How do small businesses feel about 2015? According to a recent study surveying over 1000 small business leaders they are increasingly more optimistic about the future and more confident in the economy. According to the results of the 2015 State of Small Business Report these feelings of optimism and faith in the economy will have a significant impact on how small businesses work in the 2015 and moving forward.
The steady growth of employment and revenue across industries over the past year should dispel any lingering doubts about the economy's state. Businesses are adding jobs and posting record profits, inflation is below target and interest rates are extremely low -- this is a prime growth spurt that is being taken advantage of by many businesses. Below are three tips for business owners who want to take advantage of the economic surge in 2015:
1. Overcome top Challenges. Small businesses project revenue growth and increased profits in coming years. However, this revenue and profit growth still stands as two of the top challenges SMB leaders face. In order to quell this challenge, the small business market must adapt and create an environment where consumers pay for more goods and services while business earnings are simultaneously increasing. While this may be an obvious statement, the solution isn't as simple: Small businesses should plan to spend more of their working capital to do two things: hire additional staff and invest in newer technology -- and according to the survey, they're doing just that.
Just over 33 percent of SMB leaders anticipate their credit needs will rise in 2015 as a result of Obamacare, new tax laws and more. 33 percent may not seem like a significant percentage; however, 40 percent of small businesses don't need to borrow additional funds because they don't need to, the increased revenue and profits they earned in 2014 have made that possible; as a result 73 percent plan to reinvest that working capital, whether borrowed or earned, within their businesses.
2. Hire Additional Staff. Unemployment is falling even more than anticipated. In 2013, the unemployment rate averaged 7.4 percent and was predicted to fall to 6.6 percent in 2014. Instead, unemployment fell to 5.8 percent. If unemployment rates continue to follow the current path, unemployment will fall an additional half a percentage point by the second quarter of 2015. The steady growth in optimism and confidence in the economy has caused businesses (small, medium, and large) to add new jobs. 2015 projections have 230,000 jobs being added per month. SMBs who anticipate significant growth in sales will need to hire additional staff to meet their production and operational goals.
Unfortunately there is a downside. While unemployment rates fall and more jobs become available, employers are finding applicants lack the necessary talent and, unfortunately, see this as a new challenge to face through 2020. Skilled trades are currently the hardest positions to fill with sales, IT staff and accounting and finance positions following respectively.
Oregon's Labor Commissioner, Brad Avakian, recently stated, "What I hear from [small business owners] is: invest in your public schools, invest in your apprenticeship and training programs, give us a good, skilled workforce so we can go out there and compete." The ongoing shortage of qualified applicants for these skilled positions is forcing small businesses to rethink and adopt a variety of short-term and long-term hiring and retention methods:
- Rewarding newly acquired skills
- Redesigning procedures
- Offering flexible work arrangements
- Partnering with colleges to design curriculum or even sponsoring courses/prospects
3. Invest in Technology. In 2014, 54 percent of small business IT departments spent over $5000 -- largely to maintain hardware infrastructure. With 38 percent of SMBs anticipating an increase in IT spending in 2015, what will that spending look like? No longer will IT spending only be allocated for hardware infrastructure but next tier IT priorities will receive the benefit of additional working capital -- with investment in new initiatives and projects for 2015 at 52 percent and ongoing maintenance at 48 percent.
The path a small business' IT department takes implementing new technology varies; here are just a few investments respondants reported on :
- The Cloud: web and email hosting; file sharing
- Virtualization: productivity and industry-specific apps; development
- BYOD: smartphones, tablets & laptops
- Security: protecting both business and client sensitive data
- Marketing: social media platforms (LinkedIn, Facebook, Twitter)
For example, small businesses looking to the social media market as a way to expand in 2015, will now have to "pay to play" as Facebook and Twitter have decreased organic reach from 30 percent of followers to about 7 percent. The 2015 State of Small Business Report states, 36.8 percent of surveyed small business leaders (the majority) spent only 1-3 percent of annual revenue for total marketing in 2014.
One way to increase visibility and market share in 2015 is social media marketing. Small businesses should be "spending from $100 to $200 a month for social media advertising in order to get the most marketing value for their dollar.
Small business leaders' expectations are high for the coming year. Although challenges continue to face SMBs, current feelings of optimism and confidence are significant motivators of change. Small businesses are ready to invest more working capital to grow revenue and increase profits by hiring new staff (decreasing unemployment rates) and investing in new technology.