The fledgling economy can knock us down, but small business isn’t having it. Small business optimism leapt 20 percentage points in October, according to the SurePayroll Small Business Scorecard, which measures payroll data of 35,000 small businesses across the country. This, despite the fact that nationally—for over a year now—small business hiring has been flat or down.
The SurePayroll Small Business Scorecard has told the story repeatedly now for 13 months. With year-to-date hiring down 2.9 percent and wages down nearly 1 percent, small business optimism is a glimmer of sun through an otherwise dreary scene. Hiring continues to decline, but the decline is slowing and if optimism holds, it could turn positive. In addition, wages have declined since a February peak, but are slightly up over this time last year.
Still, 53% of small business owners report feeling “positive” in October. There are two ways to look at this. At first glance, you could assume that optimism is following the stock market which made a steady climb in October. But I think the story goes a bit deeper. I think it is more about the typical temperament of successful small business owner. Typically –entrepreneurs don’t let the so-called “state of the union” hold them down. When things get tough, they knuckle down and find a way to turn the negatives in their favor. They’re in it for the long haul and they know that the long haul sometimes requires faith and a fight.
That long-haul perspective is crystal clear in our October survey of small business owners. In the survey, we asked small business owners: ”Of all the various economic challenges the president and presidential candidates are debating (the budget, deficit, housing crisis, health care, tax rates, access to capital, entitlements, and more), what are the things you would want the president or future president to focus on to positively impact hiring? Their answers are telling. Number one and two respectively were balance the budget and reduce the deficit. The basics of running a successful business, right?
On the surface, it looks like your first lesson from Business Basics 101. But these answers say much more. Asking the President to focus on these things could actually hurt a small business owner in the short term. These answers prove small business owners today are thinking long term! They are willing to hurt a little today to ensure a stronger and more successful future. Smart…that’s why our nation was built on small business.
And innovation, another critical building block to small business success, also came up in the survey results. Innovators look at the obvious and create the ingenious. When asked whether some form of a simple flat tax would impact hiring, nearly 50% of small business owners feel that a flat tax would have a positive impact on hiring and only 1 in 10 thought a flat tax would negatively impact hiring. The message to legislators: A flat tax may just be an idea worth more aggressive exploration.
So as optimism makes a small business comeback, we hope that we will see the tide on hiring and wages turn with it. And as we watch those economic indicators, there are a few things I recommend small business owners focus on:
• Caution is your friend, but use it wisely. Take the time now to plan your strategy so when the time is right you are ready to act.
• You control your success! Don’t allow market forces to freeze your potential. You can adapt your business to be successful or you can fall victim to the economy and let it hold you back. It’s your call.
• Innovate, innovate, innovate. Historically, more innovation happens in difficult economic times. When times are tough, better service wins, so look for ways to turn challenges into opportunities for your business.
As the boss, you don't get much applause on a day-to-day basis. Unless you've hired a circle of yes men to sing your praises, life as an entrepreneur means receiving very little recognition for something you do very well. “Thank you” are two words you're just not accustomed to hearing often.
If you're like me, you don't need constant pats on the back to keep running your business and always reaching for the next big goal. But your staff probably isn't like you. The thrill of reaching (and exceeding) goals with limited resources isn't what keeps them coming in every day. It's those two little words that can make the difference between employees walking out the door or staying a little late to go above and beyond.
The truth is that recognizing your employees for all the contributions they make to your company is one of the most important tasks you can do every day. Simple, sincere “thank yous” are one of the most valuable retention methods you have at your disposal, and they don't cost a thing.
According to a 2007 Florida State University study, 40% of employees leave their jobs due to “bad bosses,” not the desire to switch industries, grow in their careers, or earn more money. You're probably thinking that not recognizing employee achievement does not necessarily a bad boss make, especially if you've watched Horrible Bosses. But the number-2 reason people ditch their bad bosses is the result of supervisors who “failed to give them credit when due.”
I don't know about you, but in this tough economy when workers nationwide are doing so much extra work without additional compensation, my company can't afford to replace talented employees simply because my managers and I aren't taking the time to acknowledge our employees' dedication and achievements.
So I start with thank you and then make it stick by making it personal. Handwritten notes recognizing extra-effort, anniversaries and birthdays go a long way. You’ll know it when you start to see them pop up on your employees’ desks and bulletin boards – proudly posted for their coworkers to see.
