Outlook for Entrepreneurial Economy for 2011

The last couple of years have been rough on small-business owners and a discouraging time for aspiring entrepreneurs. So what is the outlook for entrepreneurship in 2011?

Unfortunately, the next year may be a repeat of the past couple of years.

This is a big concern for all of us, as it has been entrepreneurs who have led us out of almost every past recession.

Most forecasts for 2011 are indicating little or modest growth in employment. And weak employment means weak consumer spending. This is particularly bad news for most small businesses because they rely on customers who are willing to spend money to fuel growth in revenues.

Small-business owners remain pessimistic about the near-term future. The latest survey by the National Federation of Independent Business finds small-business owners are still not ready to grow their businesses and help lead us out of the recession.

“Overall, owners remain stubbornly cautious and uncertain about the future course of the economy and their business prospects,” said William C. Dunkelberg, chief economist for the NFIB. With continuing weak sales, small-business owners remain unwilling to increase hiring.

“Until sales pick up, there is no pressing reason to hire, and job creation will remain slow,” Dunkelberg said.

The survey suggests that we probably will not see an increase in spending on capital equipment in the coming months.

Also, small-business owners are continuing to reduce their inventories. Both of these findings clearly signal a lack of confidence in any economic improvement in the near future.

Some policymakers in Washington believe that increasing funding for Small Business Administration loan programs is a solution to the sluggish small-business sector of the economy. However, the NFIB survey found that 91 per cent reported that all their credit needs were met or they weren’t interested in borrowing at this time. A lack of access to credit isn’t the culprit holding entrepreneurs back. Until sales improve, business owners will not need additional credit to buy new equipment or help fund new hiring.

Entrepreneurs have adapted to the thought of a prolonged recession. They have cut back on debt; trimmed their expenses, including payroll; and gotten back to their bootstrapping roots.

A recent survey of small businesses by Forbes Insights suggests that entrepreneurs have hunkered down and are waiting for the economy to recover. Many of the respondents in this study remain worried that we may face a double-dip recession.

They are building their cash balances to weather whatever additional challenges the economy brings them.

If you are already in business, remain cautious and prudent. Build your cash as best you can, and avoid additional debt at all costs.

If you are hoping to start a new business in 2011, know that there are still opportunities out there. But approach any new business startup with as lean and bootstrapped a game plan as possible.

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