2016 is upon us and the challenge is to stay ahead of the curve.
While the presidential race and terrorists are important issues, SMBs face a number of critical factors today.
Among them are:
- First and foremost is the belief by many SMB leaders that the economy is not strong.
- Interest rates which may go above the negative rates of recent years.
- Energy costs, which have shown a marked decline in recent months.
- Inflation, which has not been a factor in recent years.
- Pressure to add to wage levels at a time when there is still vast unemployment.|
- Changing technology making it easier for new competition.
- Many new disruptive offerings changing the way consumers shop and buy.
- Changing demographic of SMB ownership.
In recent surveys by Information Strategies, Inc. (ISI) and others these were some of the most important issues facing SMBS. How they will be addressed in 2016 may well decide long-term profitability.
Economy: Many SMB leaders do not believe the economy is as strong as national leaders argue. The latter two months economic data supports this view. The ‘all important’ holiday sales season is upon us and the signals are mixed as to whether it will positive for the New Year.
Interest Rates: If the Federal Reserve in early December follows through with its threatened rate hike, it will be the first in a long period. SMBs, like many smaller enterprises, are turning to more non-traditional lenders to finance growth. This move will force them further into new lending territory.
Energy Costs: The bright spot for many companies, energy costs have fallen dramatically this year. But it has also brought pain to many producers. They in turn have cut back with suppliers and labor with the result that many SMBs are suffering.
Inflation: Another bright spot has been inflation which may be dimming as upward pressure may force many SMBs to raise prices to consumers and other businesses. Low inflation has held down prices but surveys indicate this may not be possible in 2016.
Wage Pressures: Recent contract settlements in the auto industry indicates the nation’s wage earners want more from the profit pie. Add in the movement for higher minimum wages and there is real fear by SMBs of wage increases that will force price hikes.
Technology Growth: Clearly in the last five years technology has enabled new companies to appear and older companies to reduce costs. This trend will continue in 2016 but it is doubtful they will reduce pressure for price hikes.
Disruptive Changes: The taxi and hotel industries are but two of the industrial sectors affected by major changes in the way they are accessed and payed. The payment industry is also changing and with it the ability of individuals to settle transactions. This is just the beginning a massive tsunami that will engulf the SMB world.
Ownership Demographic: One major change is in who owns SMBs. Many are guided by individuals in their 60s and 70s who have not been able to get new generations involved or found someone willing to pay a reasonable price. This will be a major issue in 2016 as tax laws also change. Another large group of SMBs are owned by crowd-funders.
What other critical factors are you facing in the upcoming year? Please share your thoughts with our editor, JoAnn M. Laing/.