If you have or are thinking about a formal recognition program that includes additional cash incentives – try personalizing those as well. You will get far more bang for your gratitude buck by making it memorable. Let’s face it -- if you give your employee a $500 bonus, $350 will end up paying for groceries, bills or other ordinary expenses. But what if instead, you knew your employee loved Kenny Chesney and ordered a limo and front row seats for her and her spouse to Chesney’s new concert? Suddenly you’ve done more than say thanks – you’ve created a memory that shows you know and care about her. As your mother once said – it’s the thought that counts. A thoughtful, personal “thank you” will have a lasting lift that will garner a greater level of loyalty.
Don’t stop there. You can also personalize team “thank yous” in a cost-effective way. Your customer care team doing a great job? Bring in breakfast – or better yet, make them breakfast! It is a great way to start the day and by serving them you are clearly demonstrating that you care.
Again, increasing morale and productivity doesn't have to cost an arm and a leg. At SurePayroll, we say thanks in a number of ways like:
• handwriting personal notes.
• sharing letters of praise with the entire company.
• personalizing quarterly recognition and gift certificates for outstanding employee contributions.
• catering lunches and providing desk-side delivery of snacks such as ice cream, popcorn or candy bars during our busiest payroll-processing days. Sometimes I do the serving!
• celebrating employees at an annual awards ceremony thanking employees for their hard work and honoring the best new mistake.
Like the golden rule – know your customers, you should know your employees. Words matter – especially simple words like thank you. To help retain employees, boost morale, and inspire innovation add that personal touch to your “thank you” and make it matter even more!
More than 30 years ago, Meatloaf sang that two out of three ain't bad. Sure, it was a hokey and over-the-top love song, but it contains an important theme for entrepreneurs. When everyone else focuses on the negatives, entrepreneurs get busy identifying the positives. They find opportunities where others see problems. Then they act on the opportunities, often risk their capital, and create jobs and competition that keep the American economy chugging along.
At least that's how entrepreneurs normally act, even during tough times. As recently as June, SurePayroll customers were in tune with Meatloaf. Two out of three monthly Scorecard optimism survey respondents were optimistic about the state of the American small business economy. But times keep getting tougher, and the once-optimistic entrepreneurs we survey are now feeling serious doubts about the nation's economy. In August, our optimism survey reached a recent low: one out of two was optimistic. In normal times, small business owners are 80 percent or more optimistic about the future.
But bad has gone to worse. Our September Scorecard survey came back with the lowest optimism number ever—and we've been doing this for more than five years. Now, only one in three small business owners surveyed is optimistic about the current state of the economy. And one out of three is definitely bad.
The news media has been singing economic doom and gloom since 2007, and while entrepreneurs aren't typically swayed by mass media reports, small business owners have good reason to be at their least optimistic. September marked the 12th consecutive month of flat or decreased hiring. SurePayroll customers have witnessed a year-to-date decline in hiring of 2.7%.
To make matters worse, small business wages have remained down slightly for the year. That may sound like entrepreneurs are able to save on labor costs during this recession but for most entrepreneurs, it doesn't necessarily mean they're paying smaller salaries or lower hourly wages. It means they're paying less because they're making fewer goods or performing fewer services. They don't need as much staff because they aren't booking as much business.
I wish I could say good news is on the horizon, or that Washington has a viable solution for rejuvenating the economy. Unfortunately, the President 's release of the American Jobs Act in early September did virtually nothing to help small business sentiment. While 20% of our respondents reported being more optimistic after its release, 40% said they were more pessimistic. A whopping 70% thought the legislation will either do nothing for the economy or even decrease jobs.
This leads me to say what I've been saying for months: Be cautious. I believe that as business leaders, it's not time to place big bets. It's time to wait and try to find a glimmer of hope while remaining realistic that we may have a few more years of economic downturn yet to come.
If you see a slight rise in business that requires more labor, it may not be time to start offering full-time positions. Consider giving your employees more hours and overtime before recruiting new hires. And see if there's any technology, particularly online services, that can help you keep up with demand without necessarily expanding your workforce.
Hopefully business owners can eventually be more like Meatloaf and fly out of this bad economy like a bat out of hell. But for now, Meatloaf is one “Celebrity Apprentice” American small business owners just can't relate to.
If there's one thing entrepreneurs have to work harder for than winning business, it's some well-deserved time off. As mobile technology has made it easier than ever to work from anywhere, it also seems harder than ever to take a non-working vacation. You're expected to be on your smartphone no matter what's going on in your life—at least that's what we tell ourselves.
