While their confidence in the overall economy declined, more business owners said they thought sales over the next six months would be higher compared to last year (39% vs. 34% in the spring) and employee morale has shown modest improvements.
Business owners are also increasingly tapping into social media to reach customers and prospects. Four-in-ten now indicate they use at least one social media platform; Facebook is by far the most popular platform, with 27% of relevant businesses on board. By comparison, only one-in-ten business owners a year ago were using online social networking to market their businesses.
“Over the last two years, many business owners shelved investment and hiring plans and dipped into cash reserves and personal assets to stem the tide of declining sales,” said Susan Sobbott, president, American Express OPEN. “Now entrepreneurs are driving more business with existing customers through regular follow-up and better customer service. They’re also tapping into relevant and low-cost marketing tools like social media.”
Hiring Driven by Growth Opportunities: Welcome Back Full-Timers
Small business owners remain cautious on hiring, opting to do so only when business growth warrants it. Of those business owners looking to hire (26% overall), more than three-quarters say the reason is “to handle growing business.” By comparison, only 29% said they would hire for a “new business venture.”
The Small Business Monitor indicates that those employed by a small business are happier than they were a year ago. Seventeen percent of business owners reported that the morale of their employees has improved, nearly double from a year ago. The survey also showed a correlation between hiring plans and additional investments in their businesses. Overall capital investment plans remain low (38% plan to make investments over the next six months). That number jumps to 61% among businesses with hiring plans.
Cash Flow under Control; More Looking to Access Capital
An outcome attributable to business owners’ belt-tightening is a better handle on cash flow. The number of businesses with cash flow concerns has essentially dropped to pre-recession levels (53% versus 49% in fall 2007), and business owners have adjusted the way they deal with issues that do arise.
Small business owners are just as likely to address cash flow issues by putting off purchases as they are to use personal or private funds (28% and 27% respectively). This is a subtle shift compared to a year ago when more were accessing personal funds than putting off purchases (32% vs. 25%). Six-in-ten entrepreneurs also say they find themselves holding onto cash for their business more now than in the past.
With cash flow concerns declining, the number of business owners who are confident they can access the capital they need to grow their business has remained steady (57% vs. 60% in the spring). The number of entrepreneurs looking for ways to access capital jumped to 62% compared to 45% last fall). In addition, their sources of capital have also shifted.
Generating Customer Demand: Service and Value
Overall, business owners say that increased customer demand is by far the most important factor in driving business growth (50%) compared to tax cuts (23%), access to capital (14%) and the ability to hire more employees (6%). To help boost demand, they’re focused on two key strategies: deepening relationships and creating value.
- 72% are working to build better relationships with existing customers through regular follow up, and 34% are actively using social media to keep connected with customers
- 25% are highlighting how their products or services can save customers either time or money, 24% are bundling products or services to add greater value, 20% are establishing loyalty programs, 18% are establishing rewards/incentive programs, and 14% are offering free trials of their products and services
This focus on service and value could strike a chord with consumers, who reported in American Express OPEN research that price, proximity and personalized service were the three biggest drivers in choosing where to shop.
The apparent exponential growth in the use of social media by business owners is rooted in the need to drive demand. When asked about the primary benefit of using social media for their businesses, nearly four-in-ten entrepreneurs (39%) said it increases the exposure of their business.
Social media is a lower cost marketing channel through which business owners can talk directly to consumers, who say they’re more than willing to listen when it comes to special promotions and deals. In fact, consumers said they were most interested in hearing about small business loyalty programs (59%), followed by free trials (49%), rewards or incentive programs (44%) and invitations to new product launches or special shopping days (39%).
“For business owners, social media ultimately should be a two way street. It’s about business owners connecting with customers and customers connecting with businesses,” Sobbott added. “More than 10% of consumers we surveyed reported posting a review of a small business through social media channels such as Facebook, Twitter or LinkedIn, and of these posts, two-thirds say the reviews have been positive.”
Findings by Geography, Gender and Industry The Monitor also looked specifically at key, bellwether states Texas, Florida, New York and California, as well as women entrepreneurs, small business owners by generation, and by industry. Some of the notable findings include:
- In these bellwether states, Texas business owners are the only ones who say that tax cuts are the most important factor in driving business growth
- More than half of entrepreneurs in New York say their customers are taking more time to pay over the last 60 days (54% in NY vs. 32% overall)
- More than four-in-ten Florida entrepreneurs offer healthcare benefits to employees, up from three in ten this spring
- California business owners are increasingly optimistic about the economy and their business prospects (54% vs. 45% in the spring) and the most optimistic compared to these other states (39% in NY, 36% in Texas and 49% in Florida)
- One in five women entrepreneurs say employee morale has worsened at their firms, twice as many as last fall
- Generation Y has the most positive outlook on the economy; Generation X are the most likely to pay themselves a salary and Baby Boomers are most likely to have cash flow issues
- Among industries, manufacturers possess the most positive outlook on the economy
- Services businesses are the most likely to have hiring plans and retailers are least likely to have cash flow issues
