Small business does the slow-growth shuffle

Economists generally seem to agree that the U.S. economy in 2012 is likely to be a slightly rosier version of the 2011 economic landscape. Continuing modest growth, say some forecasts, will gradually rise to an annual rate of perhaps just over 2% in the fourth quarter of 2012, but progress in the overall economic recovery may depend on what happens in three particular areas: gas prices, fiscal constrictions in the United States and financial stress in Europe.^* Unemployment is expected to remain in the 9% range, with some forecasts suggesting it could edge up to 9.25%.

Briefly, the worries are that high gasoline prices at the pump extract such a large share of consumer spending that it curtails spending on other consumer goods. Because gas prices are driven by global growth and unpredictable factors, such as political stability in the Middle East, it is uncertain whether prices in 2012 will be as unsteady as they have been in 2011.

In the wake of this summer’s downgrade of the U.S. credit rating by Standard & Poor’s – in August, the credit rating agency dropped the rating from AAA to AA+, the first U.S. credit downgrade in history – expect continued fiscal tightening at the federal level. And continuing fiscal stress in Europe could have far-reaching effects on the U.S. economy in that it could degrade the export market and thus affect U.S. growth.

2012 Outlook For Small Business

What does this mean for the nation’s 27 million small businesses? More slow growth, essentially, although in September the National Federation of Independent Business (NFIB) Small Business Optimism Index turned positive after six months of decline. The report – showing its best reading in more than 40 months – indicated while small business owners are not exactly applauding current trends, more of them than in the earlier months of 2011 are expecting economic improvements as we move into 2012.

The index showed more small business owners expecting higher sales, more planning to increase inventories, and more expecting better credit conditions in future months. Among the negatives, job growth and earnings trends decreased.

Retail Fears

Consumer austerity and the effects of consumer deleveraging seem certain to have an effect on small businesses in particular. Consider: Total household debt – consumer credit and mortgage debt – hit $13.8 trillion in 2008. It had declined to $13.3 trillion by mid-2011. In the meantime, the personal savings rate went from less than 2% in 2005 to 4.5% in August 2011.^** Thus, less retail spending.

This may represent a crisis of confidence on the part of some consumers, driven by worrisome housing prices, employment uncertainties and the continuing negative noise regarding the global economy in general and the U.S. economy in particular. “Consumers are intent on rebalancing their finances to prepare for a new economic era,” said Richard Curtin, director of the Thomson Reuters/University of Michigan index of consumer sentiment.

Small business faces many uncertainties, but its economic importance is seldom disputed. The NFIB points out that small business represents 99% of employer firms and that it generated between 60% to 80% of net new jobs over the past decade, employs approximately 50% of private-sector workers and creates more than half of nonfarm private gross domestic product. (The job creation role is questioned by some, however, because the businesses are small and tend to stay that way.)

A study released in September by the Graziadio School of Business and Management at Pepperdine University concluded that approximately 41% of small businesses plan on expanding the workforce over the next six months.

That sounds a positive note as we head into 2012. 

^*“The Outlook for the U.S. Economy 2012,” Goldman, Sachs & Co., August 2011. Moody’s Analytics forecast a higher growth rate – as much as 3% for 2012.

^**‘The Great Deleveraging: Will Consumer Spending Ever Recover?” Knowledge@Wharton, October 2011.

Customer loyalty drives business growth

Owners of businesses large and small, industrial or retail, know a satisfied customer base is, in myriad and fundamental ways, the key to success and growth. Why then, do so many businesses spend more time, effort and dollars trying to gain new customers rather than take the relatively simple steps necessary to sow happiness among the ranks of those already on board?

Studies invariably show large numbers of customers are dissatisfied with customer service – 64% percent of respondents earlier this year told Consumer Reports they had “stomped” out of retail stores or hung up while on hold after calling customer service numbers. A study by marketing researcher Dan Kennedy reported that 68% of the customers who stopped doing business with a vendor did so because they felt they had become unimportant or had been taken for granted.

Retaining Customers

Observers of the small business scene note many owners seem so obsessed with enlarging the customer base by adding new ones that they fail to notice shrinkage of the existing customer base. Yet business gurus agree that sales growth success depends on existing customers.

Suppose you assess your business and determine you want to put more emphasis on customer retention. What can you do? Quite a bit, it turns out. Customers may need your product or service, but the manner in which it’s provided is what induces that customer to come back to you rather than seek an alternative. Consider:

The happiness factor – are your employees happy?