Like I've written before, sometimes the most difficult decision is saying “no.” But at least once a year, it's time to say “no” to long days in the office, to mentoring and monitoring your employees, and to interacting with your customers for a few days. Disconnecting from your office can be one of the best decisions you can make as a leader. As president of a payroll services company with over 30,000 customers, I know it's not easy to disconnect from your business, but I do it every year and have never regretted it.
I guarantee you'll be amazed in the benefits of a little away time to recharge. Even when you're doing what you love, you can't do it 24/7. Everyone needs a break. Taking some time away from my normal routine clears my head and recharges my batteries. If you're constantly drained from your normal routine, it's time to comb Priceline to start planning your get-away. And that means a bona-fide break—not just working from your favorite tropical locale to change things up. Unplugging is the only way to fully rejuvenate.
Going back to work fully energized not only boosts your productivity but also clarifies your thinking and priorities. When we're faced with big decisions, we'll often say “let me sleep on it.” I say “let me vacation on it.” You obviously can't hop on a plane every time you're faced with challenges, but you'll be surprised how your perspective changes after a good vacation. Besides seeing things in a different light, you may realize that what you thought was an urgent priority is actually a minor concern. When you're not under the gun to make a decision, you can think from a viewpoint that, in my experience, leads to the best solution.
And you won't be the only one in your company to benefit from vacation. Once you're out of the picture and unavailable for questions, your employees have to learn how to function without you. While I don't think baptism-by-fire is the greatest way to create strong leaders and independent thinkers, giving your staff the freedom to make decisions in your absence lets them grow as professionals and become more valuable to your organization.
When I'm around, projects often end up with my voice, direction, or suggestions—even when I try to stay out of it. But when I'm pool-side with a good beach read, my team needs to step up and make decisions then move forward. I find I learn as much from their decisions as they do when they're in the trenches without back-up. Once you're willing to place the trust in your employees to run the ship while you're on leave, your staff will discover the need and value for more process and structure that will allow your business to scale and grow. Remember that your business can only grow so much until you start letting go of some responsibilities.
Did you take a vacation this summer? I'd love to read your comments to see how other entrepreneurs recharge so they can tackle things with a refreshed mind.
I like to look at most areas of life as a game. If I didn't think it were fun to navigate the challenges of the game called "business," I wouldn't have taken the career path I have. As the president of a company, it's my job to win when it comes to the balance sheet, doing what I can to increase revenues and profits in any kind of economic conditions, and generating happy customers and employees while I'm at it.
I believe that most business owners feel the same, as they've chosen to be responsible for the results of their game, to take on the game's risks and happily reap the rewards.
Over the last few years, it's been easy to forget that we're playing a game. Winning, or even getting ahead, has been tougher than it's been in a long time for small business owners, as the SurePayroll Small Business Scorecard reveals once again in August. Hiring continues to slide downward each month (August hiring numbers show we're down 2.6% year to date), and we're not able to pay the wages that make the game as fun for all employees (small business pay is down 0.3% year to date). Not adding more players to our team or being able to provide substantial rewards can be the toughest type of defeat to swallow.
At this time, only half our business owners report feeling optimistic about the economy. I feel confident translating that statistic to "only half are enjoying the game." What I find interesting is that whether business owners are optimistic or pessimistic, the affects of the government's actions on the game do not go unnoticed.
As you can see from a few of the reasons given by small business owners who checked the “I am pessimistic about the economy” box, many feel the government has a heavy hand in determining the outcome of their game.
- "The federal government and federal reserve are out of options to stimulate the fledgling economy because of the deficit. Individuals aren't spending as much because they aren't confident about the government’s ability to handle this problem, and more importantly how they will be impacted by taxes and further regulation. This affects small business owners the most since they won't be getting any handouts or bailouts like the big banks or big business."
- "The government is incapable of making the changes needed to drive consumer spending and job growth."
- “Uncertainty! While nothing is certain, our current outlook must be one of caution. The uncertainty is directly related to poor performance of all of our leadership in Washington D.C.”
And those who are optimistic seem to feel they have more control in the game than the government.
- "...Congress may be out of touch, but small businesses aren't."
- "I believe individuals & small business will overcome politics & wall street blunders."
- " I am pessimistic about our government's ability to communicate and implement fairness and ethics but I feel optimistic because small businesses will be the only way to employ the jobless. I think that people will realize that they need to take what they know and open new businesses, and create competition and income to get our economy rolling again."
