It's All About Sales

The latest NFIB survey reveals that poor sales is now the dominant issue facing small business owners, troubling a record 25% of surveyed companies.According to Warrillow & Co., just last June, inflation was the number 1 concern. Now, as deflation rears its ugly head, that almost seems quaint. Now, small businesses are stuck with the reality of dropping sales -- a quarter of surveyed businesses reported lower-than-expected sales in November -- "the worst reading in the 35-year history of the NFIB survey."

Not surprisingly, slumping sales are leading to layoffs. NFIB's December Jobs Statement finds that: "Over the next three months, 8 percent plan to create new jobs (up 2 points), and 19 percent plan workforce reductions (up 2 points), yielding a seasonally adjusted net-negative 6 percent of owners planning to create new jobs, the third lowest reading in survey history. Lower readings occurred only in the 1974-5 and the 1980-82 recession periods."

Yikes!

How can small companies deal with these conditions? Warrillow offers advice to vendors selling to small businesses, but it's easy to spin the ideas around. Here's what Warrillow says most SMBs are doing:

1. Shortening time horizons. While it's good to think about the long run, small businesses are worried about surviving long enough for the the long term to come around. 2. Sales not Growth.SMBs are focusing on selling enough stuff to stay in business, not growth. As wags used to crack during the dot.com bust, "Flat is the new up." 3. Consider loss leaders. Or, from the small business' perspective, chase bargains.

Numbers 2 and 3 make sense to me, but Number 1 can be dangerous. It would be painfully ironic to somehow survive the recession only to be wiped out by stronger competitors in a recovery.

(Download the whole NFIB Small Business Economic Trends report.)