Pointner: The sea of mediocrity in which small businesses are sailing
In Part One of this article (published Sept. 18, 2013), Wheaton Attorney Scott Pointner explained the “top line” (revenue) challenges faced by “Main Street” in this post-recession recovery. In this second half, he explains the struggles small businesses face on their “bottom line” (profitability).
When it comes to increasing costs of goods, borrowing costs and gas prices, the tools available to Wall Street darlings are vastly different than those available to Main Street storefronts. For large multi-nationals, a few percent contraction in workforce, reductions in the cost of materials or parts imposed on suppliers, or large-scale equipment acquisitions to more efficiently produce goods, can all lead to increasing bottom line profitability without increasing top line revenue growth. In fact, aside from unprecedented fed intervention, recent stock market gains have been largely driven by cost-cutting measures such as these.
For small businesses, effective strategies like these are rarely available, and when they are, they are typically accompanied by risk or disruption. Recent census data shows more than 78 percent of the nearly 6 million employers in the United States had nine or fewer employees. Cutting even one employee for most small businesses means significant changes in the lives of those that remain, especially given the close-knit social fabric of Main Street. The economic leverage of the average storefront is insignificant in the new world of big box retailers, and thus price concessions from suppliers are difficult to secure. Finally, the debt and risk of big capital expenditures keep small business owners up at night before “pulling the trigger.”
Couple this lack of options with the uncertainty of rising healthcare costs and higher taxes around the corner to address government debt and unfunded pension obligations, and it is no wonder that just as the small businesses have not seen significant top line revenue growth, few have been able to significantly increase bottom lines.
Just as wind resistance makes incremental increases in speed more difficult for a sailor to obtain, until our leaders figure out how to extend Wall Street success to Main Street, the by products of the recovery will likely continue to act as headwinds, slowing the growth of small businesses more so than that of larger companies. The foreseeable future of slow growth from these headwinds, coupled with the need to remain cautious amid the many reefs of economic uncertainty that lie just below (and in cases such as healthcare and rising taxes, above) the surface, small business owners are likely to be sailing the slow Seas of Mediocrity while watching the cigarette boats of Team Bernake/Yellen racing by.
Scott E. Pointner is the legal counsel for the Wheaton Chamber of Commerce.