HUMAN RESOURCES

Entrepreneurs Think Like Consumers

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The SurePayroll Small Business Scorecard results are in and they're revealing more of the same. Jobs increased slightly from last month (0.2%) to bring us to a year-to-date increase of 4.1 percent and paychecks neither dipped nor rose from June, keeping us at a year-to-date loss of 0.4 percent. Independent contractors continue their slow and steady increase, now comprising 4.9 percent of the workforce (a 10 percent year-to-date increase).

This month's numbers don't reveal anything earth-shattering. But what's really changed is the small business owner's outlook on the state of the economy. Although we've had two months of similar hiring and paycheck numbers, the SurePayroll small business owner optimism number plummeted 11 points, revealing that only 55 percent of business owners are optimistic about the economy.  That dip is not too far off from consumer sentiment, according to the Thomson Reuters / University of Michigan consumer sentiment index. Their survey shows a 9 point dip in consumer sentiment from June, with 67 percent of consumers indicating they feel good about the economy.

I would say the numbers and rise in number of people who are pessimistic just confirm that we're in a near holding pattern in our long, slow climb out of the depths of the recession. That is, if you think we've left the recession.  Unfortunately, most small businesses don't think we have (3 in 4 business owners we recently surveyed don't think the recession is over). When asked why, the majority cited a continued high unemployment rate as the main reason and government policies as another reason they don't buy economists' views that we left the recession several quarters ago. Perhaps the difference between the small business owners surveyed and these economists is simply a matter of semantics — what does 'out of a recession' technically mean? But either way, business owners aren't yet feeling better about the economy.

Likewise, consumer confidence is in a decline. More business owners may be feeling that the economy is not improving, but they aren't drastically changing their hiring or pay habits at this point.  We learned that consumers, on the other hand, are acting on their feelings. They put a drastic halt on spending in July, which certainly won't help improve small business sentiment.

The results of this month's scorecard come out at the same time we get news that the GDP was much lower than expected in Q2. While there were some winners in the report that could be helping some of the business owners who reported that they are optimistic (non-trade business increased and equipment, software, structures and new construction spending rose), the media has concluded what business owners have —without more jobs,  we won't see increased spending.  And without increased spending, we won't see more jobs.

What does this mean for how you operate your business?  Clearly, everyone's situation is different and requires an individual evaluation.  However, given the catch-22 we're in (without increased demand/revenues, it is unlikely businesses will hire and take us out of the recession and without businesses hiring, it is unlikely consumers will have the income to spend to increase demand/revenues), the mantra of the day remains 'caution.'  Take slow, deliberate actions that limit your risk for now. 

Last updated: Aug 2, 2010

MICHAEL ALTER | Columnist | President of SurePayroll

Michael Alter is president of SurePayroll, America?s leading online payroll service. He received an MBA from the Harvard Business School and holds a bachelor's degree in economics from Northwestern University.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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