Small businesses with less than 500 workers comprise 42% of American employment and 43.5% of Gross Domestic Product, and yet they’re facing an eternal existential threat from an elusive economic virus called globalization. To know the full economic effects on small business, the researchers surveyed about 5,300 privately held businesses nationwide. They found that every business firm is deeply affected by globalization, although not nearly as significantly as some firms. The largest companies are feeling its negative impact most directly, as the larger companies have a much greater concentration of global labor. Those companies with the largest shares of U.S. labor are also feeling the negative repercussions of globalization more directly, as the workers of those companies have begun moving home in response to an increasingly unfavorable economy.
“The geography of entrepreneurship has changed dramatically over time,” the economists write. While the entrepreneurial landscape hasn’t changed dramatically, the way they’ve moved and the new places they’re going to have. In addition to being affected by geography, entrepreneurs are also being affected by other forces beyond their control. These forces include luck, timing, education, technology, taxes, entrepreneurial networks, government policies, and the like. As these forces interact, it’s become clear that the entrepreneurial class has become more polarized along traditional lines, and those on the periphery have little in the way of opportunities. “The geographic divide has become even more pronounced between and within U.S. business firms,” the researchers conclude.
As this economic pandemic spreads throughout the world, business leaders should recognize that the time has come to adjust their thinking to face this crisis, rather than try to resist it. As the researchers note, “zooming forward” isn’t the right mindset to have when confronting a crisis, as “zoom and fall” can be avoided if you can proactively manage risk and effectively plan for change. Instead of trying to avoid the current challenge, business leaders should be proactive, work with authorities, and develop a system to deal with the crisis, so that they can move ahead. This might entail a rethinking of how they view their industries. While the crisis is indeed an opportunity, using the crisis to build a stronger and more stable business is probably a better path.
Another factor that business people need to understand is that the best time to start a new business is right now, not anytime next year. According to the economists, “zooming forward” is simply not a realistic outlook. They further observe that the best time to start a new business is now because of the economy’s health, which means that starting new enterprises is a good thing for the economy. The problem is that many people are starting new businesses right now, even in a weak economy, which damages the economy further.
Even if a small business makes more profit than its competitors, there’s no guarantee that the profits will be big enough to cover the costs of operations and the ongoing expenses, such as overhead, rent, utilities, advertising, and payroll. Therefore, entrepreneurs are advised to consider this carefully before jumping in. The profit of a small business is just one aspect of its overall health. A well-managed business plan will address the other areas as well. This way, small businesses can grow without worrying about whether their products or services are in demand.
Even if small businesses generate more profits now than they did before, the economy may still be in a recession. This doesn’t mean that the business climate has changed; it simply means that the business climate is uncertain. To better handle this, business owners need to prepare business plans that include both long term and short term goals, along with realistic forecasts. If you’re looking for a good business plan, you could always consult one of the most successful entrepreneurs of our times, Michael Lynn, who founded HomeGain Inc. In 1999, the business started out as a part-time online service for small businesses.
Today, it’s much easier to make money from home than it was even a few years ago. Many small business owners are taking advantage of social media marketing, online auctions, and other forms of internet advertising to boost sales. Although there are some obstacles to entrepreneurship, small business owners can overcome these challenges, as well as many others. Whether you’re considering a home business or an offline business, it’s important to have realistic expectations about the economy and about yourself.
One of the most effective ways to manage expectations is by doing your homework. You should spend time studying the history of business cycles, including recessions and recoveries. You should also research the different indicators that business owners typically look for when planning their businesses. Regardless, of how much you think you know about the economy, keep in mind that every business is different and reacts to economic conditions differently. For example, while it’s true that businesses often experience higher profits during a recession, it’s also true that they experience lower profits during a recession. It’s up to you and your business to determine which type of business environment will work best for you, and which indicators to use to interpret and anticipate market changes.