by Nancy Dunham
“Owners of small and medium-sized businesses have many opportunities for success in 2016,” said Jeff Stibel, Vice Chairman, Dun & Bradstreet. That means now is the time for those owners and leaders to plot their futures.
The trend this year will likely be for those business owners and leaders to continue to step back and determine how much they can – and should – invest to grow their businesses.
“Everyone thinks interest rates drive lending for small businesses. Small businesses don’t usually care about interest rates. Banks do,” said Stibel. “Small business owners are interested in access to capital and employing it. They look at business through a very different lens than do those at large businesses.”
PricewaterhouseCoopers reported that U.S. private companies expect to grow their revenue by an average of 8.7% over the next 12 months, according to Forbes. One-third of companies expect double-digit growth. Most of those companies will be small and medium-sized businesses, which make up more than 80 percent of U.S. businesses.
“The vast majority of businesses in the United States are mom-and-pop,” said Stibel. “I mean that in the literal sense. Mom-and-pop are the people that own the business. Most of their personal finances are intricately tied to the business. The question they ask is ‘What am I willing to invest personally and professionally to build my business?’ They really grapple with that.”
“The main reason for that internal struggle is because the finances of most small and many medium-sized businesses are interspersed with the personal lives of their owners. Think of the regional food chain In-N-Out Burger. The growth is very controlled (in the American southwest and Pacific coast) because the owners operate it on their own terms,” said Stibel.
“They’ve resisted franchising or taking the company public for many reasons including quality control,” he said of that and similar businesses. “That’s very admirable.”
Especially considering a report published by the National Small Business Association and cited by Forbes states nearly a third of small businesses are without the capital they need. Many businesses don’t even apply for financing because they believe they will be rejected.
That’s why many successful small and medium-sized business owners look at the past and present to determine the predictable future. By doing so, they can have the opportunity to reflect on the business in a much more constructive –- and profitable — way than most large companies.
“What was Dun & Bradstreet doing at the end of the year?” said Stibel. “We were talking about hitting our year-end goals and how we were going to hit our numbers. Small business owners were thinking about what the new year was going to look like. They might ask ‘How much should I borrow? Do I want to grow my business or change my focus?’ Uncertainty is by far the number one issue for those business owners.”
To best manage that uncertainty, Stibel recommended that small and medium-sized business owners move ahead cautiously.
“That’s really the same for every business. They are looking toward the future and how to manage their businesses in the best way possible. I say that with vagueness deliberately. I think with every business it’s important to take a step back.”
And they should not do that alone.
The number one person Stibel recommended that such business owners call is a tax advisor “for many, many reasons. The U.S. government has done a wonderful job of encouraging small business owners to start businesses and to help them succeed with significant and very complex tax breaks. Some are very, very attractive small business breaks for those with up to $50 million in revenue. They’re very complicated, though, so a tax advisor is vital.”
To learn more about funding sources available to small and medium-sized businesses, visit Dun & Bradstreet’s lending guide.
Photo Credit: 401(K) 2012, Flickr