Small businesses should retool for a frugality that may be long-lived

Published 10:47 pm Monday, August 16, 2010

We’ve spend the last few weeks talking with local entrepreneurs about the issues in the news that are on their minds. Not surprisingly, there’s still a great deal of uncertainty about the economic future and questions about the impact of health care reform on small businesses. Those two topics dominated our conversations.

In this column, we’d like to contribute our thoughts on those topics:

What will the economy look like over the next year?

Recently, the Wall Street Journal reported that a majority of the economists it surveyed say that the recession is over and that the country should see positive economic growth for the July-September period.

Our sense is that navigating the economy over the next six to 12 months will continue to be very challenging. Some signs point to improvement both locally and nationally — but we will need to see several months of positive reports before we conclude that the economy has turned the corner.

The economy is most likely skidding along the bottom of the trough. We have concerns that the unemployment rate will continue to stay high for an extended period of time because small businesses will be reluctant to add staff until they see a significant uptick in demand. Factor in nervous consumers, and you have a recipe for a flat economy with sluggish job creation.

What is the likely impact of any health care reform on small business?

There has been much sound and fury at the town hall meetings the members of Congress have been holding this past week. We support the president’s dual health care reform goals of universal health coverage and lowering medical costs — a country as wealthy as the United States shouldn’t have the number of people without medical insurance that we do. The current trajectory of medical costs isn’t sustainable and will bankrupt this country.

However, our read of the bills working their way through Congress is that many of these plans don’t adequately address lowering medical costs over the long term. If the final legislation doesn’t accomplish this, we have serious doubts about its success. We’d also be concerned with any reform plan that adds significant new costs and mandates to small business, especially at a time when so many businesses are struggling to make it through this recession. Any additional burden might just push them over the edge.

With an issue as important as health care reform, we would like to see Congress take the time to work toward consensus and pass a bipartisan solution. Congress clearly isn’t there yet.

When will consumers come back? Have consumers permanently changed their spending habits as the result of the economic crisis? Is being thrifty in?

We still believe that purchasing behavior has permanently changed as the result of the Great Recession.

For the small-business owner, this means examining all your marketing, financial and operational plans and adjusting them for a consumer who spends fewer dollars.

Developing new ways to improve your customer’s experience with your product or service will be critical to creating a long-term relationship with your customer. Sales growth will be less dependent on increasing consumer debt and more reliant on businesses creating innovative products that the marketplace needs and desires.

Pat Sisneros is the Vice President of College Services at Everett Community College. Lynne Munoz is Director for the School of Business Design. Please send your comments to entrepreneurship@everettcc.edu