What Is The Biggest Challenge Facing Small Businesses Right Now?

The unique challenges that come with starting and growing a business are a big part of what make the experience so rewarding. After all, is there any bigger rush than securing that first loan or finally landing that big customer? No two days are exactly alike, and that's part of what makes the journey fun.

But a schizophrenic stock market, grim economic reports and a bumbling Congress unable to conduct anything resembling a real debate have presented entrepreneurs with some big challenges lately -- challenges often out of their control. What happens on K Street and Wall Street inevitably has an impact on Main Street, perhaps now more than ever, and many entrepreneurs find themselves weathering a new storm just as they were starting to recover from the Great Recession.

Our Board of Directors hails from a variety of industries and locations across the country. So who better to ask about the state of small business today? It ain't pretty, but as usual, entrepreneurs always see some opportunity amid the chaos.

Rob Adams

Director, Texas Venture Labs at the University of Texas
"The Validator"

"General malaise. The 24-hour news cycle leaves everyone feeling on edge. This causes business owners to hunker down and customers to stop spending. U.S. debt ratings, U.K. riots, strange weather, political polarization, grainy video feeds from the Arab summer, crazy market swings, phone hackings, bankrupt countries -- it’s all a bit overwhelming. Time to turn off the TV and get back to work."

Tate Chalk

Founder and CEO, Nfinity
"The Matador"

"The biggest challenge right now is cash -- or, rather, the lack of cash. One of the largest lessons learned in the Great Recession is that nothing matters more than cash in an economic downturn. And unlike large corporations, they don't have as many levers to pull to improve cash. And without enough time since our last downturn to improve real cash position is a very large challenge facing small business."

Lawrence Gelburd

Lecturer, The Wharton School
"The Rock 'n' Roll Professor"

"The biggest issue facing small business today is what I call 'I AM' risk -- identifying, assessing and mitigating risks, including human and financial capital, in addition to the macro economy. Most small-business owners spend less time on formally addressing risks."

Clint Greenleaf

Founder and CEO, Greenleaf Book Group
"The Cowboy"

"Uncertainty. The extent of governmental regulations and taxes is causing prudent businesses to sit on cash, avoid risks and wait on hiring. Washington doesn't want to admit this, or doesn't get it, but their partisan games are stalling the recovery."

Jennifer Hill

Startup Advisory and Venture Lawyer, Gunderson Dettmer LLP
"The Advocate"

"One of the many challenges facing small businesses is the shrinking customer base. Consumers are still quite conservative with their pocketbooks, and as a result, organic growth from current and new customers is not growing as quickly as small businesses would like. Business owners are spending more time figuring out how to go above and beyond to keep existing customers, while at the same time figuring out how to cost-effectively reach new customers -- without competing solely on price, which is a race to the bottom. "

Rieva Lesonsky

Founder and CEO, GrowBiz Media
"The Beacon"

"There's just too much negativity today. Everyone from banks to the government to big business is so intractable. No one wants to find real solutions. Instead, they want to gain or maintain power. We need everyone to do their share. Banks need to lend, big corporations need to pay their fair share of taxes, companies large and small need to stop offshoring jobs to put an extra seven bucks in their pockets. We need to concentrate on what's important and work together to identify challenges and find solutions. We need to get our inner Pollyannas back -- to see the positivity and work towards common goals. We need to get businesses in a hiring mode so we can star the cycle of recovery."

Bob Parsons

Founder and CEO, The Go Daddy Group
"The Renegade"

"The biggest challenge for small businesses now is focus. With all the speculation about the financial markets and uncertainty about the future, it's easy to lose focus and worry about things you can't control. You need a clear head to recognize an opportunity when it presents itself. "My best advice for entrepreneurs and small-business owners right now is to focus on what you can control, and other than staying informed, pay as little attention as possible and do not get emotionally caught up in those events beyond your control. Listen to your customers, keep moving forward -- and as I like to say in my 16 Rules for Success, focus on what you want to have happen. Remember, so you think, so shall you be."

