What's Going To Happen In '82?

INC. asked hundreds of business people what they think this year will be like.

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It can be lonely running a small business. There's nobody to tell you how you're really doing. Are sales down because of your own mistakes, or because the economy is in a tailspin? Are profits up because you're smart, or because you're lucky? What should you do about it now?

Economic news and economists' forecasts are only marginally relevant to any specific firm. Currently, for example, the seers are debating whether we're in a recession. Some businesses are, some aren't. So much depends on your customers, your competitors, your suppliers. How are they doing? What are their plans?

Talking to people, in fact, is how most small business managers formulate their own economic outlook. When they ask "How's business?" they're not exchanging pleasantries. They really want to know.

This article looks at the year ahead the way every business owner would like to: by talking to hundreds of other businesspeople.

INC. approached the 1982 outlook in two ways. First, we convened three forums of about 20 small businessmen each, along with a sprinkling of economists, bankers, and accountants who specialize in small business. All are experienced, active small business leaders in their communities or industries. These groups met in Phoenix, Chicago, and Boston this past October and November to ask each other "How's business?" A stenographer recorded their conversations. We have excerpted highlights from the forums on the following pages.

INC. also sent a questionnaire to a sample of the magazine's subscribers. Approximately 2,000 small businesspeople gave us detailed answers to questions about their business growth, their biggest worries, and their opinions about the economy. More than three-fourths of those answering were owners or top executives of small businesses, and almost all the rest were in charge of finance, marketing, sales, or production. About half of the companies have annual sales up to $1 million; the other half range up to about $50 million. All the charts and figures in the article are compiled from this survey.

The article is divided into six sections: credit, business growth, the Reagan Administration's policies, inflation, labor, and regions and industries. Each section begins with a summary of the survey results pertaining to that topic; the rest consists of verbatim remarks by our meeting participants and subscribers.

Regard this article as a visit with your business associates and friends. Listen for trends the way you do in your daily talks with colleagues and customers. Take note when people contradict one another. And let us know what you think.

CREDIT

Interest rates will dominate the economic news in 1982 as they did last year. High borrowing costs are wreaking such havoc with income statements that other business worries pale by comparison. In INC.'s subscriber poll, interest rates were voted the major concern for 1982 by a four-to-one margin over the next item on the list (see table 1). In a separate question, about two-thirds of those responding said that tight monetary policy will significantly hurt their company.

Table 1: Most important economic factors to small business in 1982

Factor Weighted score

1. Interest rates 192

2. Growth of the economy 48

3. Availability of long-term credit 40

4. Ability to pass on price increases 40

5. Availability of short-term credit 38

6. Wage costs 29

7. Energy costs 25

8. Raw materials costs 22

9. Quality of labor 21

10. Federal taxes 19

11. Domestic competition 18

12. Regulatory environment 15

13. Federal spending 14

14. Availability of equity capital 12

15. Availability of labor 8

16. Foreign competition 8

17. State/local taxes 8

18. Government aid for small business 7

19. State/local spending 6

20. Stock and bond markets 5

21. Mergers and takeovers 5

22. Supply of energy 4

23. Union activity 4

24. Foreign exchange rates 4

Interest rates topped this list on the following vote by INC's sample of subscribers: 53% chose it as their most important concern in 1982, 12% chose it as second most important, 8% chose it third, and the remaining 27% didn't put it among their three major worries. Its score of 192 points comes from giving a weight of 3 to the percentage of times it was listed first, 2 to the times listed second, and 1 to the times listed third. The highest possible score that any item could receive would have been 300 (3 X 100%) -- if every respondent had listed that as top concern.

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