Small Talk: Small business crystal ball: Don't look for boom in 2016

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NEW YORK >> Don't look for a small business boom in 2016.

Companies in some industries and in certain parts of the U.S. may have a strong year, but overall, small businesses can expect a continuation of the slow, uneven growth they experienced in 2015.

Surveys show owners generally have lowered expectations for their companies in 2016. A survey taken in November by Wells Fargo & Co. found 70 percent of owners expect their companies' financial situation to be good in 12 months, down from 74 percent in a survey during the summer. Forty-seven percent predicted their revenue would be higher, down from 51 percent.

Sluggish consumer spending, the slowdown in the gas and oil industries and the still-unpredictable housing market are expected to keep companies cautious. Uneasiness about possible terror attacks also is likely to add to the uncertainty.

Conservative approach

David Ashen, co-owner of Dash Design, an interior design firm with offices in New York and Miami, feels that uncertainty. Ashen expects his clients' lenders to become more conservative as they await the outcome of the presidential election, making it harder for projects to be financed.

Ashen's 2016 outlook also is cautious because his company specializes in design for industries that are facing specific challenges. For instance, some of the retailers Dash Design works with are cutting back on their number of stores. And Dash Design works with the hotel industry, which is dependent on strong economic growth around the world — something economists say isn't in the cards for 2016 given slowdowns in China, Brazil and other countries.

"I believe that we are in a period of unrest on all fronts and that the economy in the U.S. will begin to reflect that in 2016," Ashen says.

Economist Scott Anderson expects companies in the Midwest to have a tougher time than those on the East and West coasts because the energy and mining industries are struggling. Anderson, chief economist with Bank of the West, counted 123,000 jobs lost in those industries from 2014 to 2015. And the plunge in commodities prices is hurting companies related to agriculture, he says.

Erratic spending

Consumer spending has also been erratic in recent months, which has a direct effect on small businesses like retailers and restaurants. Spending rose 0.3 percent in November after stagnating in October, according to the Commerce Department. Consumers have put more money into savings — $748 billion in November and $757 billion in October, up from $723 billion in September.

Consumers are willing to buy cars but are otherwise more cautious, Anderson says.

"You need to see the consumer hitting on all cylinders for small businesses to feel the full effect," he says.

Norm Aamodt, whose company plans corporate conferences and events like trade shows, expects the economy and his business to continue the slow, steady growth he's seen since the recession.

"Businesses are beginning to figure out the new economy," says Aamodt, president of Event Strategy Group, based in Plymouth Meeting, Pennsylvania.

But Aamodt is wary because companies are continually looking for ways to cut costs, and travel to trade shows is often a casualty when budgets are cut. Technology like videoconferencing is also reducing the need for big corporate gatherings.

Corporate travel can also be vulnerable in the face of increasing concerns about terrorism.

"It is a crazy world in which we're living. It could all just implode at any time," Aamodt says.

Still, some companies are expecting a good year. Evan Mountain expects business at his dance studio in suburban Detroit to grow in 2016 along with the auto industry.

With auto sales extending their recovery from the recession, his customers can afford non-necessities like dance lessons. Sales of cars and light trucks are expected to reach a record 17.7 million vehicles this year, up from nearly 17.5 in 2015, according to the North American Dealers Association. Mountain is projecting his Fred Astaire Dance Studio will have a 20 percent revenue increase, following a better-than-expected 30 percent last year.

"We are on a great rebound I expect to continue through 2016," says Mountain, whose studio is located in Bloomfield Hills, Michigan.


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