Even in a dismal, dog-eat-dog economy, small-business owners tend to define their situation in one of three ways: “Sinking Ship,” “Staying Afloat,” or – here’s the surprising part – “Riding High.” Sinking or barely staying afloat is easy to understand. But it’s the “Riding High” businesses that capture the imagination.
How do they do it? How many of them are there? Where do they come from? Results from a new survey shed some light. The Small Business Monitor, published twice yearly by American Express Open, focuses mainly on small-business hiring and investment plans and general outlook.
The number who see the current economic climate negatively affecting business prospects continues to climb. And in one finding that belies talk of recovery, the number of entrepreneurs who see things improving fell from 26 percent last fall to only 18 percent now.
But there’s another group whose experience and outlook is dramatically different. About 21 percent of business owners surveyed say they are flourishing despite the bad economy. Here are some secrets that set the successful “smooth sailing” businesses apart:
• They don’t need to borrow. Most growth firms (56 percent) generate enough revenue to cover working capital needs compared to 33 percent of “staying afloat” and just 13 percent of “sinking ship.” And this in turn helps fuel additional investment in the business. Two-thirds of growth companies say this economy has had no impact on their ability to invest in their firms, compared to one-third of “staying afloat” and just 12 percent of “sinking ships.”
• They get paid faster. Despite the economy, just 13 percent of growth firms say customers have taken more time to pay compared to 34 percent of “staying afloat” and 47 percent of “sinking ship.” One big factor is the Internet. Growth firms are almost twice as likely to use online payment solutions such as PayPal (19 percent) compared to just 11 percent of both “staying afloat” and “sinking ship” businesses.
• They look for recession opportunities. Small-business owners who’ve seen success in recession have approached the challenging economy in different ways than sinking ships. For example, successful firms are much likelier to benefit from weakness in the commercial real estate market. Nearly one in five say lower real estate costs (rent or a property purchase) have presented them with opportunities to cut expenses or expand on the cheap. That compares to just 13 percent of those staying afloat and a mere 2 percent of sinking ships. •
Daniel Kehrer can be reached at
editor@business.com.
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