{"id":3369,"date":"2023-02-16T16:21:43","date_gmt":"2023-02-16T20:21:43","guid":{"rendered":"https:\/\/www.skypointfcu.com\/wph\/workarea\/?p=3369"},"modified":"2023-02-16T16:21:45","modified_gmt":"2023-02-16T20:21:45","slug":"starting-a-business-has-gotten-harder-this-year-data-suggests","status":"publish","type":"post","link":"https:\/\/www.skypointfcu.com\/wph\/workarea\/blog\/starting-a-business-has-gotten-harder-this-year-data-suggests\/","title":{"rendered":"Starting a Business Has Gotten Harder This Year, Data Suggests"},"content":{"rendered":"\n

The economic environment for starting a small business is significantly less hospitable than it was a year ago, according to new data from NerdWallet\u2019s Small-Business Opportunity Index, and the increasingly unfavorable conditions have some small-business experts advising would-be entrepreneurs to prepare for rougher-than-usual starts \u2014 or even to put their business plans on hold.<\/p>\n\n\n\n

The NerdWallet Small-Business Opportunity Index evaluates six types of economic data that reflect the feasibility of and common hurdles associated with starting a business: average rates on short-maturity loans borrowed for business purposes; difficulty finding qualified employees; SBA loan approvals for people of color, women, veterans and rural businesses; office rent costs; general economic conditions; and regulatory concerns among small businesses.<\/p>\n\n\n\n

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 weakening environment for starting small businesses.<\/p>\n\n\n\n

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Interest rates, labor issues, other factors pushing index down<\/strong><\/p>\n\n\n\n

According to the index\u2019s underlying data, the proportions of SBA 7(a) loan approvals going to people of color, women and veterans have increased since September 2021. In addition, data from the National Federation of Independent Business shows lessening degrees of relative concern among small-business owners<\/a> about government regulation.<\/p>\n\n\n\n

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<\/a>, increasing difficulty finding qualified employees, upticks in rent costs and overall economic headwinds, all of which pushed the index down over the last 12 months.<\/p>\n\n\n\n

It\u2019s indeed a challenging time for people thinking about starting small businesses, says Rob Cordasco, a Savannah, Georgia-based certified public accountant who specializes in entrepreneurs. \u201cSetting one up is easy,\u201d he says. \u201cSurviving? Different story.\u201d<\/p>\n\n\n\n

Experts say: Aspiring entrepreneurs should do 5 things differently now<\/strong><\/p>\n\n\n\n

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

1. Be more strategic about inventory<\/strong><\/p>\n\n\n\n

People starting small businesses now have to put extra thought toward the timing of their inventory purchases<\/a>. Prices later may be much higher than prices today. \u201cIf you purchase it now, how much will you save when inflation hits?\u201d asks Desha Elliott, a business advisor at Accion Opportunity Fund.<\/p>\n\n\n\n

Starting a new business now also means doing more than the usual amount of supply chain planning. Focus on buying inventory that\u2019s currently available, and try to work with three or four vendors that carry a product you need so you maximize your access, says Julie Brander, a certified business mentor and district director for SCORE Alabama.<\/p>\n\n\n\n

2. Keep a bigger cash cushion and prepare for different scenarios<\/strong><\/p>\n\n\n\n

\u201cAbsolutely have a reserve,\u201d Brander says. The standard advice of one to three months\u2019 worth of cash reserves is now three to six months, she notes.<\/p>\n\n\n\n

Also, think through how you\u2019re going to handle disappointing sales or a full-on recession. \u201cWhat is that procedure that you have in place to help when your customer flow slows down and you need cash flow?\u201d Elliott says. \u201cAre there costs that maybe you can restructure? \u2026 You want to ask before any situation happens.\u201d<\/p>\n\n\n\n

3. Invest in workplace culture sooner<\/strong><\/p>\n\n\n\n

Tight labor markets mean new entrepreneurs may now have to put more time and effort into creating satisfying workplaces for employees during the early stages of building their businesses, according to Elliott. \u201cYou want to keep your employees engaged and committed during the shortages. And so what are you doing to cultivate that company culture and really show that appreciation?\u201d she says.<\/p>\n\n\n\n

4. Consider pumping the brakes \u2026<\/strong><\/p>\n\n\n\n

Most people thinking about starting businesses should probably wait until conditions improve, Cordasco says. \u201cMaybe not jump in with both feet, maybe you kind of just ease your way into it,\u201d he says. \u201cI wouldn\u2019t be overly optimistic.\u201d<\/p>\n\n\n\n

Entrepreneurs who do get started now may need to take extra precautions for some things to go sideways, he adds. Acquiring labor and supplies, for example, used to be a matter of having enough money; now, he says, \u201cThose things are really hard to come by, regardless of how much money you have.\u201d<\/p>\n\n\n\n

5. \u2026 Or not<\/strong><\/p>\n\n\n\n

The sidelines may be the right place for some would-be entrepreneurs right now. But for others, now could actually be a good time to start a business, Brander says. \u201cLook around and determine what\u2019s needed in the community. Business is a solution to people\u2019s problems,\u201d she notes.<\/p>\n\n\n\n

\u201cEven 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,\u201d Elliott adds. Entrepreneurs who lay solid foundations now may be primed for success when conditions improve, she notes. \u201cEntrepreneurship is a marathon and not a sprint.\u201d<\/p>\n\n\n\n

METHODOLOGY<\/em><\/strong><\/strong><\/p>\n\n\n\n

NerdWallet\u2019s Small-Business Opportunity Index combines elements of the National Federation of Independent Business\u2019s Small Business Economic Trends data, Colliers\u2019 U.S. Office Market Outlook, ADP\u2019s Small Business Quarterly Research Insights, the Small Business Administration\u2019s 7(a) and 504 summary reports, and the Federal Reserve Bank of New York\u2019s Weekly Economic Index data.<\/em><\/p>\n\n\n\n

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