Submitted by American Express OPEN
NEW YORK, October 18, 2012 – While economic uncertainty persists, many entrepreneurs feel more confident and less stressed this fall. According to the latest findings of the American Express OPEN Small Business Monitor, just 20 percent believe economic conditions are the biggest barrier to growth (compared to 23 percent in the fall of 2011), fewer have cash flow concerns (53 percent versus 58 percent in the spring) and fewer are stressed out by the economy (59 percent versus 64 percent in the spring).
Small business owners’ top priority is maintaining their current business and sources of revenue (32 percent) and as a result they have adopted a “wait and see” approach for growth plans. Only 29 percent of businesses surveyed have plans to hire new employees, down from 35 percent in the spring. However, only 16 percent of entrepreneurs say the economy has caused them to lay off employees versus 21 percent six months ago. In sharp contrast, a small cadre of “high achievers” is taking action and focusing on growth. Among this group, 66 percent plan to hire over the next six months.
“In many ways, our research on small business sentiment mirrors economic indicators on the consumer front. Confidence and optimism gauges are showing positive signs, but there is a sense that people are not willing to go all in until after the elections,” said Susan Sobbott, president, American Express OPEN. “To help small business owners navigate this uncertain time, we decided to zero-in on the small businesses that weathered the great recession and came out firing on all cylinders. We want to know ‘what can be learned from the high achievers that will help create of more of them?’”
New Index Uncovers Key Areas of Business Differentiation
For the first time, the semi-annual survey, now in its 11th year, includes a Success Index to identify commonalities across successful businesses that can provide lessons for any small business. The index profiles four groups of entrepreneurs: High achievers, strivers, sustainers and strugglers.
High achievers represent 6 percent of the total survey sample, and on average, have spent 26 years in business, employ 18 people in their firms and have attained business growth of 34 percent over the last three years (versus 10 percent growth for the total survey population). A comparison between the high achievers and the total survey group uncovers a host of key differentiators:
• They take more risks: More than two-thirds have increased their appetite for risk compared to one year ago (67 percent versus 35 percent of the total population);
• They don’t just plan for growth; they make it a priority. A majority of high achievers say they are planning to grow their businesses over the next six months (93 percent versus 69 percent of the total survey group), and 51 percent have growth as their top priority (versus 31 percent of the total survey group);
• They invest in their business: 78 percent are planning to make capital investments versus 49 percent of the total survey group;
• They provide incentives to customers to get repeat business: 84 percent are placing heightened focus on better servicing customers to set their business apart from competitors versus 78 percent overall; 40 percent offer loyalty rewards versus 22 percent overall; and 41 percent offer differentiated products or services versus 23 percent overall;
• They leverage social media: 70 percent use social media versus 49 percent overall, and 79 percent use social media to attract new customers versus 57 percent.
The Success Index was developed based on self-reported responses to questions regarding business growth and characteristics correlated with high-performing entrepreneurs. Based on a 100-point scale, four distinct levels emerged: “Strugglers” (scoring between 0-40 points), “sustainers” (scoring between 41-60 points), “strivers” (scoring between 61-80 points) and “high achievers,” who scored highest on the index (between 81-100 points).
American Express OPEN Small Business Monitor, released each spring and fall, is based on a nationally representative sample of 839 small business owners/managers of companies with fewer than 100 employees. The anonymous survey was conducted via telephone by Echo Research Aug. 23 to Sept. 21, 2012. The poll has a margin of error of +/- 3.4 percent. As part of the Fall 2012 American Express OPEN Small Business Monitor, OPEN created the “Small Business Owner Success Index” which takes into account tangible measures of business growth as well as the business owner’s mindset in the way they approach the success of their business. The index ranges from “0” least successful to “100” very successful and was developed based on responses to questions regarding business growth and entrepreneurial characteristics. Business growth was scored based on revenue and employee hiring over a one-year period. Respondents were also asked to rate themselves on 10 characteristics identified in Saras Sarasvathy’s (University of Virginia Darden School of Business) study on how great entrepreneurs think.