How Can Small Businesses Succeed in 2020?

It’s the start of a new decade, and so there’s no better time to reflect on the state of the market. There are many rumblings of an impending economic recession, which would pose a huge risk for small businesses. But regardless of whether or not there’s an economic downturn, any kind of economic uncertainty is bound to cause challenges for smaller companies that rely on local sales.

Given the “will it or won’t it” market predictions, what should businesses do to ensure their success in 2020, regardless of the economic outcome? Let’s review some of the strategies that small business owners may be looking to employ.

Take Advantage of Tax Savings

The Tax Cuts and Jobs Act of 2017 (also known as the Trump Tax Cuts) have received a mixed response from economics, but the legislation generally did a lot to benefit business owners and investors. So far as small business owners are concerned, the most useful tax change was the 20% deduction for pass-through income. Most small business owners tend to be sole proprietors, so this could be a helpful deduction that may help business owners, if not necessarily their business or employees.

Small business owners must be wise about how they spend the money saved by the deduction. It might be better for business owners to put that money back into the business in case there’s truly an economic downturn—they should place the amount of the 20% deduction in a business savings account or reinvest it in the company. If, however, the business owner owns multiple businesses, there may be more incentive to pocket the cash.

Put Money Away

Should an economic recession happen, the financial survival of some businesses may depend on how much the business has been able to place in reserves. During a recession, a business can expect consumer spending to decrease, which may severely affect companies that provide non-essential products and services. Thus, it would be wise for business owners to create a new budget for the year and allocate more money into business savings accounts than in 2019.

Obviously, increased savings go hand-in-hand with cost cutting. Small businesses may benefit from outsourcing certain jobs. Outsourced PR and HR, for example, would be an efficient way to save money. Furthermore, small businesses would do well to hire employees that can work multiple positions in the company. It may be more financially efficient to pay an employee higher wages to perform two jobs than to hire two employees.

Defend Against Fraud

According to a 2018 report, small businesses around the world suffered a median loss of $200,000 annually due to fraud. These numbers, even those on the further ends of the spectrum, can be financially devastating to a small business.

The report suggests that most small businesses are frauded by their own employees. For that reason, it’s important for small business owners to take precautions. Small businesses should always run background checks on job candidates that also screen for credit. Small businesses should also invest in security cameras for the workplace and security software (creating logins for business computers). Furthermore, financial management tools can help small business owners keep a close eye on their finances and help them detect anomalies. A workers’ compensation PBM, for example, may help business owners prevent employees from committing insurance fraud.

These types of programs might be worth investing in with money saved through tax deductions and outsourcing.

Create Healthy Work Cultures

Job creation has been strong in the United States, but wages have not significantly improved. Modern employees are less likely to earn higher wages by being promoted within the company; instead, employees are more likely to get higher wages by attaining a new job at a different company.

This presents a problem for small businesses, which may suffer a greater rate of employee turnover in the 2020s. To combat this, businesses may have to focus on creating a positive work culture that makes employees want to stay. By modern standards, a positive work culture may include lots of PTO, company-provided social events, company trips, flex hours, and the option to work remotely, if possible. Employees may feel more inclined to stay at a company if they feel as though the company can help them maintain a strong work-life balance.

Small businesses will certainly have their share of challenges in 2020 and through the rest of the decade. But, as the market constantly proves in the Internet Age, the most adaptable, resourceful, and employee-focused businesses typically prove more durable.