Small Businesses Struggling for Survival in Economic Downturn

Credit availability is in short supply, energy costs are volatile, and no one's sure how the bailout plan is going to help the economy. These concerns are weighing heavily on the minds of small business owners.

On the hit TV show Dancing With The Stars, competitors must prove their skill in the Cha Cha, Foxtrot, Paso Doble, and Viennese Waltz, among others. In the same way, small business owners must demonstrate their expertise to glide gracefully through whatever obstacles are thrown at them. Unfortunately, the current economic downturn threatens to be one of the most difficult dances ever to master.

Owners admit uncertainty

Two recently released surveys indicate that many small business owners don't feel confident about the future of their firms. A semi-annual economic report produced by The PNC Financial Services Group, Inc. concludes that pessimism among business owners is at an all-time high. And 20 percent of those responding to the American Express OPEN Small Business Monitor indicated that the economic crisis may force them to shut their doors permanently.

The PNC survey is conducted every six months to measure sentiment among those who run small- to mid-sized ventures. Respondents include nearly 1,000 owners and senior managers. Among these decision-makers, 29 percent admitted being pessimistic about their company's performance over the next six months-a record high in this metric during the five years that PNC has conducted the survey. A full 26 percent of respondents said they expect to experience a sales decline over the next six months, which is also a record high.

The American Express poll, which queries small businesses twice annually, felt the need to create a supplemental survey called the Economic Pulse.  It was conducted on October 7 and 8 to measure how the latest economic events are affecting small business. Some 63 percent of respondents indicated that the credit crunch in the current economy has impacted their business, an increase from 50 percent when the survey was taken in August. More than 50 percent of owners admitted to using personal assets to cover business expenses, and 70 percent said that sales were decreasing.

Tight credit, rising energy costs, dim outlook

The PNC survey indicates that the top three concerns among small business decision makers are rising energy costs, recession, and inflation.  What's worse, a majority of the respondents expect to face pricing increases from their suppliers.

Politics as usual

The two surveys returned different opinions on the financial bailout package. In the PNC survey, 76 percent indicated that the fiscal stimulus plan would provide "little to no benefit." But 55 percent of those who took the Economic Pulse survey thought the rescue package would have some positive impact on the economy's overall stability.

In summary, those who own or operate small- and medium-sized businesses are nervous about what lies ahead. They're ready to dance, but they're just not sure what kind of music will be playing.