Businesses that are seeing increased revenues during tough economic times have six things in common, according to a survey of nearly 1,100 business owners conducted by the Guardian Life Small Business Research Institute.
"Growing revenues during the recession was no small feat. However, insights from the Institute's most recent Index provide a fresh understanding of how higher-growth small business owners achieved their success," said John Krubski, research advisor to the Institute, which is part of the Guardian Life Insurance Company. Businesses surveyed ranged from sole proprietors to those with more than 5,000 employees.
Based on comparisons between respondents who projected 2011 revenues higher than 2009 and 2010, and those who projected "about the same" or "declining" 2011 revenues versus the prior two years, Guardian recommends the following six steps small business owners can take to improve their revenues in the year ahead:
1. Be Prepared for Contingencies. Rather than react to business difficulties as they emerge, establish credit lines and build savings. Nearly half of higher-growth companies in the Guardian sample had cash reserves that enabled them to weather tough economic times. Only 35 percent of companies that just maintained their revenues were able to rely on such financial resources.Companies with cash reserves are more likely to grow during recession
2. Seek Advice from Professionals. Owners of higher-growth small businesses reported that they relied on advice from accountants, financial advisors, and informal business support groups at consistently higher rates than did owners of companies that had revenue declines.
3. Use Borrowed Funds Strategically. Investing borrowed funds in R&D yielded the best return for 58 percent of higher-growth small business owners. Borrowing to open new offices, build production facilities, or add new capabilities or staff was more likely to correlate with a drop rather than an increase in sales.
4. Sharpen Managerial Skills. 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.
5. Avoid Obsessing about the Business. Perhaps easier said than done, but 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.
6. Have a Clear Vision. Possessing a farsighted view of where the company is headed is strongly associated with higher revenues. While 58 percent of higher-growth companies surveyed had a clear vision of their businesses, only 39 percent of revenue-declining businesses did.
See the Guardian Life Index at www.smallbizdom.com for more information.