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IF YOU THINK 1996 will see corporate downsizing and belt-tightening go the way of the dinosaur, you need to restructure your thinking. According to Watts Wacker, a futurist with Westport, Connecticut-based SRI (Stanford Research Institute) International, next year will herald even more cutbacks. On the face of it, these moves could add to America's economic agony, but there's an upside-a growing entrepreneurial wave and way of thinking that Wacker believes will continue to grow for at least the next quarter century.

In an effort to gauge just what impact all these changes are having and will have on small business, Entrepreneur spoke with seven experts, from futurists and political specialists to individuals heading organizations for women, minorities and entrepreneurs.

In general, the economy should continue to flourish and improve throughout most of 1996, predicts Glenn Neely of the Elliott Wave Institute, an economic research and investor training firm in Laguna Beach, California. "The expanding economy should make it easier to find new capital, and there will be more venture capital [available]," says Neely, who attributes the expected improvement to stable interest rates of 6 percent to 8 percent and an expectation of stock market growth.

Additionally, the downsizing trend of eliminating middle- and upper-management positions will continue in the future, Neely says, as big companies and even government push harder to get things done faster. "Consultants who can come into a company and help it dramatically improve customer relations and efficiency will do very well," says the economic forecaster.

But continuing corporate cutbacks will mean an increase in the trend of outsourcing jobs previously handled in-house. Edie Weiner, a futurist and president of trend analysis and management consulting firm Weiner, Edrich, Brown Inc. in New York City, sees small companies continuing to reap the benefits of this practice. "This is a tremendous opportunity for small businesses to grow," says Weiner.

Outsourcing also means good news for minority-owned businesses, according to Harriet Michel, president of the National Minority Supplier Development Council, a New York City-based nonprofit organization that promotes minority-owned businesses. When companies outsource work previously handled by employees, "there is no existing supplier to compete with, which makes it easier for minorities to win contracts," she explains.

Another effect of downsizing, Weiner says, is an expansion of what she calls the professional servant class. "At the turn of the last century, the servant class [comprised] basically lower-skilled and lesser-educated positions," she explains. "What's happening now is people with [former] six-figure incomes or college educations are starting small [personal service] businesses,'' such as hotel-style concierge services, which track down whatever their customers need. "They don't see themselves as being a servant but as being of service."

On the political landscape, there are a number of issues that will affect small-business owners nationally, says Todd McCracken, National Small Business United vice president for government affairs.

Among the issues in Congress he expects will spill over from 1995 are health-care reform, the federal minimum wage increase, tort and regulatory reform, and restructuring the tax system.

"I think you will see a more limited health-care reform bill than what Clinton put forth during his first two years. And it will mostly involve insurance reform," speculates McCracken, whose Washington, DC-based organization lobbies for small-business issues. He says legislation pending in the Senate would prevent insurers from discriminating against businesses based on employee health status or other factors. It also includes a provision to make it easier for small firms to pool their resources and employees to bargain for better rates.

In continuing efforts to limit businesses exposure to liability as well as their regulatory burden, tort and regulatory reform issues have been addressed by both houses of Congress. The Senate, for instance, passed a bill dealing with product liability, while the House passed a far-reaching civil justice reform measure with a broad impact on tort law. However, McCracken says, there will need to be much compromising in Congress to come up with final versions of the reform measures that encompass the House of Representatives' more sweeping changes and the Senate's much more limited revisions.

McCracken also believes Republicans will hold off sending the bills to conference committee until next year. "I think they feel they'll get more out of Clinton in a presidential election year than they will now," he says. "He might be less likely to veto a more far-reaching bill."

"[The current debate about] restructuring the tax system is also going to have major implications for small business. True, there are big problems with the current tax codes. On the other hand, a flat tax would mean eliminating many deductions helpful to small businesses." Other proposals to tax either earned or investment income or consumption will have a positive impact on some entrepreneurs but may cast a pall over other companies, McCracken adds.

Technology is another issue that will have a major impact on small business. "Small businesses keep hearing they're losing out if they're not on the Internet or involved in electronic commerce, but there's an upside and downside to this," says McCracken. "Technology is a big leveler in the market, allowing small businesses to do many things that used to require a huge staff. However, there is a learning curve that requires an investment of time and resources, and there's no real evidence it will pan out in the future."

