today’s economy without at least taking out a loan.
The truth is, there are solutions available to business owners who aren’t able to meet the challenges presented by the business climate. One solution is to hire an experienced consultant or business adviser. Often, business owners will find they can save significant amounts of money by working with a professional business adviser. In addition, because most business plan books are written by business experts, business owners can get important tips for improving their businesses without paying tens of thousands of dollars for a business plan book.
As a result of these problems facing today’s small business owners, it is clear that the key to long-term economic success rests in providing customers with products and services that meet or exceed customer expectations. Unfortunately, many small business owners don’t recognize the importance of this concept. Instead, they focus all their energy on marketing and trying to convince customers that they need or want a particular product. Unfortunately, this often results in more customers complaining about poor customer service than ever before. Instead of ignoring customers, small business owners should focus on offering excellent customer service.