Big business' cash flow may boost small businesses

If your smaller business makes its living off larger ones, you could find yourself heading toward the front of the economic recovery line.

The reason: Outside the struggling financial sector, "Corporate balance sheets are awash in cash," economist Diane Swonk says.

That's important because the bigger guys are beginning to spend, and more of them are buying services provided by small businesses.

Even so, "There's nothing easy about this economy," says Swonk, chief economist at Chicago-based Mesirow Financial, a diversified financial services firm.

"If I owned a small business, I'd do everything I could to cater to the business side of the equation rather than the consumer," she said.

With jobs uncertain and household credit still difficult, Swonk believes consumer spending will remain tight. However, she says, "Those large corporate profits do fall to small businesses."

The profits seem to be falling to some of the smallest businesses. Companies are "starting to hire consultants," Swonk says. "In smaller businesses, those (assignments) often are one person at a time - one-man shops competing with other one-man shops. But we'll take it."

In addition to dollars being spent on consultants, Swonk says that larger businesses also are investing in technology, which she says will lead to more productivity - though probably fewer job gains.

For virtually any small business, financing will be the key to the new business opportunities Swonk sees in larger companies. Depending on the activity, smaller businesses may not have the resources to take on the task.

Swonk, however, has a thought. "Go where the cash is and work a deal," she suggests. The fact that "non-financial corporate cash flow is quite good" could lead to some creative financing help for businesses that "rethink how they bid contracts."

For example, your bid might include more frequent payments that will help boost your company's cash flow or a delivery schedule that shifts inventory - and related costs - to the customer's facility from yours.

A jobs bill signed last week might help, too, although the impact will be smaller. It gives employers an exemption from their share of Social Security taxes through the rest of 2010 on employees they hire who have been out of work or working just part-time for 60 days.

If those employees are still on the job a year later, employers would get a $1,000 tax credit. Family members and other relatives don't qualify.

Overall, the economy obviously continues to sputter. "Any growth is good," Swonk says, "but we're not seeing enough of a recovery. Economic activity has stabilized at a very low point. It's like being in a traffic jam where you're moving forward but growing more and more angry (at the slow pace)."

Questions, comments to Jim Kendall, JKendall@121MarketingResources.com.