Will these new trends dent small business optimism?
Some people think that most business owners are penny pinchers, and that this sometimes holds their businesses back. Neither perception is really true. Sure, small and midsize businesses (SMBs) don’t have big budgets like larger companies have, but that is a function of size. I know hundreds of small and midsize business owners. Most of them are focused on growth and willing to invest in their businesses as necessary. Growth and frugality are not mutually exclusive. Careful cost control has always been a hallmark of well-run businesses. However, even the best of these are facing new pressures that are forcing them to watch costs as never before. Following are some examples of these pressures on SMBs.
Retailers of all sizes are dealing with previously unimaginable pressure from Amazon, and those with sufficient leverage are pressing their suppliers to lower costs or offer unprecedented concessions. A friend of mine, who sells millions of dollars of apparel to big-box retailers said to me, “I never worried about a nickel or quarter per unit here or there. Now I have to.” She is retooling her entire company to focus on looking at nickels, while maintaining its strengths in design and quality.
Rising Costs of Labor
The tight labor market and increased inflationary pressures are driving up the wages many SMBs must pay. The tight labor market also makes it easier for employees to change jobs. Taken together, these developments mean that SMB owners are shelling out more in compensation, whether for employee retention or to hire new workers, and they are likely to continue to do so.
As a side note, while rising costs can be offset by a deduction of up to 20% of qualified business income resulting from the recent Tax Cuts and Jobs Act, I don’t hear business owners talking about this. Most SMBs on the smaller end of the spectrum will see the impact when filing extensions or returns in 2019, while the larger ones are likely planning on realizing benefits throughout the year.
In a previous post, I wrote more extensively about another factor starting to affect some SMBs: tariffs. SMBs impacted by tariffs can be forced to absorb additional duties, pass on price increases to their customers, alter their supply chains, or all three.
Small business optimism is still relatively high, but these increasing costs, along with uncertainty about the timing of a possibly overdue recession, are on the minds of many SMBs. If you are marketing and selling to these companies, it is increasingly important to be sensitive to these concerns, and to reflect this awareness in your marketing and your content.
As a first step, identify the segments of your audience that are more likely to be affected by these changes. Then in your messaging, emphasize any cost savings or similar benefits offered by your products or services. Finally, update your salesforce on these trends, and arm them with FAQs that explain how your offering can help alleviate these pressures or enable your SMB prospects to respond to them effectively.
- Identify ways your product or service can help SMBs deal with the rising costs they may be facing in various aspects of their businesses.
- Consider addressing topics such as reducing costs and improving efficiency in your content.
- Educate your salespeople on the new cost-related pressures your prospects are facing, and arm them with content that explains how you can help.