Small Business Challenges in 2012
Research by the Guardian Life Small Business Research Institute indicates that in 2012, small business owners will need to focus on improving productivity and differentiating their businesses to overcome economic challenges and competition from larger firms.
Based on a survey of 1,100 companies, the study identifies six critical challenges and recommends actions small business owners can take to address them:
- The economy will continue to be volatile. Action: Develop and deploy integrated action plans. A dynamic, flexible short-term plan makes it possible to deal with immediate challenges. However, a short-term plan is most likely to succeed if it is part of a comprehensive, proactive long-term planning process.
- Access to capital will be tight. Action: Consider where borrowed money can do the most for your business. Survey respondents offered the following financing priorities: upgrading equipment (91%), short-term cash flow (81%), investing in marketing (78%), and adding people (61%).
- Many marginally successful businesses will be pushed to the brink. One in seven small business owners said they would probably close down if revenues dropped drastically over the next 12 to 24 months. For sole proprietors, that figure increased to 23.3%. Action: Improve productivity. A difficult economy presents an opportunity to right-size a company for long-term success. Ensure you have the right people in the right positions so you can focus on growing your business: especially at a time when competitors’ market share may be vulnerable.
- Larger companies will aggressively market to prospects considered “too small” in the past. Action: Look for ways to meaningfully differentiate, e.g., demonstrate how your company is more responsive to customers or can provide more customized or localized service.
- Election-year campaign rhetoric will create an atmosphere of tension and negativity. Expect presidential candidates and the media to devote much attention to how bad things are or how bad things might be. This negativity can dishearten small business customers and employees. Action: Be optimistic. If you exude a sense of confidence, optimism, and focus, your customers and employees will feel it and respond accordingly.
- Vendors and service providers will be more willing than ever to trade a degree of their profitability for the certainty of doing business. Action: Cut deals that create certainty for vendors, customers, and your business. Meet with vendors and larger customers and offer to make commitments in return for price reductions or better payment terms.
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