Small Business: Not Too Big To Fail, Too Small To Succeed
By Marc Friedland
Not Too Big To Fail, Too Small To Succeed: this is the plight of small businesses in an economic downturn. Many people understand that small businesses are a vital part of any community, and the recent economic downturn has made them conspicuous by their absence. The failure of small businesses can cause more long term harm to the economy than the high profile failures in the financial sector. If we want to see small businesses succeed, our communities need to give them support.
“A rising tide floats all boats” applies very well to a growing economy. When the economy is booming, it’s easy to do business. For small businesses, the key to success is more related to cash flow than profit. The numbers are simple. A business buys goods on credit and pays for them with future sales. When sales go up, there is more money to pay the bills. It’s easy to grow the business.
When the economy goes into recession, a falling tide leaves those in shallow water on dry land. Here the numbers get reversed. If a business has declining sales, it’s got less money to pay the bills incurred previously. This decline eats up cash in the bank on a weekly basis and is cumulative. A small business with typically low cash reserves can run out of cash long before it runs out of customers.
Many small business owners have gambled their financial lives on their business. When the business fails, it’s one of our neighbors that get hurt. Additionally, the employees of that business are out of work.
Keep in mind that the largest source of jobs in this country is small business. In 2007 small businesses accounted for 78.9% of all new jobs. But, when the recession hit, the government bailed out the banks and large corporations – not small businesses.
What can local government do to assist this situation? Most small business owners don’t start a business to get rich. They have an idea they feel can contribute to the neighborhood. However, in many cases, new entrepreneurs lack the skills to run a business, which is why their endeavors often fail in just the first year.
To gird up the structures of small businesses, local governments need to set up small business incubators, staffed by experienced people with a small business background to guide these fledgling entrepreneurs. Covering the rocky road of starting a business and maintaining it in times of difficulty would be the focus of the small business incubator. There are many retired small business owners in every community who could ably assist with such a project.
Why not leave this to the US Small Business Administration? Because the SBA is a federal program, and each community needs to take control over what matters the most to it. In addition, with all the federal money being thrown out to businesses “too big to fail,” small businesses have received almost nothing.
Why wait around for the national economic recovery? Let’s create our own recovery.
Editor’s note: The PROUT economic system is the only one that has a protected place in the economy for small businesses. One of the biggest problems facing small businesses is competition from big businesses. In a PROUT managed economy, the sector of the economy reserved for small businesses would be protected from encroachment by big businesses.
Marc Friedland was the founder and owner of Talley’s Green Grocery, the first natural foods supermarket in Charlotte, North Carolina from 1991 to 2008.