The Inescapable Truths of Global Economic Uncertainty for SMBs

bar graph showing economic uncertaintyTo say that economic conditions have been challenging for SMBs is to seriously understate the situation. SMBs are typically more vulnerable to the economy than their larger business cousins simply because they tend to have less cash on hand, fewer credit resources, and less elasticity in their response options.

However, SMBs own the competitive edge in innovation, response speed, and overall agility proving they do have the means and mettle to overcome extremely trying circumstances.

Given those combined and sometimes apparently conflicting attributes, where do SMBs stand today in their views on the global economy?

According to the largest regular economic survey in the world, The Global Economic Conditions Survey conducted by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA), global business confidence dipped slightly in the fourth quarter of last year. 43% (up from 41% in the third quarter) reported a drop in confidence, and only 19% reported an uptick in optimism. Thirty percent (up from 29% in third quarter 2012) said they expect the global economy to continue towards recovery while 65% (down from 67% in Q3), believed the global economy to be stagnating or deteriorating.

But is this pessimism, granted it is slightly less pessimism but gloomy nonetheless, based on perception or reality?

“To be sure, the fundamentals have deteriorated somewhat, with liquidity and demand tightening around the world, but it is mostly retreating, and probably misplaced, optimism that is responsible for most of the drop in business confidence in the second quarter,” say the authors of the report.

That same report concludes the following:

“Markets in the Americas, the Middle East and Africa continue to lead the recovery, as they have for the last nine months. There are signs of a robust recovery in the US, driven by the Western and Mid-Atlantic regions, as investment continues to grow and both demand and liquidity remain relatively strong. This is, however, matched by a worrying slowdown in China, where both confidence and investment are falling despite increasing business opportunities. It is tempting to speak of global imbalances unraveling, but that would be premature. For now, what is most likely the case is that both trade and the movement of capital between China and the West are slowing. 

Encouragingly, accountants around the world continue to see opportunities despite a slowing global recovery. In fact, opportunities for creating value have persisted or even proliferated even in regions such as Europe where business confidence is lagging the global recovery.”

It is interesting to note that in the U.S., according to a January 2013 Gallup/Wells Fargo Small Business survey, SMB concerns today revolve mostly around taxes (53%) and healthcare costs (54%) than overall country or global economic conditions. But even these worries tend to be based more on uncertainty rather than actual impact as concerns were largely a refection of the U.S. Congress’ inept handling of issues such as the fiscal cliff, the debt ceiling and the sequester, and a healthcare law that has yet to take full effect.

What was most surprising in that survey was how little credit tightening seemed to bother SMB owners; only 25% reported that the difficulty in borrowing “hurt a lot” while a whopping 44% said it had no effect at all.

This would seem to indicate that many SMBs are financially poised to surge forward in growth and investments without the aid of additional credit. This may very well explain the improvement in sentiment towards the economy.

“The interesting thing about the poll, despite worries and concerns about the economy, is that optimism rose in January,” said Terry Robinson, president of Sunovis Financial in a statement to the press.

The Gallup/Wells Fargo Small Business Index “returned to positive territory with an increase to +9. This is after it dropped to -11 after the November elections, but it is still lower than the +15 from January of last year. And it is much lower than pre-recession levels which were typically at or above 100.”

After all the data is gathered and weighed, an inescapable truth emerges: SMBs are a bit fearful but they plow forward towards success anyway, just as they always have.

Pam BakerPam Baker is the author of eight books and hundreds of technology articles published daily in leading online and print publications. She is a member of the National Press Club (NPC) and the Internet Press Guild (IPG). You can reach her or follow her on Twitter and on Google+.

Tags: Business,Business Intelligence