Small Businesses Matter. Listen to Them!
Small- and medium-sized enterprises account for 90% of businesses worldwide and more than 50 percent of employment globally. In the United States, small businesses account for nearly half of U.S. economic activity.
How are small businesses doing lately? Let’s check the markets. Recently, the Russell 2000, a U.S. stock market index that contains the smallest 2,000 stocks in the Russell Index, was in the headlines for becoming the first major index to flirt with a bear market this year (i.e. a drop of 20 percent from its most recent high). The index has since recovered a bit, but the explanation for the drop is that small companies are more susceptible to worsening economic headwinds. Investors are souring on small-cap stocks.
We hear plenty about economic uncertainty from clients. There’s some heavy hand wringing going on right now. Higher prices for inputs and services were already cutting into margins, and the Trump Administration’s tariff war has stoked fears that prices, and inflation, will continue to be a problem. Labor shortages have been difficult since the pandemic, and chaotic changes to immigration policy have added uncertainty for some businesses, as well, especially in agriculture.
Add the US government’s federal workforce layoffs to the mix, and people are talking about the real potential for a recession. The National Federation of Independent Business’ Uncertainty Index climbed in February to its second-highest reading on record, going back to 1973, CNN reported. The share of respondents who believe it is a good time to expand saw its biggest monthly decline since April 2020.
Moreover, a new Conference Board survey shows businesses are right to worry. Consumer confidence fell to a 12-year low in March as Americans fret over their financial prospects.
So given the volatility and potential unraveling of commercial accords that have underpinned growth in the global economy over the past 20 years, the question bears asking: can small businesses cope with the chaos?
While the stock market dip in recent weeks reflects real concern over the economy and the ability of small businesses to withstand headwinds, a longer-tern view of the Russell 2000 shows small-cap stocks higher today than 18 months ago.
The small business leaders we work with are taking action. They’re focused on controlling the things they can control. Vendor contracts. Labor allocation. Capital expenses. Borrowing strategies. They’re calling freight forwarders and customs brokers.
It’s about identifying risks and building resilience into the business. Our firm’s recommendation to clients amid the unprecedented disruption in recent months is to:
Lean into resilience strategies and contingency planning,
Update your company’s material issues and risk matrix,
Organize your data so you can make informed decisions with agility,
Leverage technology and find efficiency gains.
It’s a lot, we realize, but the key message is this: there are ways to prepare a business for uncertainty, and now’s the best time to start. There’s a new economy emerging, and small businesses will continue to have an important role in it.
Despite the alarming headlines, at DevryBV, we take the long view. While we’re also concerned small businesses are suffering the sharpest pain from chaos in Washington and beyond, if we step back and look at the Russell 2000 over time, the index remains above pre-pandemic levels. As recently as October 2023, the Russell 2000 fell to 1,634, some 400 points lower than where it landed when it neared bear territory this month.
So, taken as a group, we’ll bet on small businesses to innovate and overcome. We’ve seen our clients figure out ways to survive and thrive, again and again.
If you’re looking for new ideas on how to navigate your small business through the uncertainty, give us a call. We’re here to help.
Erik Brand is External Affairs and Stakeholder Relations Lead at DevryBV Sustainable Strategies.
