An increasingly inhospitable economic environment means that starting a small business now will feel a lot different than it would have six months or a year ago, according to small-business pros.
The economic environment for starting a small business is significantly less hospitable than it was a year ago, according to new data from NerdWallet’s Small-Business Opportunity Index, and the increasingly unfavorable conditions have some small-business experts advising would-be entrepreneurs to prepare for rougher-than-usual starts — or even to put their business plans on hold.
But other data from the National Federation of Independent Business, Colliers International Group and the Federal Reserve Bank of New York highlight significantly higher interest rates, increasing difficulty finding qualified employees, upticks in rent costs and overall economic headwinds, all of which pushed the index down over the last 12 months.
1. Be more strategic about inventoryPeople starting small businesses now have to put extra thought toward the timing of their inventory purchases. Prices later may be much higher than prices today. “If you purchase it now, how much will you save when inflation hits?” asks Desha Elliott, a business advisor at Accion Opportunity Fund.
Also, think through how you’re going to handle disappointing sales or a full-on recession. “What is that procedure that you have in place to help when your customer flow slows down and you need cash flow?” Elliott says. “Are there costs that maybe you can restructure? ... You want to ask before any situation happens.”
Entrepreneurs who do get started now may need to take extra precautions for some things to go sideways, he adds. Acquiring labor and supplies, for example, used to be a matter of having enough money; now, he says, “Those things are really hard to come by, regardless of how much money you have.”
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