As CNN has played up in recent months, the economy is issue number one with the American public. But in a recent survey of our network of small and midsized business leaders, the sluggish economy and tightened credit did not emerge as primary issues. We learned that the issues that first concern them are how they go about meeting their daily sales goals, their long-term growth strategy and certainly how they instill a sense of purpose and focus among their employees.
In late August we sent a short economic barometer survey to leaders of our Best Boss and Top Small Workplace award-winning firms and to our growing audience of Twitter followers. Finally, we invited blog readers to participate as well.
Those who responded are leaders of businesses with 1,000 or fewer employees, more than half of which from firms with fewer than 100 employees. They represent a diversity of industries: manufacturing, marketing/advertising, recruiting and staffing, construction, insurance, banking, real estate, analytical instrumentation, specialty chemicals and aviation.
What we found was quite intriguing. We first asked respondents the degree to which the current credit crunch has affected their business. It’s telling that these firms’ generally progressive people practices, designed to foster open communication and innovation, have helped insulate many of them from some of the more severe problems reported in the small business sector, including lenders who are much more risk averse in issuing credit. More than half indicate that the current climate has had little or no effect on their business. About 20 percent have faced tightened credit, and a few have experienced declining revenues or slowing growth. Only one company indicated that the current economic conditions are having a significant impact on the business.
Among those reporting moderate to significant effects from the credit crisis is the leader of a food manufacturing company located in Massachusetts, who says it has raised the cost of working capital and made growth capital fundraising more difficult and expensive. And the leader of a B2B e-commerce firm based in Montana says, “The psychology of caution, combined with the reduced ‘wealth effect’ from small-business people’s savings” has slowed their growth, primarily in new customers.
The government has gotten involved, of course – most notably this year by sending stimulus checks to U.S. taxpayers. They may be having an effect: Last week the Commerce Department reported that consumer spending combined with a boost in exports spurred by the weakened dollar resulted in second-quarter growth of 3.3 percent.
However, another government-tied factor may make an even bigger impact on the turnaround of our economy and the growth and profitability of small business, according to our respondents: the selection of the next president in November.
The primary concern that these leaders articulated was the uncertainty of what impact the election might mean for their businesses. More than 40 percent mentioned that the change in presidential leadership creates an uncertainty about the pressures and constraints their businesses will face. As one leader said, “Depending on who gets in and what they do with tax rates, health care, etc., it will affect our ability to compete.”
Yet, another 40 percent believe that the election will have little or no effect on their business. One leader in the Virginia suburbs said, “In the DC area the presidential election is always good for business.” Another from the same region seemed to sum up the issue with the perspective that “When the ‘fear’ of what’s next is replaced by ‘what is,’ we all move in the right direction.” It would seem that both presidential candidates could do more to inform small business leaders of their plans to help their organizations.
Despite the fact that most of these business leaders do not acknowledge direct economic stress on their business, most of them arecutting back to weather this tough economy. While a quarter reported no actions at present, the largest segment (38 percent) say they’re cutting discretionary spending. One example is a Pennsylvania-based marketing and advertising firm that said, “We looked at ways to first cut without impacting workforce size – reducing soft benefits like gym reimbursements, home ISP reimbursements, etc.” An e-commerce firm has reduced purchases of non-essential items and re-shopped major purchasing categories. And a health care marketing firm in Maryland has cut down on the frequency its facility is cleaned.
Sixteen percent have instituted hiring freezes and are not replacing empty positions created by attrition. Another 16 percent have had to cut staff. One organization has put a four-day work week into effect, and several have eliminated salary increases.
Still, 20 percent of respondents have not had to cut back and are using this time to strengthen their organizations. As one said, “We have so far avoided discussions of layoffs by getting employees involved in continuous improvement.” Another acknowledged, “We’ve eliminated a little waste around the office and made sure that we have only ‘A’ players in the organization.”
Reflecting the sense of optimism that has always existed among American entrepreneurs in both good and bad times, many of our respondents are thinking about or implementing one or more measures to invest more heavily in their enterprises right now.
Continuing or stepping up efforts to recruit top talent and keeping, and in many cases expanding, programs to train and develop employees are the chief means leaders and managers of small firms are using to do this. As the leader of a high-tech manufacturing firm in Connecticut said, “We have invested more in our business over the last 15 months than ever before. We believe we will emerge from the downturn a much stronger company.”
In a similar vein, another 22 percent of respondents report a greater focus on diversifying or expanding their product and/or service offerings, as well as turning to proven QA/QI practices.
How is your organization faring? If your firm is thinking about or working on either cutting back, or bucking current trends and investing for the long haul, we would like to hear from you. We will be gathering and listing your good ideas to spur others to innovative solutions that will keep their businesses strong on our blog in the near future, so stay tuned.