Bright Spots in this Stormy Economy

Barbara Weltman

Credit is tight, prices are up. Doom and gloom are everywhere. But there is good news on the horizon to keep up the spirits of small business owners.

The latest data from American Express OPEN's additional research (called Economic Pulse) in its semi-annual Small Business Monitor survey paints a depressing picture for business owners. Credit tightening has affected 63% of owners, 79% say sales are decreasing, 51% have used personal assets to pay business expenses, and 12% have been forced to lay off workers. So where's the good news? Look for it!

Low interest rates
There is money out there for business, even though it may not be easy to find. However, once funds can be borrowed, interest rates are low. The prime rate, a benchmark to which many commercial loans are tied, was 4.5% in mid-October 2008, making the cost of borrowing today rather modest.

Caution: The rates on credit card borrowing have not come down, so use this method of obtaining working capital only as a last resort.

Energy costs
Only a few months ago, the biggest concern for many businesses was the high cost of energy. At the gas pump and elsewhere, the cost of energy seemed to have been spiraling out of control. Now, energy costs are down dramatically as demand continues to slacken. The impact on businesses:

  • Lower costs for driving. It's less costly to fill up the tank, making it easier to visit customers, vendors and other business contacts.
  • Reduced air travel costs. Prices are starting to come down (although the myriad of surcharges-for luggage, onboard food, etc.-remains).

Companies that have implementing cost-saving strategies in light of high energy costs should not ignore them now. By continuing to follow energy conservation and other cost-saving measures, companies will see savings to their bottom line.

Qualified workers
One of the biggest complaints heard from small business owners in recent years has been the inability to find qualified employees to fill opening. Today, with the national unemployment rate at 6.1% and rising, there are a growing number of talented and qualified workers in the job market. Small businesses that are sure they can retain staff through a tough economic period are able to pick up new employees who would, in better times, have gravitated to large corporations offering a wide menu of benefits.

Market share
The tough economy will surely see its share of casualties. American Express OPEN reports that nearly one in five small business owners (18%) said that they are at risk of going out of business in this economic climate. What does this mean for you? If you survive, you'll enjoy a greater market share as competitors fall by the wayside.

Barbara Weltman, author of several books including her most recent, 1001 Deductions & Tax Breaks 2008
Copyright 2008

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