Top Considerations in the New Year
Money. Money. Money.
These are the top three concerns among America’s small-business owners as we begin the new year.
But there are other things that entrepreneurs ought to keep in mind as they head into 1991, including how to locate and hold on to employees.
Staying on top of these two issues can help small businesses to flourish in lean times.
Earlier this year, small-business owners began hearing about the “credit crunch.”
By the summer, business owners were feeling it, as their once-friendly bankers became skittish about issuing new loans and credit lines and began pressuring them to repay old loans faster.
It’s not surprising that bankers are nervous. A nationwide real estate slump and rise in loan defaults have caused about 800 banks to fail in the past four years. According to the Federal Deposit Insurance Corp.’s latest report, 11.6% of the nation’s banks are losing money, and the government-run insurance program is facing a $5-billion shortfall this year.
Yet, as we move into 1991, it appears that small businesses are being penalized for the wrongdoings of big businesses, especially overzealous real estate developers.
Because most small-business owners operate on very thin cash reserves, access to credit and a good relationship with a local banker is critical.
“The move toward bank re-regulation means there will be fewer, larger banks with centralized power instead of the neighborhood banks that traditionally lend money to small-business owners,” said John Galles, executive director of National Small Business United, a Washington-based grass-roots organization.
Small-business owners do not have to feel intimidated or powerless when confronted by a panicky banker if they take an offensive, rather than defensive position.
How? By calling your banker today instead of waiting for your banker to call you. If you didn’t know it already, bankers hate surprises. Surprises make bankers crazy. You can eliminate the surprises by inviting bankers to meet with you at your office. They may balk, but promise them that the trip will be worthwhile.
After giving a short tour of your business, present your banker with an up-to-date financial statement. During your meeting, outline exactly how you have adjusted your strategy to cope with the sluggish economy.
After introducing your banker to your employees to demonstrate that they are real people, dazzle the banker with a list of your most innovative marketing ideas. Wow him or her with the all the ways you have slashed overhead costs and streamlined operations. Show your banker you are a prudent borrower making good use of the bank’s money.
Your goal is to make absolutely sure your banker has no excuse to put you under pressure to accept a reduced credit line or pay off a loan sooner than its due date.
“Credit-worthy firms will be able to borrow what they need,” said Doug Freeman, executive vice president of Wells Fargo Bank’s small business banking group in San Francisco.
One of the few optimistic business bankers, Freeman acknowledges that the Northeast is in a heavy slump, but he is not convinced that the rest of the country is experiencing a full-blown recession.
“There is not a recession except in confidence,” said Freeman, who blames the current economic unease on the fear of war and the unstable situation in Kuwait.
Once you have charmed your banker, there is another, more perplexing issue to consider in the coming year. Beyond the credit crunch, there is a hiring crunch on the way.
Many small-business owners don’t realize that it will become much more difficult to find and retain good employees as the nation’s labor pool shrinks.
Employers have to be more creative in their approach to hiring workers in 1991 and beyond, according to a recent report released by the Bank of America’s Small Business Alliance advisory board.
The low birth rates of the 1960s and 1970s mean fewer people will be turning 20 and entering the work force in the 1990s. Because women are expected fill more than two-thirds of the new jobs created, employers will also have to deal with providing part-time jobs, flexible schedules, child-care benefits and family sick days.
Small-business owners must also consider the changing complexion of the American work force as more ethnic minorities enter the labor pool. For example, in California, by the year 2000, nearly 50% of the new labor force entrants will be black, Latino or Asian, according to the bank’s research. And, one-third of those employees will be immigrants or children of immigrants who arrived in the United States after 1980.
The report suggests that small-business owners gear up to accommodate the needs of women and minority workers, including child-care placement assistance or financial aid to offset the cost of child care. The report also recommends that business owners try to locate their businesses close to affordable housing and public transit routes, set up in-house training programs and conduct wider searches for key employees.
“With fewer hires to make, a business can’t afford to make mistakes,” said Kris Morris, a principal in the Pasadena executive search firm Cowen, Morris, Berger.
Morris has met many executives and managers who have lost their jobs at big corporations who are now seeking jobs with small firms and nonprofit organizations.
“Many people are questioning quality of life issues and looking to put more value into their day-to-day life,” Morris said.
Morris and National Small Business United’s Galles predict a time when slimmed-down corporations will begin wooing successful small-business owners and managers to join them. Where else can a troubled corporation find people with the entrepreneurial spirit and skills needed to turn it around in rough times?
Management Class for New Business Owners
The Orange County chapter of the Service Corps of Retired Executives is sponsoring a management seminar for new business owners Jan. 10 at Glendale Federal Bank, 24221 Calle de la Louisa, in Laguna Hills. The session runs from 8:45 a.m. to 3:45 p.m. and will cover financing, record-keeping, marketing, legal issues, advertising and business planning. The $20 fee includes coffee and materials. Pre-registration is recommended. For information, call the SCORE office at (714) 836-2709.
Chamber Sponsors ‘After-Hours’ Mixer
“Business After Hours,” is the theme of a Jan. 10 mixer sponsored by the Los Angeles Area Chamber of Commerce. The event is open to the public and runs from 5:30 to 7:30 p.m. at the Mayfair Hotel, 1256 W. 7th St. in downtown Los Angeles. The $5 fee includes refreshments and on-site parking. For reservations, call (213) 629-0622.
Latin Business Assn.’s 15th Awards Banquet
The Latin Business Assn.’s 15th annual awards banquet will be chaired by AT&T; and co-chaired by Blue Cross of California. More than 1,500 guests are expected to attend the event Friday, March 1, at the Century Plaza Hotel in Century City. Founded in 1975, the LBA represents more than 700 Latino-owned businesses in Southern California. Tickets are $150 each for members and $175 for non-members when purchased before Jan. 10. After Jan. 10, the price increases to $175 for members and $200 for non-members. For reservations and information, contact the association at (213) 721-4000.
