|Business Wire, Inc.|
Higher Growth Small Businesses Prepare for Contingencies, Use Borrowed FundsStrategically, Have Clear Vision for Their Companies, Among Other Key Traits
The Institute’s observations are based on The 2011 Guardian Life Index: What Matters Most to America’s Small Business Owners, which surveyed nearly 1,100 small business owners in nine size categories, including sole proprietors, 2-9 employees, 10-24 employees, 25-49 employees, 50-99 employees, 100-499 employees, 500+ employees and more than 5,000 employees. Comparisons were then made between those small business owners who projected higher revenues in 2011 versus the prior two years, and those who projected ‘about the same’ or ‘declining’ 2011 revenues versus the prior two years.
“Growing revenues during the recession was no small feat,” said
The following six steps are strongly associated with higher-growth small business owners – those who successfully weathered the challenging economic environment of the past several years:
- Be Prepared for Contingencies. Small business owners who built their revenues over the past two years were far more likely to engage in contingency planning by pre-establishing credit lines and retaining cash reserves, rather than just reacting to business difficulties as they emerged. For example, 47 percent of higher-growth companies in the sample had cash reserves that enabled them to weather tough economic times, whereas only 35 percent of companies that just maintained their revenues were able to rely on such financial resources.
- Seek Advice from Professionals. Owners of higher-growth small businesses reported that they relied on advice from professionals and informal business support groups at consistently higher rates than did owners of companies that had revenue declines. The respective percentages for higher-growth small business owners versus revenue-declining business owners were as follows: accountants (70 percent vs. 62 percent), financial advisors (68 percent vs. 51 percent) and informal business support groups (61 percent vs. 45 percent).
- Use Borrowed Funds Strategically. Some 58 percent of higher-growth small business owners reported that investing borrowed funds in research and development yielded the best return, versus just 38 percent of revenue-flat companies and 16 percent of revenue-declining businesses. Moreover, borrowing to open new offices, build production facilities or add new capabilities / staff was more likely to correlate with a drop rather than an increase in sales.
- Sharpen Managerial Skills. Developing business management skills and being better at strategic planning and money management consistently correlated with increased revenues. The most compelling area of professional development was an improved understanding of how to hire the right people. Sixty-three percent of higher-growth owners said this skill was important, whereas only 53 percent of revenue-declining businesses cited it as vital.
- Avoid Obsessing about the Business. Small business owners who increased revenues during the recent economic downturn tended not to be consumed by the companies they owned and ran. In fact, 75 percent of higher-growth small business owners said their businesses made it possible for them to have more satisfying experiences with their families, compared with 64 percent of revenue-declining company owners.
- Have a Clear Vision. Having a clear vision for the business was strongly associated with higher revenues. For example, 58 percent of higher-growth companies had a clear vision of their businesses, whereas only 39 percent of revenue-declining businesses had this farsighted view.
“This research demonstrates the critical importance of strong management, financial and interpersonal skills as tools to driving business growth,” said
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CooperKatz for Guardian Life
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