It’s a great time to be a small business owner. According to the National Federation of Independent Business’ Research Foundation, last year, small businesses experienced a 45-year record high of job creation, profit growth and inventory investment. But despite these historic gains, savvy business owners will still look ahead for possible challenges and opportunities. So what we can expect from 2019?
Data indicate that small business owners have plans to expand, invest in more inventory and are reporting high sales. The United States labor market hit a 10-month high in December, adding a better-than-expected 312,000 jobs. This marks 99 consecutive months of job gains, along with an unemployment rate of 3.7 percent.
Small business owners can also look forward to a few positive trends expected this year. Economic growth is still projected to continue into 2019, albeit at a slower pace compared with last year. Additionally, Kiplinger forecasts that the inflation rate will not increase past its current rate of 2.3 percent this year. Although tariffs and labor costs are pushing prices up, these factors are counterbalanced by cheaper gasoline, food and housing.
At the same time, small business owners need to be aware of new challenges on the horizon:
n A tight labor market. According to a recent NFIB report, 88 percent of all small business owners reported few or no qualified applicants for open jobs. Labor demand continues to be a top concern and will likely be a significant hurdle for small businesses in 2019.
n Rising health care costs. Small businesses need to keep an eye on rising employer health care coverage, which is anticipated to increase by 4 percent in 2019. For small businesses last year, the average per-employee cost of health care was more than $12,000.
Despite these challenges, many small businesses are still cautiously optimistic. Regardless of whether your small business is planning to expand or preparing to take on new challenges this year, you may benefit from one of the following:
n Revisit your five-year plan. The beginning of the year is an ideal time to update your five-year plan, taking into account strategic goals, financial projections and planned investments in capital spending. Aside from guiding your business activity, a detailed five-year plan will position you well if you apply for loans or seek investment money.
n Understand the business trends that may affect your company. It’s important to evaluate your market and determine possible changes. As part of anticipating relevant trends, many companies benefit from scenario planning. When executed correctly, this will position your company to act decisively to market changes and avoid being paralyzed by uncertainty.
n Identify new sources of capital for your business. For example, many business owners benefit from U.S. Small Business Administration loans. SBA-approved lenders like Zions Bank receive a guarantee that the SBA will repay a portion of the loan if the borrower defaults. Reducing the risk allows banks to consider extending financing to businesses that may have difficulty qualifying for a loan under conventional standards. Thanks to their government backing, banks can offer SBA loans at competitive rates, with fees that are comparable to non-guaranteed loans. SBA loans also offer some unique features, including flexible terms and low down payments.
Although there is some uncertainty about what 2019 holds for small businesses, savvy entrepreneurs recognize the importance of focusing on things they can control. Idaho business owners who focus on strong business fundamentals will position their companies for success this year.
R. Jay Henderson is the business banking relationship manager for Zions Bank’s Pocatello Yellowstone branch. He can be reached via email at RJay.Henderson@zionsbank.com.