Saturday, January 08, 2005

Inc Magazine's Forecast for 2005 is Tough on Small Businesses

Amy Gunderson layed out these forecasts for 2005:

  1. Shortage of raw materials

  2. Higher benefits costs

  3. More import restrictions

  4. Tighter state budgets

  5. Increase in venture capital for start-ups

Four of the five impact profitability with downward pressure for businesses of all sizes, both private and public.

Read the article for yourself.

Particularly hard hit will be human-capital intensive companies that rely on industrial materials who compete for state contracts, such as construction companies.

Companies from solo entrepreneurs on up that employ the following the following approaches will have an advantage:

  • Look for alternatives to wood, steel, and cement in synthetics and pre-fabricated structures.
  • Incorporate contract clauses that protect you from sudden raw matrial price hikes and delays due to factors outside your control.
  • Investigate storage opportunities to stock up on materials that might get tight later on in a project.
  • Leverage this storage arrangement by exploring the possibility of selling excess stock materials to competitors at a premium.
  • Retool your marketing to diversify your market base.
  • Offer discounts for project pre-payment to avoid being caught in a mid-year or mid-session budget squeeze. By law, many organizations are required to take advantage of fee discounts whenever prudent to save actual budget dollars.
  • Implement strict spending curbs now if you'll be seeking venture capital. Showing fiscal discipline will help you approach the negotiation in a better cash position and be respected by the investors as much for your financial leadership as your business product.

All of these techniques are transferable to some degree to almost any business. What course corrections will you be taking?

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