It could be argued that life as a small business owner right now is pretty darn good, with Bloomberg reporting a four-year high for corporate profitability last year, consumer spending reaching an all-time high in the second quarter of 2019 (at a whopping 13253.38 USD Billion), favorable GDP growth of two percent in the second quarter of 2019, and continued growth of investment year over year. For many businesses, this means that accounts receivables are in good standing.
It’s not hard to see why small business owners are currently walking around with a spring in their step. However, the lucrative environment they are enjoying also comes with new challenges for these businesses. In this article, we look at five financial trends that could impact small businesses in 2020.
1. The Word on the Street
With close to 80 percent of small business owners reporting profits, it doesn’t come as a shock that they are a bunch of happy campers. When surveyed on happiness on a scale of 1-10, small business owners averaged a tidy number eight. In addition, 53 percent of these businesses ranked even higher, which indicates a majority of small business owners are happy.
2. Retention & Recruitment
Right now, the US boasts a jobless rate at just under 4 percent, and as a result, the labor market is tighter. America’s current 49-year unemployment low is good news for the economy, but it also presents small business owners with unique challenges.
When surveyed, 41 percent of small business owners reported having two to five employees on their books. Fifteen percent of these businesses aim to increase their efforts in hiring and retaining employees.
With a small workforce like this, employee performance becomes more important than ever. If an employee is underperforming, it can affect profitability and accounts receivables negatively. With a small employee population, it can be difficult for small business owners to retain and recruit their required talent.
3. Independence & Personal Satisfaction
Most people dream of being their own boss, and why not? Having independence and personal satisfaction embedded in your job is everyone’s fantasy.
Each year, on average, 26 percent of small business owners start their business because they want to be the boss. Similarly, 23 percent of small business owners go into business to pursue a passion. Also, this percentage is higher for profitable business owners. For these ambitious owners, 42 percent are in it for personal satisfaction, while 49 percent are in it for independence.
4. Types of Businesses
Businesses such as health and fitness, beauty, and self-care saw a big increase in 2018. This could be a result of a more wellness-conscious and social media-connected consumer base.
The largest segment of small business owners is still very much the business service and this could be the same in 2020. Not too far behind as the second most popular businesses are restaurants and food businesses, and this could also remain a popular choice. General retail and home services make up the remaining top five industries for small business owners.
5. Popular Financing Methods
Last year saw the most popular types of funding stay the same, but there were some shifts when it came to less utilized forms of financing. Cold hard cash was still the most popular method for small business owners, while Rollovers for Business Start-ups came in second place.
There was also a 29 percent increase for Small Business Administration (SBA) loans. The remainder of the most popular methods were taking loans from friends and family, a line of credit, and unsecured loans.
As of right now, the future is bright for small business owners. While 2020 will present some challenges, small businesses can once again look forward to the beginning of a new year with optimism for their beloved business.
It’s important for all businesses to make sure they are managing their accounts receivables effectively. Rocket Receivables is an easy-to-use debt collection service that is ideal for smaller businesses should they need support. If your small business needs help to keep cash flow strong and minimize bad debt, then click to buy now!