From a slow first quarter to a robust second quarter, with a steady climb in business optimism, the first half of 2019 has certainly had its ups-and-downs. But according to recent reports, it seems that the rest of 2019 will be a strong economic year for business owners.
Mark Hamrick, Bankrate.com’s senior economic analyst, sums it up by saying, “in the near term, the outlook for small business remains upbeat.” But let’s take a deeper dive into what’s to come.
The economy continues to grow
During the first quarter of 2019, the US economy grew by 3.2 percent — higher than some economists forecasted and a full percent greater than the final quarter of 2018.
Hamrick says this points to the strength of the US economy and we may see estimates for more growth in the future. However, there’s uncertainty about the Trump administration’s policies as it relates to trade, and uncertainty is negative when it comes to financial predictions.
“For the country as a whole, I think most people are hoping the trade issues can be resolved in a constructive fashion. Until they are, it remains a negative,” says Hamrick.
Hiring and keeping employees may be a major pain point
A strong economy may be good for your business’s sales, but it can also make finding, hiring, and keeping employees more difficult.
The National Federation of Independent Business (NFIB) conducts monthly and quarterly surveys and releases reports on small business economic trends. Overall, the NFIB’s March 2019 report found that small businesses have had strong sales, are growing, and are creating more jobs. There was even a record-high number of new hires over the last couple of months.
However, the growth and hiring have led to one downside — 10 percent of business owners say labor costs were the number one problem they faced in February 2019. It wasn’t the actual cost of paying employees that troubled business owners, though. “The larger problem is finding someone to pay,” according to the report.
The availability of qualified employees can vary depending on your industry and location, but this is certainly something to keep in mind in the coming months.
In the BlueVine blog, we’ve discussed ways to retain and attract talented employees and the merits of increasing salaries versus benefits. While higher pay can certainly help you fill open positions, it’s not the only way to get the job done. Sometimes non-cash benefits can be just as effective while having a smaller impact on your bottom line. And don’t forget, building your company’s culture can be vital to keeping your most talented employees in the long run.
The boost from the tax bill could diminish over time, but it might not matter
In terms of the country’s economic growth, a fair amount of the positive outlook is attached to the personal and corporate tax cuts from the Tax Cuts and Jobs Act (TCJA), says Hamrick. But he adds that the impact is temporary and the economic benefits may be gone by the end of 2020.
Taking a step back from the macro level, small business owners had varying responses to the TCJA. According to a Wells Fargo and Gallup Small Business Survey from April 2019, about half of the surveyed small business owners said the new tax law did not have much effect on their business. Although, 25 percent did say it had a positive effect and 20 percent said it had a negative effect.
Now that the first round of tax returns have been filed with the TCJA changes in full effect, you may have a better idea of how the tax bill impacted your business. If you received a refund, you could look for ways to reinvest the money into your business.
Whether or not you got a refund, if you haven’t already met with an accountant or tax attorney you may want to schedule a meeting to figure out if you should make any changes with the new laws in mind.
Some small business owners have found that they can save money by restructuring their business or changing when they take deductions for business purchases. There are also time-sensitive benefits, such as a tax credit for small businesses that offer paid family leave to employees and will only be available through the end of 2019.
Facing the next six months
Economic outlooks can give you a sense of what’s happening around the country. Now, consider how you can incorporate this information into your day-to-day operations and strategy for the remainder of the year. We’ve touched on some ideas above, but no one knows your business better than you.
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