Is Business Confidence in the Economy Misplaced?
By Bill Lawrence
A recent Grant Thornton CFO survey conducted in Q4 2023 showed dramatic increases in expectations concerning the ability of business to meet goals related to supply chain and labor needs, cost controls, as well as increased customer demand and growth projections. The survey polled over 200 finance decision-makers from U.S.-based companies with at least $100 million in annual revenue.
Fifty-seven percent of them said they are confident that they can meet their labor needs, up from 49% in the third quarter. This marked an all-time high since the question’s inception in the fourth quarter of 2021.
In stark contrast, however, a January 2024 survey by the National Federation of Independent Business (NFIB), revealed that U.S. small-business optimism suffered its biggest drop in more than a year. The survey cited several reasons for the decline, including deteriorating profits and diminishing sales expectations. The top three concerns: a lack of confidence that the economy will improve; a lack of expectation for higher sales; and a decreased expectation for improved credit conditions.
Sizing Up the Differences
To understand the obvious disparities in findings with each survey, one needs to dig deeper. One key difference is the size of the companies who participated. The Grant Thornton research sampled companies with at least $100 million in annual revenue. Conversely, the NFIB survey polled over 600,000 small independent businesses whose average annual revenue totaled $1.3 million.
Another notable difference besides size and financial strength is the level of quality and number of resources available to each type of business in dealing with the problems they face. Smaller companies often face the same issues as their larger counterparts, however they have far fewer resources available to address them.
Given that the majority of U.S. businesses are small businesses — over 90%, according to the Small Business Association — the ability of management and their advisors, including legal counsel, to meet their challenges is critically important in shaping future economic strategy. While these companies may be in certain cases at a significant disadvantage relative to their larger peers, there are plenty of tools and resources available to help them overcome those challenges.
Bridging the Opportunity Gap
Advances in technology have improved significantly and provide a platform for small businesses to become more efficient as well as drive growth. A wide range of cost-effective software services are now available, either through purchase or on a time-share basis. Using these tools properly enables management to add new customers, re-engage those who have lapsed or buy infrequently, and identify the most profitable prospects to cultivate for future purchases.
There are also options available for small business operators to improve their financial resources and have more financial capital available to invest in their enterprises. The Small Business Association (SBA) has a number of loan guarantee options available, including micro-loans of up to $50,000 as well as loans for equipment, business capital and real estate that can range from $500,000 to $5.5 million. The SBA also provides a wealth of other resources to help companies.
In addition to the SBA, regional and community banks have financial programs and specialists who are dedicated to helping small businesses find financing solutions. They also have treasury tools that can make it easier for companies to transact business.
One of the more overlooked opportunities for leaders of small businesses is how to access and leverage the value of good legal counsel. Attorneys can help owners avoid potential legal problems or potential lawsuits around unintended consequences from existing business activities. There are a number of boutique law firms focused on the small business sector. They typically have financial arrangements that are more flexible and accessible, and often have contacts in areas outside of the legal field that can be beneficial.
One frequently overlooked opportunity, particularly for those who qualify, are free legal assistance programs offered by organizations — including our very own King County Bar Association (KCBA) — in which owners can consult with an attorney to receive general legal advice or more specific guidance on options related to debt and bankruptcy. KCBA’s lawyer referral service is another excellent resource to consider.
Changing the Mindset
While small business owners are concerned about the future, perhaps if they had more insight into the fairly extensive support network available to them to not only overcome their obstacles, but also to help them grow, they might feel more optimistic. Most businesses willing to look beyond their current situation to identify and capitalize on the resources available to them can execute a profitable business plan.
Bill Lawrence is a Principal at Seattle-based restructuring and corporate advisory firm Revitalization Partners, which has served as a receiver in more than 30 cases in the Pacific Northwest. He and his partners write regularly about the operational and financial challenges in successfully restructuring companies. Learn more in the firm’s blog as well as its e-book, “Insights to Grow, Build or Save Your Business!”