Humans in general are far more likely to share horror stories than favorable one. Your smiling, enthusiastic employees can provide a counterweight to that tendency. Do what you can to provide the kind of working conditions that keep your staff happy – it’s catching.

Quality rises to the surface.

New customers won’t return and existing customers will soon drift away if they sense that you offer anything less than top-quality products or services.

When your clients speak, listen.

Encourage existing customers to tell you how they feel about doing business with you. Take suggestions seriously and implement ideas that have the potential to help your business and please other customers.

Reward customer loyalty.

Aside from words of appreciation, which are always appropriate, in whatever manner suits your business offer discounts, perks or find a way to show these loyal customers how much you value them. They’ll likely spread the word, and that can help you build your customer base.

Small businesses that don’t ignore the human qualities of their customers have the best chance of success. It may seem simple, but price, quality of product and service, and other factors being equal, customers seek pleasing experiences and crave appreciation. Give them these things and your customers can make your business shine.

Your business in the blogosphere – Why interactive blogging could promote growth

If your business doesn’t already have a substantial presence on the Internet – or even if it does in a formal, impersonal way – you might consider establishing a weblog, or blog, a kind of diary that allows you to share your expertise and your business acumen not only with your known customers, but with a potentially much larger audience, some of whom may decide to become your clients.

Basically, blogging is an inexpensive path leading you and your business onto the Web. You won’t have to learn a computer language or pay for a Web designer’s services. The software is easy to learn and simple to use, and updating – know going in that it is important to commit to frequent updating if you set out to establish a successful blog – is quick and painless. Most view small business blogging as an additional tool to set alongside other methods of growing your enterprise. It provides a convenient way of communicating with your customers on their own timetable, and, well done, a blog can help establish your product or service expertise – just the sort of thing that attracts and holds customers.

Getting Started

Even before you investigate what software to use (see accompanying story below), you should set realistic expectations for yourself as a blogger.

First, schedule your time, just as you schedule inventory, payroll or any other essential element of your business. Depending on your ability as a writer, and the ease at which you do it, set aside at least an hour or two a week to blogging.

Next, keep an idea diary of what you intend to say. Make written notes immediately of thoughts and ideas as they occur to you. Don’t for a moment imagine they will magically reappear when you sit in front of a blank screen. They won’t.

Streamline the process of creating your blogging structure. That is, do your research, find and store links you intend to mention, document references when you think they are needed, and set out to do this in an organized fashion. Self-discipline is essential if you are to pick up the habit of blogging.

Make your blogging ideas work for you in other ways. No matter what the nature of your business, you are setting yourself up as an expert. Be alert to the possibilities your blog posts could serve as the basis for presentations to trade associations, local civic groups or articles in local publications.

Successful small business blogging may not be easy, but it can be worthwhile. Your blog posts are not advertisements for your products or services and should not come across as self-promotion. They may, however, help to establish you as a leader in the business community, and you are most likely to succeed if you keep everything on the highest professional level.

The software side of blogging

If you’ve decided blogging will be both fun and an aid to your business, do some basic due diligence before diving into the blogosphere. Some basic questions must be answered.

Will you host the blog yourself? You could go with a free blogging service, but you have little control and no portability. You won’t own the blog, and it will be in competition with millions of others.

Should you decide to host your own, you could sign up with a service such as Wordpress (wordpress.org), Typepad (typepad.com), Movable Type (movabletype.org), Blogger (Google’s entry into this field: blogger.com) – or any among many other choices.

Proposed jobs legislation’s tax provisions could aid small business

The $447 billion American Jobs Act proposed by President Barack Obama in September has been cut down by the Senate and criticized by the National Federation of Independent Business and the U.S. Chamber of Commerce for inadequate job creation provisions.

Nevertheless, you might watch the fate of its proposed tax provisions. They include:

• Payroll tax holiday – This would eliminate the entire 6.2% payroll tax on payroll increases – for new workers or for higher wages – on any amount up to $50 million more than the previous year.
• Payroll tax trimming – The employer’s share of the payroll tax (6.2%) would be cut to 3.1% on the first $5 million in wages, a job growth stimulant the White House says could benefit 98% of small businesses with payrolls less than $5 million.
• Extension of 100% expensing – Allowing firms to write off through 2012 the full cost of new plant and equipment. Otherwise, this provision will expire
• Tax credit for certain hires – Allowing a $4,000 tax credit for hiring someone unemployed for at least six months; a credit of up to $5,600 for hiring a veteran (up to $9,600 if the veteran is disabled).

Some of these may show up as provisions in other legislation.