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Friday, January 27, 2023

Starting a business has gotten harder this year, data suggests | business news

The economic environment for starting a small business is significantly less hospitable than it was a year ago, according to new data from NerdWallet’s Small Business Opportunity Index, and increasingly unfavorable conditions have some small business experts advising would-be entrepreneurs to prepare for rougher-than-usual starts, or even put your business plans on hold.

NerdWallet’s Small Business Opportunity Index assesses six types of economic data that reflect viability and common obstacles associated with starting a business: average short-term loan rates lent for business purposes; difficulty finding qualified employees; SBA loan approvals for people of color, women, veterans, and rural businesses; office rental costs; general economic conditions; and regulatory concerns among small businesses.

Overall, the NerdWallet Small Business Opportunity Index has steadily declined from its base of 100 in September 2021 to 78.1 in September 2022, reflecting a weakened environment for starting small businesses.

Interest rates, labor problems, other factors that push the index down

Based on underlying data for the index, the proportions of SBA 7(a) loan approvals going to people of color, women, and veterans have increased since September 2021. Additionally, data from the National Federation of Independent Business shows declining degrees of relative concern among small business owners about government regulation.

But other data from the National Federation of Independent Business, Colliers International Group and the Federal Reserve Bank of New York highlight significantly higher interest rates, more difficulty finding qualified employees, rising rental costs and economic headwinds. headlines, all of which pushed the index lower. over the past 12 months.

In fact, it’s a challenging time for people thinking about starting small businesses, says Rob Cordasco, a Savannah, Georgia-based certified public accountant who specializes in entrepreneurs. “Setting one up is easy,” he says. “Survivor? Different story.”

Experts Say: Aspiring Entrepreneurs Should Do 5 Different Things Now

An increasingly inhospitable economic environment means that starting a small business now will feel a lot different than it would six months or a year ago, according to three small business professionals. They say entrepreneurs who want to launch now need to take a different approach to some typical startup rules.

1. Be more strategic with inventory

People starting small businesses now have to think more about the timing of their inventory purchases. Prices later can be much higher than today’s prices. “If you buy it now, how much will you save when inflation hits?” asks Desha Elliott, business advisor for Accion Opportunity Fund.

Starting a new business now also means doing more than usual in supply chain planning. Focus on buying inventory that is currently available, and try to work with three to four vendors that have a product you need to maximize your access, says Julie Brander, certified business mentor and district director for SCORE Alabama.

2. Keep a bigger cash cushion and prepare for different scenarios

“Absolutely have a reservation,” says Brander. The standard cash reserve advice of one to three months is now three to six months, she notes.

Also, think about how you’ll handle disappointing sales or a full-blown recession. “What is that one procedure you have to help when customer flow slows down and you need cash flow?” says Elliott. “Are there costs that maybe you can restructure? … You want to ask before any situation happens.”

3. Invest in workplace culture early

Tight labor markets mean that new entrepreneurs may now have to spend more time and effort creating satisfying workplaces for employees during the early stages of building their businesses, according to Elliott. “You want to keep your employees engaged and engaged during the shortage. So what are you doing to cultivate that company culture and really show that appreciation? she says.

4. Consider pumping the brakes…

Most people thinking about starting businesses should probably wait until conditions improve, Cordasco says. “Maybe you don’t jump in with both feet, maybe you just make your way,” he says. “I wouldn’t be too optimistic.”

Start-up entrepreneurs now may need to take extra precautions lest some things go wrong, he adds. Acquiring labor and supplies, for example, used to be a matter of having enough money; now, he tells her, “Those things are really hard to come by, no matter how much money you have.”

5. … or not

The margins may be the right place for some aspiring entrepreneurs right now. But for others, now might be a good time to start a business, Brander says. “Look around you and determine what is needed in the community. Business is a solution to people’s problems,” he points out.

“Even though times are volatile and expenses and interest rates are at an all-time high, there are still plenty of opportunities for regular entrepreneurs to start their businesses,” Elliott adds. Entrepreneurs who lay strong foundations now can be poised for success when conditions improve, she says. “Entrepreneurship is a marathon and not a sprint.”


The NerdWallet Small Business Opportunity Index combines elements from the National Federation of Independent Business Small Business Economic Trends data, the US Office Market Outlook, and the Federal Reserve Bank of New York weekly economic index data. York.

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