Bad Economy Bad For Small Business – Or Is It?

By Kelly Spors

The sour economy is wreaking havoc on some small-business owners, convincing them to shutter their operations in exchange for a real paycheck, according to a New York Times article.

Bobbi Reed, of Glendale, Colo., for instance, closed her event-planning business and took a job as director of operations at a large stadium near her house after she lost some clients. “I won’t get rich on my salary, but it’s nice having someone paying into my retirement account,” she told the Times.

Small companies face several disadvantages over larger businesses in bad economies, the article notes. Researchers consistently find that small companies account for a smaller chunk of overall sales in bad economies than good ones. And it’s harder for small businesses than large businesses to weather the realities of bad economic times – like losing an important customer or coping with late payments. Tightened lending standards are also making it especially hard for entrepreneurs to borrow the money they need to run their operations.

Yet today’s economic climate shouldn’t be viewed as all doom and gloom. Savvy entrepreneurs use turbulent economic times as an opportunity to make inroads on competitors’ turf (think Dunkin’ Donuts taking on Starbucks in the coffee market).

Big companies often reel in their marketing budgets in bad economic times, leaving room for small companies to make a bigger splash. As large stodgy companies get battered, small companies are nimbler and can more quickly adapt their prices and their marketing campaigns to appeal to thriftier consumers. It can also be a good time to introduce new products into the market that address today’s economic realities, such as less-pricey alternatives to luxury goods. (Platanium, anyone?).

And of course there’s nothing like a squeezed market to force someone to be entrepreneurial about how they run their business. You might be able to finagle better deals with your landlord or suppliers.

Readers, do you think now is a good or bad time to break into entrepreneurship? Any tips for competing in this economic climate?

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Rob Fraser

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