Low Demand most Important factor for Small Biz

[RWebb]

What's Holding Back Small Businesses? - NYTimes.com

[jyl]

Also, most small businesses are dependent on local/domestic demand, less exposure to growth in international markets.

And most small business are more tightly staffed than large businesses, so less ability to boost margins by cutting headcount and shifting operations/headcount to low-cost countries. And are sometimes less able to establish reliable supplier relationships in, let's say, China and Vietnam.

In an environment where consumers are more focused on price than quality/selection/service, larger companies usually have economies of scale that small ones lack. Not just purchasing power for raw materials and components, and leveraging back-office and other fixed costs, but also things like building a major online presence.

Finally, large companies have some options that small ones often don't. A large company can set up an international tax strategy, create overseas subsidiaries to hold intellectual property, shift value-creation to those low-tax jurisdictions and thereby pay low taxes. Most of the large companies I look at have an income tax rate that is far less than the statutory US corporation tax rate of 35% federal. 10% to 20% is not unusual, some are paying <5%. Because, for tax accounting purposes, they've structured themselves to minimize taxes.

[wdfifteen]

Originally Posted by jyl

Also, most small businesses are dependent on local/domestic demand, less exposure to growth in international markets.

And most small business are more tightly staffed than large businesses, so less ability to boost margins by cutting headcount and shifting operations/headcount to low-cost countries.

+1 You are 100% right about that. i haven't encountered diminishing demand, but growth in demand had stagnated. I expect it to go south as unemployment benefits run out.

[jyl]

There is something of a productivity miracle going on in US industry right now. Astonishing how the larger companies are making strong, in some cases record, margins from lower revenues than before.