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Lookin' good: economic indicators point to bright future

As I See It

Our economy is poised for a really big surge. The small business community drives the economy and it senses opportunity and is expanding to handle the increasing volume.

In a story entitled “Get Ready to Grow” in the April/May 2004 issue of the National Federation of Independent Businesses magazine, My Business, Bill Dunkelberg says that it`s been 20 years since small-business owners have been this optimistic. “Profits are indeed improving, with reports of profit-declines falling and reports of quarter-over-quarter gains rising to produce the best reported profit trends since 2000.”

What`s behind all this economic momentum? The economy has taken several years to cool and is emerging to take a look around. What it`s seeing is low inventory levels, cheap interest, low inflation and pent up consumer demand. All the right ingredients for solid, long-term growth.

Dunkelberg says, “The four pistons of the economic engine are firing: consumption will be driven by more jobs and rising real incomes; investment spending will be very strong, with purchases of equipment and technology offsetting a slower new housing market; government spending is poised for solid growth; and exports will continue to expand in response to a weak dollar.”

So, what will small businesses do with this lovely playing field? Tighten up their belts if they’re smart.

Several years of lackluster profits may have created a lackadaisical attitude toward the bottom line. Quarter after quarter of missed revenue projections can lead to budget carelessness and a “why even try since we’re getting hammered anyway” mentality that`s dangerous to the success of any business.

Then comes the signs that a real recovery is underway and businesses, just like individuals, have pent up anxiety and runaway spending can be the result. Better to take a contrarian approach and look for opportunities to squeeze expenses rather than relax the grip. Now is the time to evaluate all aspects of company operations to find inefficiencies and get rid of them.

A caution about belt-tightening is in order. As we move more and more into a knowledge-based economy, our employees and their knowledge become increasingly valuable. The surging economy is a good time to look over key employee compensation arrangements and be sure that the best people are being taken care of.

Perhaps a good starting place would be to list the five or 10 key employees that we wouldn`t want to do without. Call them in and check their pulse. Better to find out that problems are out there now when there is still time to fix things rather than waiting to react when the time for problem solving has passed. Beware: With a surging economy, the best people will have increasing opportunities to pursue their careers elsewhere.

Though the economic indicators are positive, unforeseen circumstances can rain on the economic parade. Failure to get control of Iraq and the prospect of instability in other parts of the world could dampen the recovery. Escalating federal expenditures will eventually lead to higher interest rates and inflation if not checked in the reasonably near future.

Unemployment will be a continuing problem since technological innovations have eliminated thousands upon thousands of jobs and, even though business is prospering, the creation of new jobs may not absorb the surplus of workers in the near future.

Lastly, state governments are all experiencing budget problems that will take years to resolve. Too much spending over the past few years in a declining economy is taking a heavy toll. The temptation to increase state and local taxes is ever present and could serve as a damper on business expansion.

Nonetheless, the overall economic picture is bright and cheery. Problems come and problems go. The robust nature of the American economy will adjust and our entrepreneurial spirit will prevail.

Thought for the Moment – We have two ears, but only one mouth, so that we may listen more and talk less.

– the philosopher Zeno (334-262 B.C.)

Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. Contact him at cpajones@msbusiness.com.

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