There's no doubt that the actions of our government will affect our economy, one way or another. And right at this moment, we can't change the actions of our government. But we can choose how we play the game.
I like what one survey respondent who is optimistic about the economy wrote: “I choose to remain optimistic, but not clueless, in all areas of my life.”
Like with all games, the game of business will be won or lost based on your actions. Your actions will certainly be guided by outside influences. Do you want to take the realities of our current economic conditions and see them as a very challenging component that you’re determined to beat, or do you want to allow someone else to win the game while you sit at the sidelines, defeated by circumstances.
As the captain of the team, it’s up to you. How do you want to play the game?
Historically, small business owners (SBO) have proven to be a fairly resilient bunch. However, this perseverance has been severely tested in recent years by the Great Recession and subsequent tepid economic recovery. Against this backdrop, President Obama and Congressional leaders engaged in a highly publicized and partisan debt ceiling debate that based on the stock market’s initial reaction did little to improve the economic situation. The impact of the market’s wild gyrations on consumers’ confidence continues to cause indecision, even though larger corporations hold record levels of cash. The University of Michigan’s Consumer Sentiment Index preliminary report for August 2011 was 54.9, a decline from July 2011’s final number of 63.7. Clearly consumers remain very uncertain about the country’s short-term prospects.
SBOs are typically the catalyst for growth, but they cannot do it alone. Rather than political posturing, SBOs are looking to the government for help on two fronts to address their concerns. First, help small businesses by driving demand for their products and services, either by providing consumers with incentives or by government spending. Second, SBOs need help to get access to capital to operate their businesses. Ideally, help will come in the form of a more permanent solution rather than a one-time fix. In the past, temporary solutions such as tax holidays or a one-time check have not been nearly as effective as permanent tax cuts.
The results from the August SurePayroll Small Business Scorecard reaffirms the SBO mindset in term of what they would like to see in terms of government direction, as the following suggestions generated the most support:
- Find ways to open access to capital for their businesses: Without access to capital, SBOs’ hands are tied in terms of investing in their operations, whether it is in the form of product development, infrastructure improvements or hiring additional staff.
- Cut taxes for businesses: If profitable operations are allowed to keep more of their profits, it will provide them an easily accessible source of capital. It is worth noting that having profits is not synonymous with positive cash flow. Without some form of tax relief, SBOs may be forced to pull cash out of their business at a time when they can least afford it, just to pay taxes.
- Cut taxes to individuals: If consumers have more cash in hand, they are more likely to spend it which would ultimately generate more demand for SBOs’ products and services. Also, a sizable percentage of SBOs are set up as S Corps, which means they are also taxed on their individual returns. Ideally, lowering personal tax rates would work in similar fashion as the business tax cut.
Until some of these issues are addressed, SBOs may remain cautious with their spending. I have no doubt that the economy will eventually improve, but no one can say for certain when that will be. At times like these, survival is the number one priority. The good news is SBOs that make it through this challenging time will be well-positioned to leverage the lessons learned to return to growth mode once the inevitable economic recovery is in full swing.
Do you agree with our SurePayroll customers’ suggestions? Please comment on what you think our government should be doing to get the economy growing again?
For the last several months I’ve talked about our economy being in neutral and teetering on the brink of improvement or downturn. With results in for the July SurePayroll Small Business Scorecard in hand, I feel comfortable (but certainly not good) now declaring that we are out of neutral and sliding into reverse.
Small business hiring decreased 10 basis points from last month – the tenth month in a row of declining or flat hiring. That brings us to a year-to-date decrease in hiring of 2.4%. Average wages paid by small businesses also slipped, declining 20 basis points from last month. We’re now at a year-to-date decrease of 0.3%.
Metropolitan Statistical Area Data
Last month, SurePayroll began publishing data at the metropolitan level for the 35 largest metropolitan statistical areas (MSAs). Our intention is to allow small business owners who fail and succeed according to a more local economy to get a better idea of how their market is faring.
There are certainly positive stories in these numbers. For example, Orlando, Greensboro and St. Louis show strong year-to-date growth in hiring and pay, and continue on a positive growth trend in July. But overall the trend isn’t good. Month over month, more states had hiring and pay fall versus had them rise.
Small Business Owner Sentiment
However, none of the data slid deeper than Small Business Optimism, which has plummeted from 67% of business owners saying they feel optimistic about the economy in June to 47% in July.
