To say that Main Street is on fire is an understatement.
For many businesspeople, the last few years have been a boon to not only revenues, but for enthusiasm as well. I work with small businesses across countless industries nationwide, and it doesn't matter whether they manufacture machines, construct buildings, cut trees, or erect signs, small businesses everywhere are excited.
That excitement is justified by the numbers. Of course, if you watch the national news or the stock market, you can't help but be impressed. But better indicators are the organizations on the front lines of small business. To give an example, the National Federation of Independent Businesses (NFIB), which is the nation's leading small business association, sees small business optimism at a 45 year high.
"Small business owners are not only reporting better profits, but they're also ready to grow and expand. The record level of enthusiasm for expansion follows a year of record-breaking optimism among small businesses." said NFIB President and CEO Juanita Duggan in a recent NFIB article* referencing a yearly survey they perform to take the pulse of small business owners.
Duggan mentions lower taxes and relaxed regulations as the fuel for this optimism, and indeed, these are consistently the top two concerns for most business owners. So it's no surprise that legislation like The Tax Cuts and Jobs Act has really made a difference, both in directly lowering taxes, and also increasing the Section 179 deduction to one million dollars.
As the year goes on, we'll likely see that Section 179 increase come into play more and more. In short, another key finding by the NFIB's survey is the desire to expand, which they report is at its highest level since the survey began in 1973.
Success Breeds More Success
Let's discuss expansion for a second, because it's important. We all know economic trends are cyclical, so it makes a lot of sense to strengthen your position when times are good, profits are high, and optimism is strong. Doing such has three distinct advantages:
The first advantage is that expanding your capabilities allows you to take better advantage of the current wave. In other words, when times are good, it's to a company's best interest to maximize their capabilities and output. Having more goods or services to sell never hurts, but this is especially true when people are lining up to buy (like right now). Companies who expand during upturns almost always end up doing better for it.
The second advantage is expanding now ensures you stay at the top of your industry, rise a few notches, or at the very least, hold serve in the pecking order. As stated earlier, the desire to expand is at record levels, and this includes your competition. The last thing you want is to get left behind because they decided to go all-in on new technology or a better delivery fleet and you didn't. So now is an excellent time to take a look at areas you can improve, and strike while the iron is hot.
The third advantage is for the future. Buying new equipment now acts as a hedge against the inevitable pitfalls that are part of being in business. Older equipment breaks or becomes obsolete, and oftentimes, it can seem like it happens at the most inopportune economic time. During leaner times, many companies will put off replacing older equipment, so it's definitely a good idea to reverse that thought when revenues and optimism are high.
Truthfully, experts will always suggest that companies do whatever they can to expand in any economic climate. But the reality is a little harsher – during lean times, it's a little more difficult to justify expansion or improvement. But during strong economic times, it's always a good idea.
One last aspect to this – financing the equipment makes expanding and improving much easier for any company. Spreading out the cost over several years allows companies who are doing well to take on new equipment while also stockpiling cash reserves, and/or perhaps making an important new hire. Thus, this incredible wave we're riding can improve every area of a company – the shop floor / front lines, human resources, and also the balance sheet. Win – win – win.
With business-friendly tax policies in place for the foreseeable future, small businesses look to be in a good situation for some time to come. And that's welcome news for all of us.
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