May 27, 2008 (New York Times)
A Crippling Year For Small Business: Few Sales, Tough Cash Flow
Small businesses think the economy is falling apart with little light at the end of the tunnel. The Discover’s Small Business Watch index of confidence showed that “only 28 percent of business owners said that economic conditions were improving for their businesses,” according to Reuters.

Cash flow was a major issue, especially with bank credit hard to come by. Thirty-nine percent of the firms surveyed had cash flow problems over the last 90 days.

For small business owners trying to sell their companies, the news was probably more troubling. One of the reasons is that more and more small operations are for sale. Perhaps owners want to cash in before the downturn begins in earnest.

According to The New York Times “The country’s largest listing site, bizbuysell, has 50,000 businesses for sale — up from 43,000 this time last year, said Michael K. Handelsman, the site’s general manager.”. All of that inventory is moving into a market where tapping cash to buy a company is getting harder and harder.

The only way to match motivated buyers and motivated sellers in the current small business “for sale” sector is for those selling to bring down prices. Otherwise, it is like the current housing market. Nothing moves.

Douglas A. McIntyre

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Small Business Shows Resilience
May 27, 2008 06:02 PM ET | Matthew Bandyk | Permanent Link

The new Discover Small Business Watch survey results were released today, and they are the most powerful piece of evidence yet that U.S. small businesses are adapting to the credit crunch and slower economy. This month’s survey is encouraging compared with April’s: a decrease in the number of small businesses reporting cash-flow problems, a decrease in the number of business owners who think the overall economy is getting worse, and an increase in the number who think their personal business conditions will get better. All of those indicators had gone in the wrong direction last month, so it’s good to see that slide coming to a halt.

But let’s be clear: Adaptation does not mean elimination. These numbers by no means suggest that small-business people think they’re out of the woods. Look at that last indicator—the percentage who think their own business conditions will improve in the next six months. That stands at 28 percent in May, which is up from 24 percent in April—but down from 31 percent in January and way down from 43 percent in May 2007.

Perhaps business folks are just being cautious in their assessments. The share reporting cash-flow problems is the best sign of hope. It’s at 39 percent now, about the same as the 41 percent from a year ago. If cash-flow problems stay in check, then small-business optimism should continue to rise.