This new household term “fiscal cliff,” hangs over an economy-crippling combination of spending cuts and tax increases being fought over by politicians in Washington D.C. If the President and Congress do not reach an agreement before January 2, 2013, all businesses will be impacted by a collapsing cliff.
Without a Washington agreement, tax hikes will fall on already hurting families and companies across the country. If no action is taken before Jan. 2, the Social Security percentage withheld from paychecks soars dramatically from 4.2% to 6.2%.
The other size of the possible cliff collapse will see $500 billion in government defense spending cuts. This translates into thousands more joining the already millions who have lost their jobs.
Both of these factors have businesses concerned about the future. Economists predict that the short-term economy will be hit the hardest in the absence of a Washington agreement.
Three Small Businesses at the Edge of the Cliff
Two small business owners in Maryland facing troubled times were interviewed, according to the CapitalGazette.
One Maryland business owner, Julie Upchurch, is concerned about her flower business. She wonders if Little House of Flowers will survive another year. It is “dangling on the edge of the fiscal cliff.”
Maryland in particular, will see a median increase of $7,200.00 in taxes for the average family. Upchurch is concerned that this tax hike will impact her flower customers. To compensate for this, she has increased her marketing to wedding consumers hoping that this will provide a sustaining market for her flowers.
Upchurch notes, “We’ve worked our backsides off to let people know we’re here…For them to just get scared and decide that I can’t do this anymore – that’s the fear.”
Another business owner, James King, shares similar feelings when he says “You feel this noose tightening around your neck and very few areas to alter stuff.”
King owns multiple businesses in Maryland. Painfully acknowledging that “business is already rough,” he anticipates the need to cut at least 60 employees from his restaurant businesses as a result of the tax increases.
He confides “I know a lot of small business owners who wake up every morning, scratch their head and ask, ‘Is this worth it?’”
Interviewed by CNN, Tim Christensen owns a wine store owner in Montana. During the 2008 recession, his customers moved away from buying his high-end $ 50 a bottle wines Only recently has he began restocking these higher priced labels, but not yet to pre-recession levels.
Christiansen is now concerned that tough economic weather ahead will return customers to their frugal ways, which may mean lower sales for him.
“People are still going to come in, but they’ll look more for the $10 Portuguese red blend than the $20 Alexander Valley Vineyards Cabernet Sauvignon.”, he says.
His overall outlook of the future is not bright, as the fiscal cliff talks remain in scary limbo.
Small Business Payroll Concerns
“Paychecks will be inaccurate and workers will see dramatic increases in their taxes on their January paychecks if Congress doesn’t act by December 14.” says the American Payroll Association.
Of the 27 million small businesses in the U.S., most of them do their own payroll, with the assistance of some form of payroll software.
One online payroll company, SurePayroll, is the provider for 40,000 small businesses nationwide. Their CEO tells us that simple changes could be made in a day, but larger changes could take up to two weeks. SurePayroll is waiting for the last minute decision before making any costly changes.
Recent Data Reveals Business Owners’ Outlook
At least one out of five business owners plan to have fewer employees on the payroll in 2013 in anticipation of the fiscal cliff, according to a recent Gallup poll. This survey was conducted in November 2012. Historical evidence in polls has shown that small business owners were expecting to hire more employees in the next 12 months. In early 2012, businesses had a more positive outlook, but the latest survey now suggests that business owners have returned to the 2008 outlook of “the economy is getting worse, not better.”
Business owners across the board are hesitant to increase their workforce if there are no signs that there will be an increase in consumer spending. The obvious is apparent: With high unemployment, consumers are spending less, because fewer consumers have extra spending cash.
What To Do About It?
In other words, with all of these doom and gloom expectations, now is the perfect time to start your own small business.
Keep your cool and find the right niche that someone else either abandoned or missed entirely.
Times like these separate the talkers from the doers.
Be a doer.
Article by Zachary Love