Higher Growth Small Businesses Prepare for Contingencies, Use Borrowed FundsStrategically, Have Clear Vision for Their Companies, Among Other Key Traits
- 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.
About The Guardian Life Small Business Research Institute
The Guardian Life Small Business Research Institute is a resource devoted to better understanding America’s small business owners. It combines research the company commissions with the expertise of people within the Guardian Life family who have deep experience in the small business community, to yield deeper knowledge, insights and wisdom about today’s small business trends. The Institute was named one of North America’s top small business influencers in the Small Business Influencer Awards for making a meaningful and lasting impact on the small business market. For more information about The Guardian Life Small Business Research Institute, please visit: www.smallbizdom.com.
A mutual insurer founded in 1860, The Guardian Life Insurance Company of America and its subsidiaries are committed to protecting individuals, business owners and their employees with life insurance, disability income insurance, dental insurance products, and offer funding vehicles for 401(k) plans, annuities and other financial products. For more information about Guardian, please visit: www.GuardianLife.com.