Here’s Why You Should Be Paranoid–Very Paranoid
(This post originally appeared on Inc.)
In 1996, former Intel CEO Andrew Grove wrote his iconic book Only the Paranoid Survive. I think you can figure out what it’s about from the title. So, are you paranoid? If you’re running a business, Grove believes, you should always be. And in 2015, there are reasons to be very paranoid.
Are things good for small businesses right now? A survey from Capital One bank was released earlier this week seems pretty rosy. Small business optimism is at an all-time high since the Great Recession, the survey found. Small business’ positive sentiment has increased 33 percent since 2009 and continues to improve. Other recent surveys by American Express and cloud technology provider ShopKeep are consistent with Capital One’s findings. According to them, small businesses are feeling pretty good and that’s good to hear.
But wait. Here are three recent pieces of news that should make you very paranoid:
1. Small businesses are still recovering from the Great Recession?
Just last week, a Bank of America survey found that two-thirds of small businesses still haven’t recovered from the Great Recession. Wasn’t that seven years ago? Like the above surveys, the report said there was a general rise in confidence. But it also found that small business owners have been working long hours, forgoing raises and delaying their own compensation as “they focus on investing in employees and attracting and rewarding repeat customers.” Not only that but more than half of the small business owners surveyed said they have either never given themselves a raise, or haven’t done so in more than two years. I don’t consider that to be a good thing.
2. The portion of small businesses expecting growth is declining.
Another recent survey from micro-lender CAN Capital discovered that less than half of small business owners expect business growth within the next 12 months, which is a pretty significant decline from the 58 percent in the previous index conducted in September 2014. “After years of growth, small business owners seem to think things are leveling off,” said Daniel DeMeo, Chief Executive Officer, CAN Capital. “They’re concerned about rising employment costs, competition, regulation and new trends in digital marketing and digital payments. While they recognize the opportunities that exist from investing in their businesses, they also appear to be feeling more cautious than they’ve been in the past.”
3. Small business confidence dropped in March.
Want more? Every month the National Federation of Independent Businesses publishes a widely watched confidence index. The index has been unsteadily rising over the past few years but unfortunately March’s index took a significant dip. “Small business owners are not encouraged to expand their businesses when consumer spending is down, U.S. trading partners are weakening and the government continues to try and micromanage the private sector with red tape and regulations,” said Bill Dunkelberg, the NFIB’s Chief Economist.
4. Hillary is feeling some small business pain.
Even Hillary Clinton surprised many recently when she admitted that she was “surprised” at just how much small businesses are struggling in the U.S. “I was very surprised to see that when I began to dig into it,” she said while campaigning in New Hampshire. “Because people were telling me this as I traveled around the country the last two years, but I didn’t know what they were saying and it turns out that we are not producing as many small businesses as we [used] to.” Things are not as good as they have seemed.
So what gives? Are business owners optimistic or not? Is confidence going up or down? Should we be concerned? Let’s admit that there are between 20-30 million small business owners in this country–many from regions and industries that are doing great and many who are doing not-so-great. These surveys are only a statistical sample and I typically view them with a grain of salt. In reality it’s very tough to really get a read on how small businesses are doing. However, these mixed findings make me, and many of my clients, a little paranoid. And some, like me, are taking actions. Right now.
We are paying closer attention to the economy. While happy to see the real estate industry recovering, low interest rates and inflation and a strong lending environment, we are much concerned with the GDP’s sluggish growth, the huge number of people that are out of work and not looking for jobs, the stagnation in wages and personal income and the tech bubble that seems likely to damage recent stock market gains when reality sets in. These are factors that could cause a significant disruption in demand for our products and services.
We’re conserving cash. Very few small business owners I come across are bullish. Most are still behaving like it’s 2009. We are building but we are prudent. We are slowly, painfully growing. But we are not making huge investments unless we see a very likely return and we are not willing to take on more overhead unless it’s absolutely necessary. We are still operating in a recession mind-set. We know how important it is to have cash in the bank if things really take a downturn.
Just like Grove, we’re always worried about the next customer, the next job, the next project. My business looks OK through the summer. But what about the Fall? What about 2016? These are the issues on my mind right now. Things are never as good as they seem. Things are never as bad as they seem. It’s all about how you interpret them. Some say things are good for small businesses. Others say they’re not. In either case, There are good reasons to be paranoid. And to be prepared.
Author disclosure: a few of the companies mentioned above are current and/or former clients of my company but I have not been specifically compensated by them to write this piece.