Like many a small business, you may have been treading water in 2009 to stay afloat, but this year, business owners may well be early investors in the economic recovery, and lead the effort to reignite America’s small business growth. The entrepreneur will be an American hero in 2010. Why? Franchises and other small businesses have generated 64 percent of net new jobs in the last 15 years, and currently account for about half of all jobs, according to the U.S. Small Business Administration.
Odd as it may seem, disruptive economic times are often fertile ground for the new businesses of the future. If history has any proclivity to repeat itself, entrepreneurs discovering new ways to serve and introduce better products to the market will become the work horses that truly pull the U.S. out of recession. Here are the top ten predictions why this will be the case, according to Guidantfinancial.com:
10) The slow, jobless recovery will continue to be jobless. Businesses have been forced to automate and downsize, likely discovering they had hired many positions that weren’t critical to the success of the business. Attrition will also put companies on more profitable ground in 2010, without a significant uptick in new job creation.
9) Small service businesses can rely more on local marketing for exposure and growth. Hyperlocal and community oriented website advertising looks like a bargain, compared to mass media buys, while word of mouth, networking and business group presentations continue to grow in popularity. We are back to mom and pop business basics.
8) Small businesses will begin cautiously spending. With signs of a recovery, lenders will be slightly more willing to provide access to capital, and borrowers will be slightly more willing to accept it. Economic woes over the past few years have taught entrepreneurs to be careful about the debt they carry, and lenders to be concerned about giving it away.
7) Growth in the 401(k) Small Business Investing category. In 2005, relatively few small businesses started using their founders’ retirement funds. This segment of has grown 1,250 percent since then, and a recent survey by Information Strategies indicates that as many as 74 percent of small business owners now consider it a viable funding source. Innovative sources of small business financing will grow exponentially, as credit remains scarce and hard to qualify for.
6) Adoption of SaaS and Managed Services will grow. Like the Internet before it, Software as a Service and Managed Services providers will help level the playing field. Such tools open the doors to a torrent of innovators, unshackled from the demands of having to build major infrastructure. In other words, the costs of entry have never been lower.
5) Government purchase of small business loans will lift the lid. Initially, TARP funds were supposed to help banks keep lending. Scared to lend to less than stellar borrowers and a non existent secondary market, meant banks did not lend. Unless rates rise significantly, they still will not be able to. The government’s creation of a secondary market will encourage small business lending.
4) Big business layoffs in 2008-09 will produce small business opportunity. There will be service gaps that big companies can no longer fill, and business will also likely be outsourced to small, vendor businesses by the big guys. Formerly laid off, experienced workers will be able to fill these gaps.
3) Interest rates for small business loans will increase. Fears of inflation and a recovering economy will force the Fed to raise the prime rate by 1.75 pts to five percent in 2010. Fortunately, there are more opportunities to acquire funding, with retirement savings being key.
2) Professionals get off the Wall Street roller coaster. After being laid off again and again, and seeing their investments and retirement savings dwindle at the fluctuation of big corporate stocks, smart people will pick themselves up and learn how to invest their retirement savings in themselves and their own ingenuity.
1) A record number of new small businesses. The number of new small businesses will grow in 2010 for the first time in three years. With an estimated 25 million people unemployed or underemployed, many more people will look to going into business for themselves. Meanwhile, The New York Times recently noted that interest in entrepreneurship education among teenagers, whose unemployment is the highest since 1992, is rising.