Building a business is tough enough in this competitive landscape. Unfortunately, there are external enemies conspiring around every corner making it even more difficult for small business owners to succeed.
Here are the top seven enemies of small business and how to fight back against them:
1. Large commercial banks. Since the Great Recession, it has become much more difficult for any business owner to get a loan through a large commercial bank. A recent report by MultiFunding shows that some of the largest banks in the country are the worst at providing credit for small businesses. Some of the biggest banks that got an “F” are Bank of America, JP Morgan, Citibank, HSBC, Morgan Stanley, Goldman Sachs and Discover Bank. Another disturbing trend is that many banks have reduced existing lines of credit for many small businesses.
How to fight back: Talk to a community bank. Search your location in the MultiFunding data base to find small business-friendly banks that are willing to help.
2. The Federal Deposit Insurance Corporation (FDIC). This government regulatory body shares some of the blame for large banks not lending to small businesses. Since the Great Recession, they have imposed much stricter lending guidelines. Laws now establish minimum leverage capital requirements and minimum risk-based capital requirements for all banks.
Payments to FDIC’s Deposit Insurance Fund are based on total domestic assets minus the tangible equity of the bank. The FDIC determines the ratios of insurance premiums to assets, where banks with higher safety ratings get lower ratios. In other words, if a bank lends less, they pay less. In addition, the largest banks with $50 billion in assets are now required to show the FDIC how they would break up and sell off their assets if they were in danger of failing.
How to fight back: See #1, and find a community or small business-friendly bank in your area.
3. State and local government fees. In an effort to boost tax revenues, governments at every level are levying higher and more complex taxes and fees for running a business. Not only has this become expensive, it’s confusing and time-consuming. For example, if a company has employees in multiple states, every one of those states wants to collect payroll tax from the business. In addition, if a company has customers in many states, that local state wants to collect income tax on the revenue earned in their state. Many local governments charge a special fee to operate a business. In Virginia, for example, there are almost 100 professions that need to have special licenses, including body piercers, embalmers and ginseng dealers.
How to fight back: Be aware of your company’s tax obligations based on its revenue stream and where its employees live. Find a good accountant. Use online services like Sure Payroll to help collect and disperse payroll taxes correctly.
4. Wal-Mart. The world's largest retailer has long been blamed for driving local stores out of businesses. The Hunter College Center for Community Planning and Development recently released a study on Wal-Mart’s economic footprint, which reviewed 50 prior studies on Wal-Mart’s impact. The study found that when Wal-Mart moves into a local community, it eliminates three local jobs for every two it creates. In addition, grocery and discount stores typically lose between 10 and 40 percent of their sales.
How to fight back: Participate in "buy local" campaigns in your community. Most consumers would much rather buy locally than at the end of a 10,000 mile supply chain. Tell them why it’s important. Be a part of Small Business Saturday on November 24, 2012 when American Express encourages all consumers to shop at a small business that day.
5. Lack of workforce training. Even with national unemployment at 8.2 percent, it is still difficult to find the right skills for small businesses. Many resort to expensive recruiting companies or online services such as Monster or Careerbuilder.
How to fight back: Consider hiring a person with the perfect attitude for your business culture and then train them to do the job needed. Ask your employees for referrals and pay a finder's fee. Use online services for finding freelancers such as Elance link and Odesk. These contingent workforce sources can help find the exact skill needed at a reasonable price.
6. Long-term leasing companies. Many entrepreneurs get caught up in leasing equipment they think they need to run their businesses. They sign long-term leases for three to five years that require high monthly payments. This may include copiers, phone equipment and computers. Unfortunately, many of these leases soon become anchors as the company either outgrows them or goes out of business.
How to fight back: The cardinal rule for small business is to have as few fixed costs as possible. If buying something requires a personal guarantee, you don’t need it. In every area of your business, tie costs to revenue. Pay on a per-use basis without having to make a large investment up front. Many cloud based solutions are perfect at achieving this result.
7. Student Loans. The average debt for graduating seniors is $25,000 and climbing and the aggregate amount of outstanding student loan debt now tops $1 trillion. Graduates nowadays have such high monthly loan payments that they must seek out a paycheck immediately. This burgeoning debt is killing off a new generation of would-be entrepreneurs.
How to fight back: Go to a college that you can afford without taking on significant debt. Many students are going to relatively inexpensive community colleges for the first two years before transferring to a more expensive four year universities. Alternately, if you are accepted at multiple universities, bargain with school officials for scholarship funds since 75 of them have over $1 billion endowments.
What do you consider as "Enemy No. 1" to small business? How do you fight back?
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