Small Business Profits Are Getting Squeezed

Small Business Profits Are Getting Squeezed

Some stunningly bad data points are starting to emerge in the small business market. To wit, roughly 40 percent of SMBs have seen their profits decline this year and 31 percent say profits are flat. Translation: Fewer than 30 percent of SMBs are growing their profits from 2010 to 2011. The stats come from the latest Office Depot Small Business Index. I'm an eternal optimist so I'm not ready to press the panic button. But I wonder if it's time for MSPs to adjust their sales strategies and customer guidance.

Instead of selling your customers the "dream" of IT as a growth driver, perhaps you should simply accept the economy for what it is: SMBs need to keep their IT networks humming along. But they won't be hiring full-time IT staffers to keep the lights on. Indeed, 79 percent of SMBs have no plans to hire or add staff. You can fill that void with your virtual CIO services.

In some ways I'm stating the obvious (don't I always)? But the Office Depot survey really caught my attention. Among the other disappointing stats:

  • only 42 percent of small business owners expect economic improvement over the next six months. This is down from an October 2010 high when 58 percent of small businesses expected economic improvement over the coming six months.
  • 66 percent of the SMBs surveyed indicated that the economic slump has impacted their business, with 37 percent of respondents saying that business has been either “much worse” or “a little worse.”
  • In a prepared statement, Neil Austrian, chairman and CEO for Office Depot said small businesses are also worried about inflation, interest rates and qualifying for a bank loan.
Let's pause right there: I believe interest rates remain at all-time lows. Did I miss something? Has the economy gotten so bad that SMBs now overlook record-low interest rates?

Either way, the survey results depressed me just a bit. The survey was conducted July 13 through July 20, 2011. IT covered more 1,000 small and midsize businesses.
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