As far as small business goes, 2006 was a not-so-great year due to a slothful real estate market, rising gas prices and a decline in employment, according to Chad Moutray, Chief Economist for the Office of Advocacy of the Small Business Administration.

How promising does small business look for 2007? Some things aren’t getting any easier. The main concern of the majority of small business owners are the issues surrounding labor. If you own and operate your business on your own, 2007 looks outstanding.

But if you have employees, then you probably already know what I’m talking about. It’s hard enough to find qualified employees for your business, and analysts say it’s not going to get any easier. The challenge of finding the right person for your business is expected to continually increase as more and more baby boomers begin to retire, and the prospects begin to dwindle.

Meanwhile, competition for the meager selection of prospective employees continues to increase, as small business owners have to try and match the salaries offered by larger companies.

According to SurePayroll.com, the national average of base pay salaries rose 7.4% in 2006, to $31,292 a year. And, as we all know, when you pay someone more, you have to do something to make up for it, which is typically an increase in the cost of your product.

Another issue that small business owners face when it comes to retaining employees is the continued increase in the costs of health insurance. While it is not expected that the increase will be as dramatic as more recent years, it is expected that health insurance rates will raise another 7.7% in 2007.

One other somewhat insignificant but worth mentioning challenge that faces small businesses that are online is the increased competition of other online businesses, as it’s not surprising to see three or four new businesses in your industry pop-up daily. This poses the challenge, that many find intriguing, of making your website stand out among thousands.

Despite the negative effect labor issues may have on small business in the next year, most entrepreneurs remain optimistic. The NFIB’s Index of Small Business Optimism is currently at 99.7, a continued historic high. As stated in Entrepreneur.com’s article (below), “a positive outlook itself bodes well for growing business… confidence is a critical indicator of current and future economic activity.”

Sources:
• CNNMoney.com: Glimmers of Hope for Entrepreneurs in 2007
• Entrepreneur.com: A Look Ahead - Challenges of 2007

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