The biggest challenges Chicago area small businesses are facing this year
Chicago area small businesses are used to uncertainty and dealing with many challenges. This year is no exception.
Rising costs and financial pressures
Like many business owners, Sophia Torres who owns Sparkly Maid, a Latino-owned residential and commercial cleaning company in Cook County, is grappling with higher costs.
“All of the expenses related to running a cleaning business — supplies, insurance, rent, and taxes — have increased,” she said. “I want to continue to offer competitive pricing for my customers, but I need to ensure that my employees and other business-related expenses are met.”
The same goes for David Kolssak who runs TURNkey, a Wheeling-based technology services firm.
“Everything is going up at once,” he said. “Insurance premiums keep climbing, property taxes are brutal, health care costs are another gut punch and labor costs keep going up while profits get thinner.”
My response: There’s no silver bullet to controlling costs. However, it’s critical for business owners to review their financial statements and detailed accounting transactions each month to identify cost savings areas. This year it’s important to speak with all service providers — insurance, accounting, technology, etc. — to revisit their fees and potentially get competitive quotes. Technology investments, where it can save money long term, should also be considered.
Hiring, staffing and talent retention
Despite a softening labor market, most small business owners I know continue to search for skilled talent to fill key roles.
Torres says it’s “increasingly difficult” to find reliable cleaning professionals and maintain the ones already employed. Adam Radulovic, CEO of IT services firm XL.net in Naperville, says it’s one of his firm’s top challenges and Jonathan Klemm, who runs construction firm Quality Builders in Lyons agrees.
My response: Your best resource for finding great people is … your existing people! Get referrals from your workers. Also, pay attention to your benefits, including the top three most requested: healthcare, retirement and flexibility. There are many strategies for delivering these benefits and they can be provided affordably. Talk to professionals in these areas for advice.
Managing growth
“We grew 50% year over year,” said Kevin Krebs, the founder and CEO of HelloCollege, a college admissions counseling and tutoring firm based in Oak Brook. “Families are looking for even more handholding and concierge-style service now, so we have to make sure our team is trained and ready to deliver that consistently.”
Theresa Delaney, who owns Creative Kind, a woman-owned stationery and paper goods brand near Chicago, struggles to balance having enough inventory to meet customer demand without over buying.
“People are ordering more cautiously right now due to their own cash flow concerns,” she said.
Figuring out where to spend her marketing budget is also becoming a headache for Delaney.
“It’s harder than ever to capture and hold attention online without paid spend,” she said. “Social platforms are crowded, and organic reach is wildly unpredictable.”
My response: Inventory is a working capital problem and with interest rates still elevated it can be an even bigger challenge when financing. Invest and lean into good inventory management software and make it a priority to keep balances accurate. Cycle count daily and don’t be afraid to dispose of slow-moving items. Regarding marketing, the key is determining where your customers are (LinkedIn? Facebook?) and focusing on those platforms.
Technology decisions
“The biggest challenge is AI,” said Krebs. “It’s changing how families find us, and it’s changing how we need to operate internally.”
Radulovic agrees traversing the emerging AI landscape and identifying the best way to leverage AI and automation in his business is a big thought on his mind. He’s also worried about the security and privacy of his data.
“We’ve had to increase the investment required in cybersecurity in order to keep ourselves and our clients protected against more effective hackers now armed with AI,” he said.
My response: There is little argument that AI is going to have a major impact on businesses of all sizes in the next few years. To get ahead of the game, lean into the AI capabilities you already own with either Microsoft Office or Google Workspace. Also, grill your software vendors to better understand the AI functionality they’re rolling out. Pay for training for your employees.
Regarding security, it’s critical to hire a good IT security firm to also train your employees to be aware of potential malware or phishing threats. Update your security software and make sure your company’s devices are always running the most current operating system versions. And make sure you have cyber insurance!
Regulatory and compliance
Most of the owners I spoke to continue to struggle with the burden of government reporting, particularly to the state. Torres says she’s “concerned about making an error in one of those areas that may result in a financial loss for the business or harm it’s reputation.”
Kolssak complains that financers — banks and even the Small Business Administration — have “tighter rules and plenty of red tape.”
My response: the regulatory tidal wave from Washington has slowed down under this administration but many states — especially Illinois — are picking up the slack. Which is why it’s important to have an attorney and payroll or labor expert on retainer for any questions you may have.
These challenges — and others — are part of running a small business. And they’re challenges I’ve seen for decades, only in different flavors. My best clients are able to succeed by watching others, relying on experts and keeping their emotions out of their decisions. It’s not a bad strategy.
• Gene Marks is a CPA who owns and operates The Marks Group PC, experts in customer relationship management technologies.