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Small business has mixed response to 'cliff' compromise

The bill avoids widespread tax increases, but it delays for two months decisions about spending cuts that could be deep. Companies that benefit from government contracts still don't know how they might be affected.
By JOYCE M. ROSENBERG Published: January 3, 2013

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 said.

The unknowns will lead owners to keep running their businesses conservatively, said 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 said.

Compounding owners' concerns are the weakness in the economy and the government's inability to come up with solutions to its budget problems, said 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: When is the sword going to fall, what is the effect going to be?” he said. “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, said 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 said.