Small businesses grow cautious, just in case
The stock market’s volatility this year has some small business owners deciding to run their businesses cautiously.
Consumer spending and the economy are strong and many businesses report all is well. But some owners are worried because their customers are spending less.
Some owners are thinking of taking fewer risks. One concern is that the gyrations are a harbinger of recession; investors tend to buy and sell based on what they think the economy will do in six to nine months. And while the market has been right before – as in mid-2007, when it began falling half a year before the Great Recession began – it’s not foolproof. Chester Spatt, a finance professor at Carnegie Mellon University’s Tepper School of Business, notes that when the market crashed in October 1987, “that fall was not really associated with a material change in business.”
Still, when there’s volatility, “businesses may react, for example by reducing their orders in advance,” Spatt says.
What some owners are doing:
● Cost-cutting is becoming a priority.
● The Slumber Yard, which operates product review websites, will hire more slowly next year, co-owner Jeff Rizzo says.
● Prospecting for business, something many owners do continually, is becoming more important.
● Entrepreneurs having a harder time getting investor money are putting Plan B together. When it looked like Steve and Bea Fisher wouldn’t get investors for a hardware store in a rural part of Nevada, the couple looked at their savings and began inquiring about non-traditional lenders. But they found that lenders offered only small amounts, sometimes $2,000 out of $10,000. “We thought we might be forced to dig a little bit deeper into our pockets,” Steve Fisher says.