What does 2011 mean for small business?

 

Editor’s note: Michelle Stockman is an independent consultant with her company, Fort Smith-based Msaada Group. Stockman earned a bachelor’s degree from Loyola University-Chicago in communications and fine arts, and earned a master’s in entrepreneurship from Western Carolina University. Her thoughts on business success appear each week on The City Wire.

This is a great time of year for small businesses to turn year end reflections turn into New Year actions; where economists are reviewing the previous year and making predictions for the next 12 months; and budgets are forecasted and fresh. The New Year brings a wealth of information that business owners can use to prepare for the months ahead, including the Arkansas 2011 Business Forecast lunch hosted by the University of Arkansas (Fayetteville).

Stories on the Business Insider, zerohedge.com, The Wall Street Journal, Kauffman’s Growthology blog as well as other national business news sources are showing economic predictions to both be positive and negative for 2011. The news is not intended to scare business owners, but to engage them to take the information and utilize it for their own best business uses.

The news that the U.S. has emerged from the recession has seen mixed reviews since last June, but the holiday shopping season showed us that retailers were much happier with sales than in the previous two years. Economists are showing some concern for the housing market still, but they are also concerned about rising oil prices. Knowing that oil prices have yet to peak, small businesses need to prepare for subsequent increases in freight costs. This leads to the question of inflation for the year. Goldman Sachs is predicting an increase of 2%, which would show the U.S. economy being stronger than it has been since 2007.

Domestically, it is predicted that we will see more companies file an IPO to go public. This is good news for equity financing as this typically allows venture capitalists to gain their return on investing in the new public company and filter it back into investing in young entrepreneurial companies.

Entrepreneurs will also see more movement and recognition for their role in the U.S. economy in the coming year. The Kauffman foundation noted in Jonathan Ortman’s blog  “A Look Back at Entrepreneurship in 2010” that the “net job growth occurs in the U.S. economy only through startup firms. While older companies lose 1 million jobs annually, new firms add (cumulatively) an average of 3 million jobs in their first year.

Moreover, during recessionary years, job creation at startups remains stable, while net job losses at existing firms are highly sensitive to the business cycle.” Now that statistics are proving the strength of entrepreneurship in our economy, legislatures (federal and states) have begun to address policies that will help grow entrepreneurship in the coming year.

However, the economy is really a global economy now, and analysts have started to show concern over foreign issues. There are many nations, including China and India (according to Business Insider) that are facing major food shortages in 2011. These shortages along with an increase in commodity usage to produce alternative fuels will push food prices to rise. Natural Disasters in foreign countries are straining their exportable resources and a push for earth material consumption rises.

Economic stability troubles are being watched for Spain, Italy and a few additional European nations. Analysts are also watching recession potential for China and India this year. While these issues may not affect each of us in a way we see it directly, what happens globally very much affects businesses and our economy.

Additionally, identifying the potential risks that are lurking outside your business walls will help you prepare for action rather than reaction. As for the good news, relish and remember it as the economy is not all gloom and doom.

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Stockman can be reached at [email protected]