8 Reasons Small Business Owners Must Remain Cautious

Mar 8, 2012

Despite some positive economic indicators, small businesses in the U.S. still have a lot to fear, according to Gene Marks in The Huffington Post. Marks outlines eight things about the economy that continue to “scare” small business owners:

  1. Gross Domestic Product: Marks points out that while GDP was revised upwards for the fourth quarter, it is projected to hover around 3% for 2012, which isn’t much to get excited about. A good growth rate, according to Marks, is around 5 - 6%.
  2. Debt and Deficits: With a national debt of $15 trillion, tax increases and/or significant cuts in spending are on the horizon. Small business owners are anticipating the tax increases that will go into effect in 2013 as a result of healthcare reform, and, according to the U.S. Chamber of Commerce’s Small Business Outlook Survey, 74% of these business owners say the recent healthcare law makes it harder for their businesses to hire more employees. The survey also finds that small business owners view regulation and the federal debt and deficit as equally threatening to their businesses (39% to 39%).
  3. Inflation and Interest: The Fed has $3 trillion of assets on reserves. Marks said, “This means that banks have the ability to inject massive amounts of money into our system and they may do so if the economy heats up and credit-worthy businesses start actually asking for financing…And if demand does increase the Fed's strongest weapon to control this inflationary threat would be to raise interest rates.”
  4. The Stock Market: While the stock market seems to be doing well, drastic fluctuations have become commonplace and make business owners wary.
  5. Energy: Virtually all small businesses are hurt by high energy costs. While building the Keystone Pipeline XL or drilling for offshore oil could help alleviate energy costs in the future, current gas and utility prices are preventing many small businesses from growing in the present.
  6. Europe: Marks points out that Europe’s financial crisis affects small businesses in the United States. “The GDP of the European Community alone is about $18 trillion. That means less economic activity with us.”
  7. Unemployment: While recent employment numbers have shown modest improvement, there are still 5 million more people unemployed in the U.S. than there were before the economic downtown of the past few years. The Small Business Outlook Survey indicated employers’ plans to hire in 2012 didn’t increase, with 63% planning to keep the same number of employees in the next year.
  8. Overall Business Conditions: Upticks in manufacturing activity and consumer confidence are not noteworthy enough to consider the U.S. a healthy business climate. Most measures of growth are still significantly behind pre-downturn levels.

Click here to read Marks’ full article in The Huffington Post.

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