What Are the Biggest Threats to Small Business?

Small businesses are an essential part of the fabric of our society, and their success is critical to the success of our economy and our communities. I'd like to suggest that small businesses represent the heart of America's free markets. Small businesses are where people put their entrepreneurial dreams into action. 

Here are some of the benefits of small businesses:

1. Job creation: Small businesses are significant contributors to job creation. They create job opportunities for the local community, providing employment for people of different skill levels and backgrounds. According to the Small Business Administration (SBA), small businesses created 1.5 million jobs in 2019 alone.
2. Economic growth: Small businesses are vital to the growth of the economy. They contribute to the GDP and promote economic growth by generating income and creating wealth. They also stimulate competition, which helps drive innovation and reduce prices.
3. Local community development: Small businesses play a crucial role in the development of local communities. They help to build and sustain vibrant neighborhoods by providing goods and services that meet the needs of the local population. You can see this happening in Duluth's Lincoln Park District. Small businesses also tend to reinvest profits back into the community, which helps to support other local businesses.
4. Entrepreneurship: Small businesses are a platform for entrepreneurship. They provide opportunities for individuals to start and grow their businesses, pursue their passions, and achieve their dreams. Small businesses also help to create a diverse and dynamic business environment, which encourages innovation and creativity.
5. Resilience: Small businesses are generally more agile and adaptable than large corporations, which makes them more resilient in times of economic uncertainty like today. They can respond more quickly to changes in market conditions and customer needs, which enables them to stay competitive and survive challenging times.

On the other hand, small businesses also face a unique set of challenges and risks that can pose significant threats to their success. Some of the biggest threats to small businesses include:

1. Limited resources: Small businesses typically have limited financial and human resources, which can make it difficult to compete with larger players in the market. 
2. Economic downturns: Small businesses are particularly vulnerable to economic downturns as they may not have the financial reserves to weather a prolonged period of low sales and revenue. 
3. Increased competition: Small businesses may face competition from larger, established businesses or new entrants in the market, which can put pressure on their profitability.
4. Difficulty accessing financing: Small businesses may struggle to secure financing due to their size, lack of collateral, or limited credit history, which can limit their ability to invest in growth or ride out tough times. The current economic turbulence is especially problematic for companies dealing with debt. Uncertainty about interest rates makes it difficult to accurately plan ahead.
5. Cybersecurity threats: Small businesses are often seen as easy targets by cybercriminals, who may exploit vulnerabilities in their systems and steal sensitive data or money. This and most of the other challenges are directly related to not having the necessary funding to stay current. 
6. Regulatory compliance: Small businesses may struggle to keep up with changing regulations and compliance requirements, which can result in costly fines and legal issues. You may not be able to afford having an HR pro on staff, but there are HR pros out there whom you can lean on for this nightmarish facet of your business. Locally, Stacy Johnson of Audacity HR is a capable "go to" for this and other matters.
7. Staffing challenges: Small businesses may have difficulty attracting and retaining employee talent, which can impact their ability to grow and compete. 
8. Cash flow issues: Small businesses may face cash flow issues due to late payments from customers, inventory management, or other unexpected expenses.

These are just a few examples of threats to small businesses. One more to consider: life insurance. If your business is a partnership, what happens if one of the partners dies unexpectedly. How much will it set you back? Don't assume everything will be hunky dory because you're all young. 

On a related note, if the past three years has taught us anything it's that we can't take tomorrow for granted. Remember, it's not what happens to you, but how you react that counts.

To overcome these challenges, small business owners must develop sound strategies, stay agile and adaptable, and seek out support and resources as needed. If you're a business owner, I hope you've found something useful here.

EdNote: Story created with assistance from ChatGPT.

Illustrations by the author.

An Altercation and an Intervention: A Memory from My Year in Puerto Rico

When I was in Bible school I did an internship in Puerto Rico. There were a number of classmate interns there that year living at a small compound associated with Libreria Betania, a Christian bookstore and distributor of Christian literature. Once a week I was also involved with prison ministry at the Bayamon Prison. 

My workspace most of that year was a desk at the front of the warehouse in a small office area with several other desks. I recall very little of what my work consisted of there. In the evenings I often went there for privacy. I would read, do journaling or write long letters to Susie to whom I was engaged. She was in Maine that year and we were to be married the following summer.

