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Why the Small-Business Landscape Isn't As Gloomy As It Seems

Instead of peering over the fiscal cliff, small business owners should turn their gaze inward. They might find there's more to concentrate on in-house than what's happening in the White House.
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In working with Chambers of Commerce and teaching MBAs, I’ve noticed a recurring tendency of business owners and people studying the field to take macroeconomic issues and apply them, incorrectly, to all small businesses. An entrepreneur making $30 million in income each year will have many questions about a new tax rate. And the CEO of a multinational company might reasonably ask, “What does President Obama mean for my business?” However, the average small business owner should focus on factors he or she can control, rather than worrying about the outcome of an election, or a Congressional resolution.

Sageworks recently polled accounting professionals and bankers who work regularly with the owners of privately-held companies. When asked about private companies’ prospects for the future, 74% said that the national debt made it less likely that businesses will increase hiring in 2013. A nearly identical 73% also stated that the national debt made it less likely for businesses to boost other investments.

So why the pessimism? Figures from our database show that across all industries, profit per employee is up, net profit margins are up, and while the rate of sales growth has slowed since 2011, sales are still up an average of 6.8% percent from the previous year. And sectors like home health care services and computer systems design have been thriving due to aging Boomers and the continued automation of the workforce.

The ongoing game of chicken between the President and Congress over various pieces of legislation might be a contributing factor to entrepreneurs’ uncertainty. There is no doubt that healthcare, for example, was a legitimate national concern. However, the debate over health care itself was not the issue so much as the fact that it lasted two years. Private companies can’t operate in such uncertainty. Their owners are practical and need to account for costs; they have to make payroll and know what their taxes will be.

Still, business owners shouldn’t conflate a negative political atmosphere with the ability to thrive. Become monomaniacal about what you can do and about customer satisfaction. Ask yourself: Is my store located on the right corner? How many donut shops are near me? Are the bathrooms clean? Does what we’re selling taste good and work well? It’s more important to be messianic about all of these details before worrying about anything else.

There are always underlying insecurities in running a business, but the economic data shows that their situation isn’t all doom and gloom. Concentrating on the immediate business at hand is key. 

As told to Judith Ohikuare

Last updated: Dec 26, 2012

BRIAN HAMILTON | CEO, Sageworks

Brian Hamilton is the co-founder and chairman of Sageworks, an Inc. 500 honoree. Hamilton is an original co-developer of FIND (Financial Information into Narrative Data), which converts financial numbers into plain language.




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