In a recent interview with MSNBC, Small Business Administrator Linda McMahon discussed the challenges that are facing small business owners in 2019 and beyond.
According to McMahon, the No. 1 reason small businesses fail is because they are under-capitalized. Small business owners often don’t understand how to manage their cash flow and don’t know what’s coming in from one month to the next.
“You really have to plan out your cash flow needs,” McMahon said in the interview. “You have to understand when you might need a loan. Some folks are risk adverse to borrowing money to get out of bad spot. Sometimes, there are opportunities they can take advantage of.”
McMahon said the SBA is trying to increase the percentage of loans going to minority- and women-owned businesses. This rate has fallen in the past eight years and is lower than before the recession in 2008.
“That’s one of the things we’re doing through our Women’s Business Centers,” McMahon said. “I find the counseling aspect is almost as important as the access to capital. We are encouraging more women to come forward to help develop their businesses in economically underdeveloped areas.
“We help women and minorities at the same time in those areas, by helping them develop the right kind of business to get that capital.
McMahon said the SBA is looking to extend its reach into rural areas and to minorities through digital platforms.
Competing For Skilled Workers
One of the biggest issues facing small business owners across the country is a shortage of skilled workers. With a low unemployment rate across the country, the pool for skilled workers continues to shrink.
“Small businesses are now competing with large businesses for those skilled workers,” McMahon said.
McMahon is encouraging small businesses to work with local community and technical colleges, along with some high schools, to help redesign the curriculum so students know what to expect when they hit the job market. This will help small businesses find the type of trained workers they desperately need.
McMahon has a point. Small businesses are falling behind larger companies in the race to raise wages, making it even harder for them to attract that shrinking pool of available workers.
In the third quarter of 2017, annual wage growth for businesses with 49 or fewer employees averaged two percent, according to figures from payroll processor ADP. That compares to 3 percent pay gains at companies with 50 to 999 workers and 4.8 percent average salary increases at firms with 1,000 or more employees.
Strong Benefits Can Entice Workers
Small businesses can add perks to their benefit package that are appealing to job seekers. Many niche benefits have emerged allowing them to compete against larger organizations without taking on huge implementation costs.
These benefit packages can include flex time, which allow an employee to take care of family obligations and maintain a healthy work-life balance. It also sends a message that the employer trusts the employee.
Other benefits small business owners can offer are telecommuting, student loan benefits, and health and wellness programs.
McMahon continues to reach out to small business owners across the country to learn their challenges and pain points.
“I have talked to 800 business owners during my time in this office (since the end of 2018),” she said. “I hear what they have to say. I’m the chief advocate for small business in Washington. I want to be able to know what’s impacting them.”