Opening a Small Business in 2014

While the economy has been slowly recovering, it's still a tough environment out there for small business owners. And it looks to be just as tough going into 2014.

Here are some of the issues to consider when thinking about opening your small business in 2014:

What Will Be the Economic Impact?

While the economy is expected to grow slightly more than it did in the first three quarters of 2013 (3% vs. this year's 2.2%, according to the Federal Reserve), that growth is still far from being healthy.

The recent government shutdown highlights another major problem: Congress will still have to reach some sort of agreement on the national budget by mid-January 2014. If they don't, we could be looking at yet another shutdown -- and even a default on government debts.

This uncertainty about the economy's health may mean small businesses will have to put off plans to open or expand.

Will You Be Able to Get a Loan?

Economic issues may make banks more hesitant to hand out small business loans -- making it even more critical to have a bulletproof business plan before applying.

Home equity loans, which have been a common way to secure funding for starting a small business in past years, are harder to come by after the mortgage collapse in 2008.

However, the news isn't all gloomy.

This year, Congress introduced legislation that would allow credit unions to make more small business loans. It would more than double the amount of assets a credit union can use to make these loans.

How Will the Affordable Care Act Affect You?

Deciphering the ACA and the rules you'll have to follow as a small business owner is another major concern.

The ACA requires companies with more than 50 workers to provide health insurance, starting in January of 2014. That may limit the size of many small businesses that are just starting out.

Small business owners will have to either devote some time to understanding the law, or hire outside help. Either way, it could be another factor that delays many businesses from getting off the ground.

What Kind of Business Should Do Well?

With all that in mind, what sort of business should you consider starting next year?

Think service.

Service-based businesses don't have to compete with large retail chains, and tend to have a far lower startup cost and overhead than retail businesses. They do tend to be more labor-intensive, so you'll have to be willing to put in more hours or hire a few employees to get the work done.

Another benefit of a service-based business is that, depending on the service you offer, it's a little more recession-proof than retail. Choose a service that isn't dependent on the season and that people will always need, and you'll be able to weather more economic storms.

Starting a business in 2014 may be a bit more of a challenge than in years with a robust economy.

But with a little extra planning and legwork, you can still launch your business and make it a success.