Outlook for small businesses is sunny
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In partnership with Forbes Insights, CIT Group Inc. recently published a report entitled U.S. Small Business Outlook 2010: A Case for Greater Optimism. It suggests a majority of small business owners feel more confident and better positioned to advance their companies this year as a result of having survived the past 12-18 months.
Nearly half (45 percent) indicated that the recession exposed flaws in their business strategies that were previously not apparent to them. “Our study found that a surprisingly high percentage of small business owners are more optimistic about 2010 after having survived the worst of the recession,” notes Chris Reilly, President of CIT Small Business Lending. “Many believe that the survival strategies they’ve implemented and hard lessons they’ve learned have better positioned them for growth this year.” A significant 81 percent of respondents said that they are now smarter about running their businesses and 70 percent said the challenges of the recession have made them stronger leaders.
The information in the CIT research report is based on the results of a survey of 220 U.S.-based small business owners and leaders, as well as a series of one-on-one interviews, conducted between December 2009 and January 2010. All companies’ has revenues that ranged between $1 to $5 million, and $5 to $15 million, and operated as for-profit entities. Respondents represented companies in a broad range of industries including business and professional services, engineering and construction, financial management, investing or advisory, retail, technology/telecommunications, and others. About 61 percent of those surveyed described themselves as small business owners, 30 percent held C-level titles, and the remaining 8 percent held other top management positions.
Greater optimism for growth
A majority of the small business owners surveyed indicate greater optimism about their 2010 growth prospects, with 60 percent of respondents expecting their companies to grow (53 percent) or grow significantly (7 percent) this year. Less than a third (28 percent) expect their revenues to be flat and just 12 percent anticipate a decline. At the same time, small business owners are still feeling the pressure of the current economic environment, with 71 percent agreeing that they are working harder and longer than ever before, and nearly a third (29 percent) indicating that the recession has made them doubt their commitment to running a small business.
Small businesses also believe they will play a key role in the U.S. economic recovery, in spite of, rather than assisted by, support from the federal government. Nine out of 10 respondents agreed that current stimulus has not provided any benefits. Still, small business owners remain hopeful that Washington will take action to help them, particularly in the area of financing. Fifty-eight percent agreed that higher Small Business Administration (SBA) loan limits would benefit small businesses.
“Many small businesses expect to fare better this year than last, but the current environment is still a challenging one, mainly due to lack of available financing,” Reilly continued. “This is why CIT has allocated up to $500 million in funding for small businesses in 2010, and has waived the packaging fee on all new loan applications through March 10. It’s also why we strongly support the Small Business Job Creation and Access to Capital Act of 2009 and the Obama Administration’s recently announced plan to make $30 billion available for small business loans,” said Reilly.
Taking action to improve performance
CIT’s study also reveals that a majority of small business leaders (64 percent) intend to be more aggressive in 2010 by implementing a range of actions to advance their businesses. A full 59 percent of respondents cited a greater focus on operating efficiencies as the number one step to achieving growth in 2010. At the same time, 62 percent plan to invest more in marketing and advertising, while 50 percent will invest in expansion and 46 percent will pursue new revenue streams.
Stuart Feil, Editorial Director of Forbes Insights said “a significant number of small business owners are taking strategic steps to improve efficiencies and diversify revenue streams so their businesses can achieve an even stronger upswing as their markets recover. Seventy-eight percent of respondents acknowledged that the old way of doing business will no longer work. Moreover, they need to find new ways to take advantage of market opportunities. This explains why many are planning to be more aggressive with their marketing spend this year as a means of grabbing market share from competitors.”
Noteworthy Findings:
Cash flow pressures: During 2009, falling income put additional pressure on small business cash flow, as evidenced by the 64 percent of respondents who said cash flow was harder to manage last year. As a result, companies turned to cutbacks over boosting financial reserves. Reducing overhead and expenses (63 percent) led the list of actions companies took, followed by travel/entertainment cutbacks (55 percent) and reducing workforce size (45 percent). Just 11 percent said they sought new lines of credit and financing.
Owners see value in planning, but don’t practice it: Small business owners recognize the importance of planning amid the new economic environment and want to spend more time doing it. Eighty-five percent of respondents agreed (65 percent) or strongly agreed (20 percent) that the recession put additional pressure on their businesses to plan more effectively. Moreover, 61 percent indicated they would spend more time on planning and budgets in 2010 than they did in 2009. However, only 44 percent indicated they had a strategy in place to guide growth during the coming recovery period. Another 44 percent said they were working on one and 11 percent indicated they did not have any plan.
About Forbes Insights
Forbes Insights is the custom research practice of Forbes Media, publisher of Forbes Magazine and Forbes.com (www.forbes.com), whose combined media properties reach nearly 50 million business decision makers worldwide on a monthly basis. Taking advantage of a proprietary database of senior-level executives in the Forbes community, Forbes Insights’ research covers a wide range of vital business issues such as talent management, corporate social responsibility, financial benchmarking, risk and regulation, and doing business in emerging markets.
www.forbes.com/forbesinsights
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