November 23, 2014

Small Businesses: “We Need Customers, Not Loans”

The National Federation of Independent Business (NFIB) has released its November Small Business Economic Trends report.  When polled, small businesses believe conditions are getting a little better — but just a little.

The problem, the report suggests, is that small businesses need customers and sales more than anything.  When they get more customers and/or those customers buy more, small businesses in turn will be able to make capital purchases and do more hiring.  But until customers loosen the purse strings, conditions for small businesses will remain challenging.

optimism-index-november-2009

The Small Business Optimism Index rose 0.3 percent to 89.1 in October, as the above chart shows.

  • The good news:  this is the highest level in over a year, since September 2008.
  • The bad news:  it’s far below the five-year peak of 107.7 in November 2004.

Employment: In the last three months, 8 percent of respondents had increased employment, but 19 percent had cut employment.

Capital Expenditures: Plans for capital expenditures in the next few months fell one point to 17 percent, just 1 point above the record low last set in August.

Access to Credit: Getting a loan continues to be difficult, with a net 14 percent of those who would like to borrow saying that loans are harder to get than the last time they tried. Thirty-three percent reported regular borrowing, unchanged from September. But there is little demand for loans, since most businesses have record low plans for capital expenditures and are postponing investing in inventory.

Sales: A net negative-31 percent said sales were higher in the last three month compared to the prior three months. And a net negative-4 percent expect sales to be higher in the next three months.

NFIB Report Conclusion: What does it all add up to? While access to capital is getting lots of press, the NFIB report suggests this is not truly the biggest issue facing small business. When asked what was the single most important problem facing their business, 33 percent said “poor sales.” (Most other concerns earned only single-digit percentages.) In contrast, “financing” was cited as the most important problem by just 4 percent of respondents. With record low numbers of business owners planning to expand, add inventory or make capital expenditures, there’s little demand for credit.

My Advice: if you want to help, go out and buy something from a small business.

Download the full report (PDF).

11 Comments ▼

Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

11 Reactions

  1. Anita,

    I agree. Let’s go out and buy something from a local small business owner.

    Now of course, I wouldn’t mind finding some new small business owners to sell their wares.

    If they could only get a commercial start-up loan…

    The Franchise King
    Joel Libava

  2. This article hit the nail right on the head! We are a small business surviving the economic struggles, and we do not wish to increase our credit obligations any further, even if we could find some financing. We have worked hard to cut our debt, and now we just need customers to go back to spending money on local businesses for products and services, so we can pay our bills and get back to growing our businesses.

  3. Bravo Anita! You are absolutely correct – more debt is not what we need. I think a big mistake small businesses often make is to cut their marketing spending when money is tight. Cut someplace else, but increase your marketing.

  4. Consumers don’t need to go and buy MORE stuff to support local businesses, they need to buy their current purchases from local businesses instead of huge chains. Money spent at a local business stays in the community and has a multiplicative effect, so shop local people.

  5. Have you compared Small Business Economic Trends report with Purchasing Managers’ Index? Here you could find early buying signals and a steady trend for the economy for the long run if you follow the development of the index. I have written on this index in a couple of articles on Open Forum.

  6. The recent information released by NFIB leaves me with a feeling of cautious optimism. On one hand, things seem to be slowly turning around, but on the other hand, small businesses are still in desperate need of customers and sales. It looks like the upcoming months will show some economic improvement, but the market is going to continue to be tough for all industries. In light of this news, businesses both small and large are looking to cut costs in an effort to keep their employees’ jobs safe. A huge expense for businesses are long-term office space leases. A cost effective alternative would be a company like Regus that offers businesses flexible, more affordable office space that allows you to pay only for what you use. In fact, Regus is offering 2 months free when you sign up for 12 months of Manhattan office space. To learn more and take advantage of this offer call 1-877-REGUS-01. – Rebecca Tann, Vice President of Marketing for Regus. For more information visit http://www.regus.com/nyc .

  7. It is very important to concentrate on getting a reasonable number of customers instead of just concentrating on getting loans for your small business. I was able to find great tips and ideas about how to attract more customers for my retailing business through Small Capital. They are running a great website where you can find all the information you may want.

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