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Small Businesses: Difference between revisions
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=== Magaly === | === Magaly === | ||
Currently small businesses despite the evident drop in sales and earnings for most, still seem optimistic about their financial health, and they seem to be focused still on finding the correct talent, as job openings continue to be very high compared to history. However, positive expectations of future revenue and growth seem to be more sentiment base, and the current stable conditions could be having a biased impact on their sentiment, so I don't think we can take it as a reliable indicator of future conditions. | Currently small businesses despite the evident drop in sales and earnings for most, still seem optimistic about their financial health, and they seem to be focused still on finding the correct talent, as job openings continue to be very high compared to history. However, positive expectations of future revenue and growth seem to be more sentiment base, and the current stable conditions could be having a biased impact on their sentiment, so I don't think we can take it as a reliable indicator of future conditions. | ||
Analysis of the 2008 recession indicates that small businesses were hurt mostly by falling demand more than by credit tightened, however concern with sales started until late in 2008, after conditions deteriorated significantly. So is difficult in my opinion to forecast that while sales have been stable currently, they will remain this way later on, as it seems more of a lagging data. | Analysis of the 2008 recession indicates that small businesses were hurt mostly by falling demand more than by credit tightened, however concern with sales started until late in 2008, after conditions deteriorated significantly. So is difficult in my opinion to forecast that while sales have been stable currently, they will remain this way later on, as it seems more of a lagging data. | ||
Small businesses were also the ones that has the largest declines in employment in 2008 among all firms, and their recovery was also significantly slower than largest firms, with reported recovery in some factors being sluggish even after 2010. | Small businesses were also the ones that has the largest declines in employment in 2008 among all firms, and their recovery was also significantly slower than largest firms, with reported recovery in some factors being sluggish even after 2010. | ||
Bankruptcies are starting to increase at a faster pace this year (from a very low level, and I dont expect to see 2008 levels, but we could see a similar rate of increase), and current funding conditions don't signal yet the best environment for unprofitable businesses to thrive, which unfortunately is more than 50% of small businesses. | Bankruptcies are starting to increase at a faster pace this year (from a very low level, and I dont expect to see 2008 levels, but we could see a similar rate of increase), and current funding conditions don't signal yet the best environment for unprofitable businesses to thrive, which unfortunately is more than 50% of small businesses. | ||
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* Fiscal support has now rolled off completely | * Fiscal support has now rolled off completely | ||
* Higher rates could make it impossible to refinance their debt or take new one | * Higher rates could make it impossible to refinance their debt or take new one | ||
* Past cycle indicating small businesses have a slower recovery and bigger hit on employment in a recession | * Past cycle indicating small businesses have a slower recovery and bigger hit on employment in a recession. | ||
* Their decrease in investments if prolongue could be detrimental for their competitiveness and growth long term. | |||
'''Key Insights''' | '''Key Insights''' | ||
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* Due to the uncertainty, higher rates, and financing conditions small businesses are pausing plans for expansion or larger spending. | * Due to the uncertainty, higher rates, and financing conditions small businesses are pausing plans for expansion or larger spending. | ||
* Much like in 2008, small businesses seem to be in a more difficult position than larger firms. | * Much like in 2008, small businesses seem to be in a more difficult position than larger firms. | ||
* Tightened standards have increased considerably for small firms, but falling demand for loans is what seems to be more prominent. This is also a similar pattern that in the 2008 crisis, and in line with companies not planning to expand. | * Tightened standards have increased considerably for small firms, but falling demand for loans is what seems to be more prominent. This is also a similar pattern that in the 2008 crisis, and in line with companies not planning to expand. | ||
=== Others === | === Others === | ||