Small Businesses Pen Plans for 2001

New and existing small businesses in Northwest Arkansas face classic hurdles and fresh obstacles for operating in 2001. Budgeting wisely can help prepare for the new year.

Current conditions, such as high fuel prices, should be considered for 2001 budget plans. Business owners, especially those harboring multiple delivery vehicles, must make room for the expanded mileage costs. Since the end of 1998, the national average price of midgrade unleaded gasoline has climbed from $1.04 to $1.52.

Not only does the cost of mileage increase, but freight expenses also rise with the fuel.

“I expect UPS to have a price increase Jan. 1,” said Lance Sexton, director of the University of Arkansas Small Business Development Center. Mounting shipping costs must eventually be passed on to the customer, or small businesses take a hit.

High interest rates also affect small-business budgets.

“Small businesses tend to get an [interest] rate higher than people who are just buying a home,” Sexton said, adding that some small-business owners pay 11-12 percent interest on their loans. That interest compares with that of larger retailers, which pay closer to the prime interest rate, about 9.5 percent.

Although the U.S. Small Business Administration offers longer-term loans, the liens often come with a comparatively higher interest rate.

“A high interest rate squeezes the cash for a small business that has borrowed money,” Sexton said.

Business owners should also regard Northwest Arkansas’ tight labor market when planning for 2001.

Hosting more jobs than people to work them, some Northwest Arkansas small businesses have resorted to offering signing bonuses for entry-level jobs, such as fast-food cashier, Sexton said. Minimum expected wages for the area start at $6.50 or $7, and wage earners can quit one job and find another very quickly.

Small-business owners can budget funds for benefit packages to attract high-quality, reliable employees. Financing attractive benefits like child care and medical insurance also challenges small-business owners.