That kind of sentiment is no surprise considering the roller coaster of a ride we’ve all taken this month as we’ve waited for the government to get on the same page – or at least sign the same page – regarding the debt ceiling. By this point, most people have seen the devastating effects that uncertainty takes on the economy. I don’t think anyone was more uncertain over the past few years as they have been over the past week.
But now that gridlock seems to be ending and we’re pretty sure we’ll have an answer about which direction we’re taking as it relates to our debt, maybe the economy’s back-pedaling will be slowed. In the meantime, I advise small business owners to plan for an economy driving in reverse, most likely longer than we’d all like. Hire only when absolutely necessary. Invest cautiously. And curtail spending…at least until the indicators point you act otherwise. While this perpetuates a cycle of a slow-to-recover economy, surviving this economy with healthy revenues is your number one goal.
We all know it’s a bad economy, so why pay attention to monthly economic reports? It’s a fair question, and one that a lot of small business owners wrestle with.
The truth is that monthly economic reports can be valuable to small business owners. It’s a matter of knowing what each monthly report focuses on and what information is valuable for you and your business.
I thought it would be helpful to outline some of the reports available and how each differs. Below are a few of the economic reports on which the media focuses consistently.
The Government Jobs Report
The Department Of Labor releases a number of jobs reports every month. The “United States Department of Labor Employment Situation Summary” is one many pundits care about.
This one provides the official unemployment rate and the nation’s employment gains or losses, based on answers from surveys sent to households and business establishments. It’s a good measure of where the American economy stands overall. But it is by no means the be-all, end-all indicator, particularly for small business owners, as only 40 percent of the establishment surveys come from businesses with 20 or fewer employees. The numbers reflect everything from side-business sole-proprietors to companies with tens of thousands of employees.
If your customers are all over the board in terms of size, this will show how they’re doing. But if you cater to a niche market – like businesses between 50 and 200 people, for example, you won’t have much insight into your customer base.
Challenger Job Cut Report
Challenger, Gray & Christmas brand themselves as “the original outplacement company,” so the focus of the Challenger Job Cut Report isn’t how the economy’s growing, but how many jobs companies are cutting. The June 2011 report stated U.S.-based employers announced 41,432 job cuts for the month, an 11.6 percent increase.
Why care about just the cuts and not how many jobs were added in a month? Frankly, we all need a reality check that downsizing happens, even in a good economy. Small employers aren’t required by law to announce layoffs and the Challenger report doesn’t account for them, but the majority of businesses with 100 employees are required to report layoffs. So, if your customers are corporations, paying attention to how they’re scaling up or down can give you insight into where your production may need to go. Also, if you sell to consumers, the higher this number the more likely your sales could be impacted, as your customers may not have as much income to spend with you.
ADP National Employment Report
ADP’s National Employment Report focuses on the payrolls of their customer base, which, according to their Website, includes companies of all sizes – small, medium and large. The challenge for small businesses is that their small business numbers (establishments with 1 to 49 employees) is not made up entirely of small businesses – it can include small locations of large companies. For example, a large national clothing retailer with thousands of stores would have the employment levels at each of their stores reported in the small business segment numbers, so you’ll need to take their definition of “small business” with a grain of salt.
Really, this report is useful for getting a glimpse at what’s going on with bigger businesses.
Our report at SurePayroll, the SurePayroll Small Business Scorecard, analyzes payroll data from 33,000 small business customers. Our average customer has 7 employees. While our monthly economic report won’t provide insight into medium or large companies or the government sector, it’s a good barometer for small businesses. It shows what’s happening on Main Street.
The Scorecard also includes economic data for 35 U.S. metro areas’ small business. Want to know how Atlanta’s small business economy compares to Chicago’s? You can easily see year-to-date employee and paycheck size info for both cities from one Webpage.
I realize there are dozens of other reports out there. And they all make great fodder for the business talk shows to fill air time. However, at the end of the day, the only ones that matter to you are the ones that are relevant to your personal and business situation. When you’re your own boss, you’re also your own strategy department. Knowing which data is most relevant for you from the various reports out there can help you make the right strategic decisions about your future prospects.
- Small Business Optimism is Back
- Two Words Matter -- Make Them Count!
- Why Business Owners Are Less Optimistic than Meatloaf
- 3 Reasons to Take a Vacation
- How you Play the Game
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