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Business owners brace for another rough year

By Catherine Clifford, staff reporter

NEW YORK (CNNMoney.com) -- Do you have any idea if the economy will rebound in 2010? Small business owners don't, and it's the single biggest challenge they face in planning for the year ahead, according to a recent survey by the National Small Business Association.

The industry trade group polled 450 small business owners around the country for its year-end report. Economic uncertainty is their biggest challenge, respondents said: 64% called it a threat to the growth and survival of their business. More than 70% said their sales dropped or stayed flat in 2010, with just 22% reporting revenue growth.

Will you be looking for a new job this year?
  • Yes, I don't love my current job.
  • Yes, I'm unemployed.
  • No, I'm happy where I am.

Business owners have a lot to be uncertain about, from when consumers will open their wallets again to whether Congress will pass a health care reform bill.

Main Street is largely bracing for another gloomy year: Two-thirds of the owners NSBA surveyed think their profits will stay the same or drop over the next 12 months.

Rising costs push pink slips: Health care reform is turning into a quagmire in Washington, but for business owners, the status quo isn't working. In a separate NSBA study, 92% of small business owners said they expect an increase in the cost of their premiums in 2010. To defray those ever-rising costs, business owners are having to skimp on the benefits.

Forty percent of those the NSBA surveyed said they switched policies in 2009 to one with higher co-payments, and 41% of business owners switched to a plan with a higher deductible.

But most worryingly, some decided that they only way they could make ends meet was to shed staff. In December, one in five small business owners reduced their head count as a way to deal with rising premiums, according to the NSBA's year-end survey.

"In this tough economy, more and more small-business owners are being forced to make the tough decision between keeping their employees or keeping their health insurance," NSBA Chair Keith Ashmus said in a statement supporting health care reform.

Tight credit is another obstacle. "Contrary to various reports that the credit crunch has eased or is no longer a problem, NSBA's members are still struggling," the organization wrote in its report.

Treasury Secretary Timothy Geithner agrees with that assessment: "This credit crunch is not over," he said in November at a Washington forum convened to address the problem. "It may feel dramatically better for large companies, but it is not over for small businesses across the country."

The nation's biggest recipients of bank bailout funds cut their small business lending by $12.5 billion in the last half of 2009. Business owners are feeling that loss: 39% of those polled by the NSBA said they can't get adequate financing for their business, up from 22% in August 2008.

Despite all those challenges, small business owners tend to have faith in their own storefronts. By the end of 2009, 61% of business owners said they were confident about the future of their business -- up from 58% six months earlier. That change marked the first uptick in confidence in two years.

Still, the NSBA tossed some grains of salt on the findings.

"This change is certainly welcome, but taken in context this shows that more than one-third of small-business respondents have concerns about the ongoing viability of their business," the organization wrote. "That amounts to more than 10 million small businesses." To top of page

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QHow does a florist sell more in this economy? We changed our business to designing weddings and events only, as the everyday flowers are not selling. We had to throw out too much product at the end of the week -- flowers are perishable! More
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