Economic Indicators for Small Businesses

By Burton M. GoldfieldPresident and Chief Executive Officer, TriNet

Small business is the heartbeat that drives the economic engine of this country. According to United States Censuses Bureau data, more than 99 percent of businesses in the United States are considered a small business. The Small Business Administration defines a small business as a company with less than 500 employees. Though their larger counterparts often steal the headlines, what’s happening in small businesses is a good indicator of what’s happening economically across the nation.

Though monthly trends are entertaining to watch, larger snapshots of time, whether quarterly or yearly, can be much more telling. For example, I like to watch hiring trends. Which industries are expanding each month and which ones are experiencing a period of reduction in their workforce? Which geographic regions are in growth mode, which ones are holding steady and which ones are declining? These are great indicators of employment activity as well as for unemployment.

By utilizing data and reviewing trends in small business employment and human capital economic indicators across SMBs (small and medium-sized businesses) in a large number of industries, positive growth was reported across most industry verticals, with technology and construction leading the way.

This type of information is important for small businesses to know because it can lead to better decisions. For example, if a start-up company needs to expand, it may want to analyze whether it is better served by focusing on growth outside of its current location or even potentially moving to a different, faster-growing region.

We are in a constantly changing economic environment, and while the economic recovery is still tentative, paying attention to basic economic indicators can help small businesses make decisions on hiring, production and expansion. It is, therefore important for SMBs to leverage existing data sources and pay close attention to trends that matter to their business.

With a little careful advanced planning entrepreneurs can avoid missing these indicators and make the right decisions For example, many small businesses utilize professional employer organizations (PEO). PEOs can help provide insight into market changes, provide several HR services for smaller companies, including payroll and benefits administration, as well as assistance with many aspects of employer-related risk management and compliance.

Whichever option a small business owner chooses, he or she faces the obvious need to let qualified experts provide strategic guidance in regards to these issues. The return on investment for making the right business decision is not only in the prevention of costly errors, but in the satisfaction and productivity of the entire workforce.

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