The minimum wage increase will most likely be an election year political hot potato as well, McCracken says. "Raising the rate was discussed this year, but I don't think it will see any real action. It's in the Democrats' best interest to put off approval until next year so people like Bob Dole and Phil Gramm have to come out against it," he says, which is risky because the American public likes the idea of raising the minimum wage.

In addition to these challenges, minority and women business owners face some additional obstacles, with affirmative action changes looming on the horizon. (Entrepreneur's "Equal Opportunity?" feature in September provided a more in-depth look at this issue.) "All the indicators suggest it could be a rough year for the smallest minority businesses because of changes in affirmative action, but you can't know for certain," says Michel of the National Minority Supplier Development Council. "Until laws are tested and thresholds defined by the latest Supreme Court case are determined, it is hard to say just how restrictive the new programs are going to be. Clinton's strong pro-affirmative action stance could go a long way toward softening the blow, though."

Another way affirmative action could change the business landscape is through its influence on women. With many already leaving the ranks of middle and upper management to start businesses, Audrey Tayse Haynes, executive director of nonprofit association Business and Professional Women USA, believes that if affirmative action is rolled back, there may be an even greater exodus of women from middle and senior-level management positions who think they may not be able to rise any higher on the corporate ladder.

Haynes sees the rate of women starting businesses continuing to rise. "In our organization alone," she says, "the number of small-business owners has doubled from 16 percent to 32 percent of our 80,000 membership since the mid-1980s."

Women are also a fast-growing sector within the ranks of Latino entrepreneurs, and they're moving into all areas of business, says Jose F. Nino, president and CEO of the United States Hispanic Chamber of Commerce.

"Hispanic businesses are also growing in the international arena in number and volume as far as exports," says Nino, who adds that many are creating joint ventures with non-Latinos in the United States to export south of the border.

Michel says minority small-business owners in general need to create strategic alliances among themselves if they want to be strong enough to compete for larger contracts. "When you're a small entrepreneur, your company is your baby," says Michel. "To submerge it into something larger that you do not have total control over is difficult." Some companies have circumvented this problem by creating a third, jointly owned business.

Detroit-based Regal Plastics and Bing Steel, for instance, initially talked merger but instead became partners after creating a completely separate third company, Bing Manufacturing Inc., says Michel.

Another obstacle facing minorities, adds Michel, is a continuing move by corporations to pare down their supplier list and a tendency to award larger multiyear contracts. "This trend, which preceded any discussion on affirmative action, has squeezed out minorities and small businesses," says Michel, who adds this practice has been underway for at least four years and has changed the face of American industry. "[Corporations] have far fewer suppliers and are developing deeper and longer-term relationships with those they do have."

More progressive corporations, however, have identified their strongest minority suppliers and begun to develop them into major partners by giving them enough business and technical assistance to make sure they stay around.

Overall, next year looks promising for entrepreneurs who are prepared to handle the challenge of providing the products and services wanted, offering the quality of work demanded, and rapidly adjusting to the changing business landscape.

This article is reprinted with the permission of Entrepreneur magazine. With Entrepreneur, you get expert advice and friendly assistance. Learn how to master the art of marketing, management and finance. Gain insight from fellow business owners and entrepreneurs. Save yourself valuable time, and avoid costly mistakes with proven start-up secrets and sound business strategies. For more information on subscribing to Entrepreneur, call 1-800-274-6229, Dept. 5GD84.

Elliott Wave Institute, 1278 Glenneyre St., Laguna Beach, CA 92651, (800) 636-9283;

National Minority Supplier Development Council, 15 W. 39th St., 9th Fl., New York, NY 10018, (212) 944-2430;

National Small Business United, 1155 15th St. N.W., #710, Washington, DC 20005, (202) 293-8830;

United States Hispanic Chamber of Commerce, 1030 15th St. N.W., #206, Washington, DC 20005, (202) 842-1212;

Weiner, Edrich, Brown Inc., 200 E. 33rd St., #9-I, New York, NY 10016, (212) 889-7007.

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