Small business owners are confident about the economy and their prospects for growth. What is behind that confidence, and what are their priorities, plans and worries for the coming year? The annual SunTrust survey of small business owners, conducted in February 2019, asked 515 small business owners (annual revenues between $100,000 and $5 million) what they thought about the current business environment and their priorities for 2019.
With stress levels down and confidence up, owners are ready for growth, yet many don’t have specified growth plans or broad communication of what they want to achieve and how they will grow. They want to take charge of cash management and cover the cash fluctuations and shortfalls common for small businesses.
Find out more about how owners plan to take advantage of opportunities in 2019.
Small business owner confidence in the strength of local and national economies increased for the third straight year. Most businesses feel that their company’s financial well-being is on par with or better than in 2018. While stress levels have declined from the previous year, insufficient revenue, challenges to increasing profits and rising costs leave nearly half of owners extremely/somewhat stressed.
Growing the business is the #1 priority for small business owners and increasing business profitability is the next. Eighty-five percent of owners say that cash reserves are important to business strategy, yet only about half (44%) feel they are performing well at accumulating those reserve funds.
Three-quarters of business owners say that attracting new customers is the greatest opportunity for growth. They plan to market to more profitable niches, establish online and/or social media presence and develop new products.
Managing cash flow continues as a top priority for owners. Monitoring monthly cash movement ties with building cash reserves in importance, but owners are doing better at monitoring cash movement (55% doing well versus 30% needing improvement) than at building cash reserves (44% doing well versus 41% needing improvement).
Two-thirds of businesses experienced cash flow variations in 2018 resulting from seasonal revenues and expenses or from the loss/gain of major customers. More than one-third experienced a cash shortfall that required an infusion of the owner’s personal cash or a business line of credit. Only one-quarter of owners had cash reserves available to cover the cash crisis.
Small business owners feel confident in their access to business credit, with many using business or personal credit cards and business loans. Building cash reserves is the top priority for improvement in 2019.
Business owners look for growth this year from opportunities presented by the strong economy. Owners believe sales growth will come from finding and acquiring new, more profitable customers through niche marketing and digital/social media efforts.
Only half (49%) have created a business growth plan, even though they have identified growth as the top priority. Of those, nearly 30% have neither written out a plan, nor shared it with anyone. The fastest-growing companies understand the opportunities a growth plan can provide and are 1.5x more likely to have a publicly stated growth plan, and to share that plan with 15 or more family members, business partners or advisors.
Cash reserves once again feature prominently in growth plans, with 61% of business owners planning to invest additional cash from exceeding growth expectations back into the company as cash reserves.
Owners plan to improve business processes to achieve increased profitability. The vast majority cite controlling expenses as the top profitability measure, followed by improving time management skills and developing a financial plan/budget.
Increasing profitability aligns with growth plans and overall business strategy goals. Over half of small business owners plan to grow sales to improve profitability, while one-third plan to increase pricing.
Rising costs and expenses put pressure on the profits. Two-thirds of owners are enacting expense savings or cost cutting measures while close to half plan to increase pricing and perceived product value to keep pace with inflation and rising costs.
Companies are looking to technology to help improve cost-effectiveness. Half of small businesses cite online marketing, social media presence and online/ecommerce websites for payments and ordering as their best technology investments.