Tom Szaky

Founder, TerraCycle
"The Eco-Capitalist"

"To me, it's the perception that we are in a recession and that it's very hard to start a small business during such a time. The reality is that it's always hard to start a small business, but due to lack of competition, perhaps it's easier in a time when people think there is a recession."

Phil Town

Investor and Author of Rule #1 and Payback Time
"Rebelman"

"The biggest challenge facing small-business owners right now is to get up in the morning. It looks like we could be on our way to complete political gridlock with a future of unsustainable debt and Zimbabwean billion-dollar bills. Then we can start over with a constitution that limits government interference in our businesses. I mean, seriously, they pass all these new regulations that require a lot more creativity in the lies we have to tell to get around them, they've got us paying for the health care of employees we can't fire and now the National Labor Relations Board is setting up regulations to make it possible to unionize us before we get back from golf. And sexual-harassment law is so onerous, if you have an affair with your assistant, he gets to be COO or retire for life.

"Which means something really cool if you've got the guts to act on it. The big guys are scared to death that they are going to get unionized, health-cared, over-regulated and then perp-walked for Sarbannes-Oxley, so they ain't hiring, they ain't investing in the U.S. What they are doing is figuring out how to move to Switzerland and pay one-third the taxes.

"The huge opportunity for the little guys who are gutsy enough to invest right now is the chance to grow big, fast. Hire temps and consultants, stay clear of employees as much as possible, stay light and quick -- but I think now is a time to jump in there and start grabbing business from the big elephants who are too scared to move or are moving to Singapore. Go for it. There is blood in the streets and fear on the loose and there is never a better time to grab off a bigger piece of your market."

Comments

[Iceneedle]

10:24 PM on 09/30/2011

I do think part of the problem concerns taxes. Not about paying, about small businesses not being paid by the government to collect taxes. If the T Party want to limit government, then either the federal and state and municipalities pay the book keepers who collect employment taxes. If not, then let employees pay their taxes on April 15th. The law that made employers slaves to collect federal income taxes was because of World War II. That war so long gone, and this law should also be part of the past. Let the people pay their income taxes on April 15th, end of the story.

[stratmarco]

06:29 PM on 09/01/2011

Who would even know where to start with this list ... I'm certain these people have made it with their own business, but this list of biggest challenges:
- General Malaise
- Cash
- Risk
- Govt Regs and Taxes
- Shrinking customer base
- General negativity
- Lack of focus
- Perception that it is hard
- Hard to get up in the morning
This really doesn't resemble any business I've done. The cash comment is the only one here that makes any sense. Government is willing to guarantee loans but only if you already qualify at a bank. Why would I need a government guarnatee if I already qualified?? After that, maybe not enough hours in the day. In our current business we grew over 100% last year with no LOC available, expanded overseas to broaden our market. We can't move fast enough ... Focus? Hard?? Getting up??? We barely sleep there is so much to go after. Who cares about taxes ... paying taxes is a great sign you are making profits. I'm still looking for a government reg that significantly impacts our growth curve. Maybe I'm too busy being positively focused on growth by expanding my customer base to notice how bad this all is.

[Organic-Guy]

06:20 PM on 08/25/2011

We need customers to stop being thrown out of their homes and have their mortgages adjusted to the real value and ability to pay. No one wins in foreclosure except maybe the predators who come after and buy them up cheap and raise the price again. People need jobs and that could happen if republicans would stop attacking unions and suppressing wages. We need the democrats to get a back bone and lead us into that bright future like they used to do.

