What's ahead for small businesses in 2014?
What stresses small business owners the most? Our conversations with them and the research we come across suggest it's a lack of clarity. Well, there's no small business crystal ball -- at least one we are aware of -- but if one existed, here's a look at what it might reveal for 2014:
HELP FROM WASHINGTON?
Look for a more conciliatory attitude in Congress. Lawmakers' collaboration on a budget deal in December is a sign that they'll cooperate on issues affecting small business, including tax reform, says Barbara Kasoff, president of Women Impacting Public Policy, a group that advocates for women and minorities in business. The deadlock over the budget and government shutdown in 2013 hurt small businesses including federal contractors.
The safest bet? An increase in a tax code provision that allows businesses to deduct up front rather than depreciate the cost of equipment like vehicles, computers and machinery. Without action by Congress, the 2014 deduction is $25,000, down from $500,000 in 2013.
A tepid economic recovery will continue to frustrate small-company owners, says Susan Woodward, an economist with Sand Hill Econometrics in Menlo Park, Calif. Small retailers are struggling even as consumers spend more. Growth in online shopping and a tendency for people to patronize stores owned by big companies (choosing Starbucks rather than the local coffee shop, for example) will continue to be a challenge.
Small businesses shouldn't expect gold mines from government contracting. Agencies will spend carefully. Some small federal contractors reported even before the $85 billion in spending cuts in 2013 that agencies had been cutting back. Contractors will prospect for business with private companies to make up for budget cuts in 2013 and to diversify their revenue streams.
LABOR MARKET CHALLENGES
Expect small businesses to struggle to find skilled workers for jobs like high-tech manufacturing. It's not a new problem. Surveys throughout 2013, including monthly reports from the National Federation of Independent Business, showed that owners had positions they couldn't fill.
The situation may change if employers of all sizes keep adding jobs at the stronger pace of the second half of 2013, says Peter Cappelli, a professor of human resources management at the University of Pennsylvania's Wharton School. A shrinking pool of workers would force small businesses to train new hires, something many have been reluctant to do.
Health care may become a recruiting issue. Owners who say they can't afford to buy insurance under the health care law could find it harder to attract top talent.
Banks are expected to continue gradually increasing their lending to small businesses. At the end of the third quarter, the Federal Deposit Insurance Corp. tallied $284 billion in small business loans, up 2 percent from a year earlier.
The number of small businesses using cloud computing is likely to keep soaring, but owners may feel some pain as cloud providers start charging more.
In 2013, 43 percent of small businesses used the cloud, storing data and software off-site and accessing it via the Internet. That's up from 5 percent in just three years, according to a survey by the National Small Business Association.
Cloud providers are starting to price their services like cable TV companies, says David Rosenbaum, president of Real-Time Computer Services, a technology services company in New York. Businesses get attractive introductory offers, but they're likely to pay much more in the future, especially if they decide to move their data elsewhere.
Health care: 2014 will give business owners a chance to understand the complexities of the health care law.
Insurance brokers and benefits consultants have said it would take a year for owners to get a sense of the law's impact on their profits.
Many businesses avoided the law's requirements by renewing their 2013 policies before the year ended. They'll need to get up to speed before renewing in 2014.