There’s not much good news to report on the financial front as we move into 2009. Layoffs are occurring at breakneck speed and “out of business” signs are in high demand for many small business owners.
Overall, the landscape is different than it has been for a long time, but small business owners are used to adapting to diverse issues and have remained the economic engine of the U.S. for a long, long time.
I expect that force to remain constant during 2009 as small business owners get more creative to help their companies survive and thrive. One thing’s for sure. Small business focus will be where it always should have been – on cash flow. Here’s what I think small business owners will be doing in 2009 to keep their cash flow going in the right direction.
- Wise business owners find opportunity in chaos – While everyone else is focused on what they can’t do, small business owners will focus on what they can do. That means they’ll look for new niches to focus on and new ways to market to reach those in their current target area. They’ll assess the business landscape and create businesses to solve business problems that no one has even thought of before.
- Cloud computing becomes mainstream and offers cost-effectiveness – A big cost for any business is upgrading to current versions of software to stay competitive. Technology has made so many advances in the last few years, much of that replacement cost is no longer necessary. Small business owners will turn to online solutions, like QuickBooks or FreshBooks to manage their finances. Each of these services offers a chance to try the software for free to help small business owners determine the right solution for their business.
- New financing opportunities appear – Over the last few years, peer-to-peer lending platforms have entered the marketplace offering financing options. With these financing platforms, people register as lenders and set the minimum interest rate they are willing to earn. When someone applies for a loan, the lending network typically secures the loan and then sells promissory notes to the lender. These networks have come under recent scrutiny by the SEC which claims these notes are investments which must be regulated. Given recent economic events, the intervention by the SEC is a good step in the right direction to protect both borrowers and lenders. If the peer-to-peer lending companies can get through the regulatory requirements, growth in this loan area will definitely rise during 2009.
- Small businesses will opt for contractor vs employee – Hoping to remain lean and mean to keep their bottom line stable, small businesses will tap heavily into the freelance contractor arena for business assistance. And more businesses will look to virtual assistants (VA) for help. VAs can be found in any specialty area to help small business owners achieve business success. Since the cost of having employees on staff takes a big chunk out of the bottom line for any business — as much as sixty percent — small business owners will take a closer look at whether to hire full time or use the wealth of temporary talent in the marketplace. This assessment will be based on short term business needs and long range goals of the company. The best bet for determining the right strategy is to perform a cost / benefit analysis and to ensure the hire passes the IRS Independent Contractor test.
- Bartering as a cash outflow buffer picks up – Most barter arrangements take place on a one-to-one basis between two companies, one with a need and the other with the solution. According to wikipedia, it is estimated that over 500,000 businesses in the U.S. are involved in a barter exchange activities and that approximately 500 commercial and corporate barter companies serve all parts of the world. Memberships will be on the rise for two barter industry groups, the National Association of Trade Exchanges (NATE) and the International Reciprocal Trade Association (IRTA) as more small business owners seek barter opportunities. As reported in BusinessWeek.com NATE has already seen a 10% to 12% increase in new members and recently reported that 400 barter exchanges in the U.S. and Canada generated transactions worth $4 billion a year.
- SBA becomes an important small business partner … again – During the Clinton administration, the SBA administrator was part of the president’s cabinet which hasn’t been the case under the Bush administration. President Elect Obama has completed his cabinet selections which include an appointment for the Small Business Administration. Obama was co-sponsor on Senate Bill S2.1256: Small Business Lending Reauthorization and Improvements Act of 2007 which is still pending vote in both the House and the Senate. This bill will move quickly through the process and onto the President’s desk for signing when the new administration is in power. Once in place, capital for small business loans should be easier to obtain. Pick up your copy of his plan for small business now (PDF) to read all the details.
- Social media is the new way to get out of a cash flow crunch – If you haven’t heard of Twitter or any of the other social media tools available, you must be living in a cave. Social media is about having a conversation with business partners, customers and prospects. It’s inexpensive or free. For the most urgent cash flow issues, some small businesses will reach out to their network for help. A good example of this happened just recently when Remarkablogger – Michael Martine reached out to his social network for help after a major car accident and they came to his rescue. Without this assistance, his business may have struggled to survive.
- Credit cards continue to be a top financing source – According to the 2008 National Small Business Association (NSBA) survey of small business owners, 44% use credit cards to finance their business operations. With bank loans getting harder to secure, the number of small business owners using credit cards will rise. But the credit won’t be cheap. Credit card companies have been reducing credit lines and raising interest rates over the last few months. That means small business owners need to keep a sharp eye on their available credit by reading change in terms notices that arrive with credit card statements and take defensive action by shopping around to find the best card available. Help is on the way from the government, but not until July 1, 2010. The Federal Reserve Board approved regulations this month that will stop arbitrary increases in interest rates and eliminate two cycle billing. This is good and bad news for small business owners who may have to deal with increased tightening of business credit over the next year as a result of the pending action.
- Collecting receivables gets increased attention – Small businesses aren’t the best at collecting the money they are owed according to a recent “Getting Paid Survey” by Intuit. Not collecting on overdue debts has amounted to a $42 million dollar loss for 22 million small businesses in the US. That’s a lot of money to lose. An increased focus will be placed on getting invoices out the door quickly once work has been completed and follow up on overdue invoices will begin sooner to ensure they get the cash they deserve.
- A better focus on personal finance integrity – It’s no secret that small business owners with bad credit have a tougher time securing funding for their businesses. To increase the possibility of their business obtaining credit for business growth or sustainability, business owners will focus on making sure their personal finances are in good shape by taking steps to improve their FICO score and using free software solutions like Mint.
So there you have it. Ten trends we’ll see in action during 2009. I’m optimistic because no matter what the external drivers have been, small business has always survived. The year 2009 will be no different.
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About the Author: Denise O’Berry is a small business expert who provides tools, tips and advice to help small business owners be successful. O’Berry is the author of “Small Business Cash Flow: Strategies for Making Your Business a Financial Success.” Her business blog can be found at Just for Small Business.