Few signs of economic recovery for small business on Main Street
The latest surveys of small businesses in Main Street America, the outlook for an economic recovery is dim.
I recently attended the second annual Kauffman Foundation Economics Bloggers Forum at the foundation's headquarters in Kansas City, Mo.Skip to next paragraph
Jeff is the Jack C. Massey Chair in Entrepreneurship and Director of the Center for Entrepreneurship at Belmont University in Nashville, Tenn.
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The invited attendees were economists who write popular blogs or those, like me, who write about the economy in their blogs.
The economists there were in general agreement that the economic forecast for the next year or so remains pretty bleak. This is particularly true on Main Street America, as they see little job growth in the foreseeable future.
About half believe the economy will remain as it is now, with unemployment hovering around 9 percent or 10 percent and economic growth staying anemic. The other half think the economy will turn significantly worse in the next year or two, in large part because of the federal debt.
Recent surveys of small-business owners seem to indicate that many entrepreneurs share the worries expressed by the economists at the bloggers forum and are taking specific actions to deal with what they see as a continuing recession.
According to the latest poll of small-business owners taken by the National Federation of Independent Business, one defensive measure entrepreneurs are taking is putting off hiring.
"Net job creation will appear in the coming months, but the gains will be painfully slow with timid consumer spending, especially in the service sector," said William Dunkelberg, the NFIB's chief economist.
In the NFIB survey, owners complained that poor sales are their biggest problem, and that there is no need to hire with no new customers. In this harsh sales environment, it's hard for workers to earn their pay. Owners cannot pay workers more than the value they add to the firm.
More than half stockpile cash
A survey conducted by Brother International Corp. found that small-business owners are strengthening their cash reserves to buffer the impact of a prolonged recession.
The survey revealed that 53 percent of small-business owners believe stockpiling cash is the best strategy for surviving the current economic climate, as opposed to investing in their businesses.
This is a prudent strategy during a weak economy and can help protect a business from future economic shocks. Cash is the best cushion against uncertainty.
The same survey showed that the majority of small-business owners (79 percent) plan to strive to make their company more efficient this year. Bootstrapping is back in style, and it's a great path to higher cash reserves.
Economists and entrepreneurs seem to agree that, in terms of Main Street America, the economy will not improve anytime soon. While the economists disagree on the public policy needed to improve the situation, entrepreneurs are taking steps to weather the ongoing financial storm.
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