The Danger of Overconfidence in a Recovering Economy

 The economy is healthier than it has been in years, and small business owners are upbeat about their prospects for 2015.

The January Wells Fargo/Gallup Small Business Index, which gauges small business owner optimism, increased to +71, up by 26 points from a year ago and at its highest since January 2008, pre-recession.

Small business owners surveyed for the Index saw increased revenues, better cash flow, more hiring activity, and better access to credit in 2014 — and they expect to maintain or even improve their performance in 2015.

Optimism about the economy is a welcome tonic for businesses that survived the lean recession years. Even so, business owners must guard themselves against overconfidence and follow a course that minimizes risk and maintains efficiency in their operations.

How can small businesses make the most of the favorable economy — sensibly?

• Focus on hiring and retention. You may have heard about the growing shortage of skilled workers. Smart business owners would do well to invest energy in finding and hiring either qualified employees or less-experienced candidates that they can train, then keeping those employees engaged.

• Develop a downturn strategy. The economy is cyclic, so use foresight to prepare for the eventual slowdown. Set aside money to buffer against the effects of a business slowdown, build strong networks of customers and business partners that will serve you well in leaner times, and cultivate investments that will increase in value, such as intellectual property.

• Stay lean. Your client base is growing, and sales are up. To handle the increase in business, you may need to expand your staff, purchase new equipment, or relocate to a larger facility. But such expansion can bloat your organization, adding process complexity, costs, and overhead. Plan your growth, be conservative about adding resources, and if necessary, seek outside guidance from a business operations consultant such as Cloud9b2b to help you make your internal processes leaner.

[cta]OpX helps your business grow and keeps it afloat in lean times. What’s OpX? Find out by contacting the Cloud9b2b business experts at 469-384-7122, by email, or through our contact page.[/cta]