New Research Report Outlines What "The New Economy" Means for Small Business

Share Article

As the Great Recession gives way to economic expansion, "The New Economy" will look quite different from the other recoveries of the last 30 years. Growth in The New Economy will be sluggish and constrained in many ways - and that will have a negative impact on small business.

The Family Business Institute has produced a new White Paper outlining in detail why fundamental changes in our economy will make this recovery especially challenging for small businesses.

Leading economic indicators are trending upward showing that, while the economy is not yet what anyone would call robust, it is at least digging out of its hole. Single family home starts have now risen for five straight months. The New York Federal Reserve Bank reported that manufacturing is growing for the first time since April, 2008. The stock market has rebounded from its low of around 6500 in March to over 9000 today. Newsweek reports that the economy is currently expanding at a 2.5% annual rate in the third quarter, and consumer confidence is finally starting to come around again. However, this recovery will be quite challenging, and small business will have to behave and manage differently from how they have in the past. Wayne Rivers, president of The Family Business Institute says: "To survive in The New Economy, small business leaders will need to take several important action steps - and quickly. Relying on a new spike in economic growth to turn things around won't work this time around."

There are five foundational areas which will have enormous constraining impact on our economy's ability to recover.

1. Consumption. Consumption is not likely to come around soon because of a number of different factors including: persistent unemployment, length of unemployment, short average work week, falling wages, and psychological stress.

2. Government. Confidence in government is decreasing. The $787 billion stimulus package, a product of both political parties, has unsettled many family and closely held business owners who don't believe in government bailouts of corporations - large or small. The relationship between government, individual citizens, and family and closely held businesses may have been altered permanently - and it scares the wits out of most small business owners who don't see positive outcomes for them as a result.

3. Technology. Technology is continuing to change at a rapid pace. According to some analysts, the internet will revolutionize how businesses reach out to their potential customers - but most family and closely held business owners don't yet know how they'll use technology to make this so. Small business owners have been reluctant to fully embrace technology as a way to market, communicate, and increase efficiencies. As a result, they have fallen behind the learning curve.

4. Leverage & Finance. McKinsey reports that "the future will reveal significantly lower levels of leverage (and higher prices for risk) than we had come to expect." Therefore, businesses that rely on leverage - that means virtually all real estate and development related businesses - will suffer years of lower or even negative returns.

5. Demographics. Several factors which allowed and even encouraged economic growth in the past are no more: 1. Immigration is slowing, 2. the historic entry of women into the workforce has basically run its course, and 3. the increase in the number of college graduates is slowing. The fact is America is "graying."

Rivers recommends family and small business owners take several action steps including:

1. Totally rethinking business development
2. Focusing on how they invest their executive time
3. Building better, more effective teams
4. Rigorously analyzing expenses and benchmarking company and department performance
5. Becoming proactive about politics; small business owners - long part of the "silent majority" - can no longer afford to be complacent about coming political change

For more details, see "THE NEW ECONOMY: The Great Recession is Ending - NOW WHAT?" (http://www.familybusinessinstitute.com/index.php/White-Papers/), the latest White Paper produced by the team at The Family Business Institute.

About The Family Business Institute
The Family Business Institute has over 150 years of combined experience in family and closely-held business management and planning. The Family Business Institute specializes in helping family and closely held businesses manage succession, communications, and managerial issues. The company is the leading source of expertise in guiding family and closely-held business through the challenges that growth and change can bring. For more information contact Wayne Rivers at 1-877-326-2493 ext 228 (FAM-BIZ-DR) or visit the company website http://www.familybusinessinstitute.com.

# # #

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Wayne Rivers
Visit website