One night, while I was seated at my desk in the office, I heard voices on the sidewalk outside. They were talking in Spanish, so I couldn't understand what they were saying due to my limited vocabulary. One voice sounded like a man who was drunk and pleading, the other seemed to be shouting threats. I felt prompted go see what was going on. 

When I stepped outside I saw the altercation directly in front of me ten feet away. One man was holding a knife to the throat of a second man. They were each in their thirties, each with a wiry build wearing button down short sleeved shirts. The tendons seemed to stand out on the bare arm of the man with the knife who was facing away from me, looking into the eyes of the man he was threatening, the point of his knife under the other man's chin. 

There was a gate between us, so I didn't feel threatened by making my presence known. I stepped forward and shouted in a harsh attention-getting tone. "Hey. What's going on here!" 

The man with the knife twisted his head around to look directly into my face. He then threw the knife so that it skittered across the sidewalk and ended up at my feet. His features became rigid as he turned and walked away.

The drunk, who was leaning with his back against a parked car there, gathered himself together, stood and glanced at me before walking off in the other direction. His demeanor was tragic, a caricature of a character in a Hemingway story, but he was still alive.

I picked up the knife and looked at its serrated edge, a standard steak knife. 

* * * 

Here's the takeaway. We often hear people say, "See something, say something." It's a good admonition. When you see something wrong, speak up. The result might surprise you. 

Serious Labor Shortages Are Threat to Economic Recovery

Help Wanted. Now Hiring. It seems like everywhere I go I see signs announcing the need for workers to fill vacancies.

As it turns out this appears to be a national problem, not just a Northland issue. Nearly every restaurant is short of help here. A friend who owns 11 fast food restaurants between Duluth and the Twin Cities normally employs 350, but has to keep things running with 250 employees. Panera Bread has put up a sign that says they're limiting hours because of the shortage of help.

The government's good intentions in providing financial help above and beyond regular unemployment has, for many, become a disincentive for returning to the workplace.

In addition to labor shortages we have materials shortages, partially caused by labor shortages in this arena. According to a Bloomberg article, Biden's infrastructure plan could be hamstrung by the lack of qualified workers to execute this ambitious dream. Currently the U.S. manufacturing industry has 500,000 positions unfilled.

The great irony here is that this massive infrastructure push has as one of its aims to provide Americans with more jobs. But with the shortages in materials, we may end up outsourcing to other countries, benefiting others rather than those we're supposed to be helping. Lumber (now up five-fold) aluminum, copper and cement prices are high due to tariffs, so building homes has become exceedingly expensive. (EdNote: We have lots of copper inside the U.S. borders, but have made it near impossible to mine it.)

An article at CNN.com begins with this telling Q & A: "Chicken, lumber, microchips, gas, steel, metals, chlorine and ketchup packets: What do they all have in common? They're all (nearly) impossible to find."

A New York Times article this past week is titled "How the World Ran Out of Everything." It explains how the evolution of "Just In Time" manufacturing and sales systems resulted in businesses minimizing inventories. The concept of J-I-T is fine when all is good. It reduces waste, and reduces the amount of space you need to store things, which also reduces costs. It's efficient. 

But when the entire system experiences a major hiccup -- like our unplanned year-long pandemic and subsequent lockdowns, these efficient systems can be disrupted in ways many businesses could never have imagined. That appears to be what we are now experiencing, at a time when we believed everything was opening up with clear sailing ahead.

Once again, Andy Grove has been proven right. His book Only the Paranoid Survive details all the forces that businesses must juggle and manage. He then asks, "What happens when one of these forces -- government regulations, consumer demand, raw materials, labor, financial impacts, legal matters, etc. -- hits us with an unexpected 10X tsunami?"  

For businesses that survive this will be remembered as the year of the wake up call. 

The weird thing is that politicians and think tanks will undoubtedly spend gobs of money and time piecing together a strategy designed to ensure that it never happens again. Alas, these things can never be so easily predicted. It will surely come in a manner that was unforeseen. Like Pearl Harbor. Like 9-11. Like the Housing Crisis. Like the Pandemic. It will be original. It will be different next time.

Something to think about.