[Organic-Guy]

06:19 PM on 08/25/2011

THERE ARE A FEW THINGS WE NEED. Easy access to capital at low or no interest. I'll take the one page document the banks got during TARP. That works for me.
We need the t party to shut up and stop interfering with our system of governance and economics. They have no idea what they're talking about and they are making us the country of can't do this and can't do that. They have a negative outlook and approach to everything. When I was growing up in the sixties and seventies every thought we had was about the future. Making the future better for everyone. Every magazine and newspaper article was about, The city of the future, the cars of the future, houses of the future and more. We went to space. Everyone lived excited about the possibilities and wanted to be a part of that better future. Now, all we get out of these dweebs is, we can't do that. We can't afford that.. we can't we can't we can't and one of their leaders has cant in his name(Cantor).

[oilfield]

01:21 AM on 08/23/2011

biggest problem in the oilfield....dc and its sweeping punishment for all because of bp.

[William McKibbin]

08:55 PM on 08/19/2011

The biggest problem being faced by small businesses is that potential customers have no money to spend...

[webarch]

05:17 PM on 08/19/2011

The biggest challenge facing me right now is the State of Wisconsin. It's difficult as the owner of a small business to keep up with all the regulatory paperwork. Now I'm being punished for having the gall to hire employees. The Department of Workforce Development sends me new bills just about every day, driving my wife (bookkeeper) and me up the wall. It's like they're saying, We'll get you for having employees, just wait! It's working, so far we've had to let go of three of our four employees. The fourth firing is about to happen anytime. Then they can take their paperwork and bills and shove them.

[Dh Barr]

07:20 PM on 08/24/2011

We have the same thing here in Maryland. This is probably the #1 reason why it makes more sense to hire independent contractors instead of putting people on the payroll.

[HockeyMom]

12:21 PM on 09/09/2011

In Michigan I have to make sure the don't use my tools, I don't set their hours, and I don't use them too much, otherwise they are my employee, like it or not. Plus I spend many hours computing, tracking and tallying their hours and wages so I can send them a 1099. All this feels like I am doing the gov't work. Even if they run a legit business I have to track them and send and report their money.

[AmericanFreeEnterprise]

12:29 PM on 08/19/2011

Thank you, Rod, for posting this article about the current challenges that face our small businesses. I work with the Campaign for Free Enterprise, a project of the U.S. Chamber of Commerce. We believe that the free enterprise system is key to enabling innovation by decreasing government interference that can hold businesses back. This article reveals that petty indecisiveness and a “politics first” mentality leads us nowhere in terms of economic progress. It is helpful to read the perspectives of entrepreneurial leaders who have already been through the business development process. Individuals looking to formulate startups want to know the kind of business climate they should prepare for, and your article provides a great illustration for our supporters. I will be sure to share this article with our fan base.

-Hillary,
www.freeenterprise.com
www.facebook.com/AmericanFreeEnterprise

[Algo]

12:38 PM on 08/20/2011

In my opinion, the US Chamber of Commerce tends to be a parasitic organization that skims and funnels campaign contributions and obfuscates the source of such monies. It's part of the problem. The companies they cater to are not "small" but better characterized as living off of taxpayers dollars or money printing - i.e., in existence and thriving due to government contracts. I lived in a town where one US Congressman directed millions to an unsustainable "small" business in response to campaign contributions - a classic "US Chamber of Commerce" type of client. I headed an international trade organization, most of the traction was for large companies - i.e., the ones politicians, lobbyists and the greedy parasitic ecosystem really care about. Let's add some transparency - take a look at the SBIR and STTR programs - it's not hard to find some evidence of awards linked to entities that are headed by people that are big campaign donors (usually right wing, anti-same sex marriage, religious zealots living off some prosperity gospel that underlies the drive and love for money and power) - or to see how once on the gravy train, leads to spin-offs that suck off the gravy train too (especially on questionable security programs - to protect "Our Homeland" - what a farce). My tax dollars are being directed to those with political clout. What a wonderful system - same as it ever was.

