Kaney Aerospace, an engineering services company in Rockford, Ill., does business with federal contractors. If the government cuts their business, owner Jeff Kaney expects his company to be affected. He's not sure yet what the impact will be on his business.
Nelson shares some of Kaney's concern. He's worried that the budget debate could result in a reduction in Medicare reimbursements on the medical tests he provides. "It could have a detrimental effect on our business," he says.
The unknowns will lead owners to keep running their businesses conservatively, says Dennis Ceru, an adjunct professor of entrepreneurship at Babson College in Wellesley, Mass.
"The concern I see is expressed in the form of not signing longer-term leases, looking to defer expensive equipment expenditures, looking to defer hiring and using seasonal and part-time workers instead of full-time ones," he says.Compounding owners' concerns are the weakness in the economy and the government's inability to come up with solutions to its budget problems, says Scott Meadow, a professor of entrepreneurship at the University of Chicago's Booth School of Business. "All of those things are kind of the foundation of this anxiety that's out there â¿¿ when is the sword going to fall, what is the effect going to be," he says. "It's that anxiety that causes (a small business owner) to slow down." That means 2013 is likely to look a lot like 2012 for small businesses, says Kathleen Allen, a professor of entrepreneurship at the University of Southern California Marshall School of Business. "I don't think that this kind of uncertainty and volatility is going to change anytime soon," she says. Some other important issues for small businesses related to the fiscal cliff deal: Business tax breaks survive: Owners contemplating equipment purchases got some help. The bill maintains what's known as the Section 179 deduction, which allows small businesses to deduct rather than depreciate the cost of many types of equipment, at $500,000 for 2013. It was scheduled to fall to $25,000.