2007 has been a murky year economically, and that haziness will only linger into 2008, economists say. The housing slump, higher prices for essentials, (like gasoline), and layoffs are making consumers nervous, which, in turn, is causing a drop in revenue for small business. It’s uncertain how deep the drop will be or how long it will last, and the recent run-up in oil prices to record levels will undoubtedly slow business and consumer spending, which only adds to the difficulty in predicting how (or when) the tide will shift. According to a poll of 53 economists taken by USA Today, there is a 30 percent chance of the economy sinking into a recession in 2008. The aforementioned housing slump and higher interest rates for those with adjustable-rate mortgages may mean customers will be unlikely to seek home-equity lines of credit, giving them less money for discretionary spending.

High energy costs are another factor contributing to the current economic instability. The high costs are forcing the public to spend more filling up their cars and heating their homes, once again leaving less in the budget for nonessential spending. The U.S. average gas price is approximately 62 cents higher than in 2006. The Energy Department has warned that, as winter approaches, heating costs could hit all-time highs.

This all adds up to tight-fisted small business owners. The uncertainty in the marketplace means that as the populace spends less, businesses are also spending less. Also, like the general public, business owners are spending more on essentials, putting a strain on their bottom lines. Diesel fuel for shipping trucks has risen 57 cents from a year ago, and companies are being charged higher delivery costs — which oftentimes get passed on to customers. It’s an unfortunate reality, but reality notwithstanding, business owners shouldn’t let fear stop them from doing what they have to do. No one wins if a business can’t earn a profit, so have a clear idea of what your break-even point is and base your fees on what the benefits and results of using your product or service are worth to your customer. Fear of losing customers is expected, but if you can solve their problem, and if it is important enough to solve, then they shouldn’t mind paying the appropriate cost for the solution.
–todd williams

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