[mediakrush]

12:46 AM on 08/19/2011

I agree with Bob Parsons that focus is a major goal. Small business can no longer compete through traditional marketing methods simply for the reason that consumers are tuning out. Focus encompasses focusing on that long forgotten mission statement we all had at one point and truly providing the value consumers expect from us. Social Media has proven a viable route for those who can do it right. Establishing long term relationships and nurturing return customers is essential to long term viability. Simply focus on the value and solutions you can provide.

[ValcorWorldwide]

12:14 AM on 08/18/2011

3 Words: Confidence, Trepidation and Cash.
1, SMB owners are lacking confidence in politicians to implement business/growth friendly policy.
2. Unable to make decisions because GDP has plummeted, and appears we are heading into another recession.
3. Not hiring or investing because demand/cashflow has come to a standstill. Without liquidity, or access to lending, most SMBs die quickly.

[JAS23]

09:27 PM on 08/17/2011

Its not rocket science. Cash rules. When more people have more disposable income, they spend more money. When the spend more money, demand rises for products and services. To meet demand, small businesses will hire more people.

Thats it.

[Reno Fickler]

05:25 PM on 08/17/2011

"Showing Up" is no longer enough. In business only one word matters. DEMAND.
Without demand the rest is moot.
In keeping with that thought, it is easier to develop 'demand' in an area where people HAVE to do something, not an optional activity.

[Dino MA]

04:35 PM on 08/17/2011

The problem is cash!

You can't get a loan just based on a good idea. You can't chase investors without giving up control of your good idea or newly formed company.

Most regulations that are passed (as opposed to stalled or watered down) are written by large corporations and have a funny way of punishing the small business but merely inconveniencing the large corporation. Compliance requires more resources from a small business than a large one.

If you're really small, you can't just lay off staff to gain more profitability because often small businesses only hire staff they deem to be essential.

Statistically growth in the small business sector has a larger effect on the economy as a whole and can bring down unemployment faster than growth in large corporations. If government is focused on making our country more large business friendly while not making loans available to new ventures and they insist on a one-size-fits-all approach to regulation, we'll continue to punish innovation.

If government treated small businesses differently in terms of regulation and spent more money on small business loans and an infrastructure overhaul (roads, sewer, fresh water pipes and electrical grid), we would be out of this mess in no time. We could spend money efficiently but it seems lawmakers either want to cut or spend on bad ideas while rewarding their largest campaign contributors.

[drichfatcat]

04:20 PM on 08/17/2011

The answer is to Rod's question is clearly: Barak Obama. Once he's gone the economy will pick up lickety split.

[bad spelling grammar]

06:50 PM on 08/17/2011

lol how so?

[HockeyMom]

12:23 PM on 09/09/2011

You are right..I don't understand your statement.

[Algo]

06:45 PM on 08/16/2011

"it’s all a bit overwhelming. Time to turn off the TV and get back to work." Are you saying small biz should simply look the other way and ignore because if they really get involved in saving this country from the demise of power hungry, egotistical, anti-same sex marriage Texan bigots - your taxpayer funded butt could be on the line? Dude, get real, most small businesses are one right-wing idiotic destroy the President vote (or non-vote) away from bankruptcy. I'll take a 10% increase in state or federal taxes to pay for Bush's wars if that going to help buy some domestic and global stability. I'll also take a nationwide "socialist" healthcare system if it keeps me from experiencing this year's 29% increase in premiums! I stopped contributing to my 401(k) retirement b/c I am hoarding cash and believe that tax rates in 15 years are going to be much higher (and the markets?). I sold my home b/c I am hoarding cash. I am expanding globally - against winds of anti-American sentiment (thanks Bush). I'm not some rich student living off mom/dad/trust fund or with an option for state subsidized healthcare at a state university. In other words, UT students have little in common with mature small business owners that have REAL responsibilities and NO safety net. General malaise? More like fascists rising - small business owners (w/o government contracts) may have the most to lose.

[hypnotoad72]

01:17 PM on 08/17/2011

Agreed