Small businesses have created 65% of net new jobs over the past 17 years and employ half of the private sector workforce.1
Americans place a lot of hope on small businesses to create jobs and help fuel the country's economic growth. How are small business owners feeling about their future? What are their concerns and their views on success? Have they changed over the past year and if so, how?
The Hartford's second annual Small Business Success Study surveyed over 2,000 small business owners nationwide for answers to these questions and more. Here's what we learned.
Success Mixed with Caution
According to the 2012 study results, small business owners see the economy as a major risk and barrier to growth. Only one-third (33 percent) of small business owners are optimistic that the national economy will strengthen in 2012, down from more than half (61 percent) reported in the company's Spring 2012 "Pulse" Survey.
Despite the struggling economy, many small business owners feel their enterprises remained successful in 2012. Whatever their personal criteria – whether to earn enough for a comfortable lifestyle, to maintain the status quo or to simply do what they love, 61% of respondents believe their businesses are moderately or very successful. Seven percent say their businesses are extremely successful, up from 4% in 2011.
What do small business owners see as major contributors to their success? Most say an increased demand for their products and services (57%) is the most significant contributor. Other factors include fewer governmental rules and regulations (47%) and an improved pool of qualified talent (43%).
An Eye on Growth and Jobs
Yet, the realities of today's economy have caused some small business owners to lower their expectations for growth. Looking to the year ahead, half of businesses (52%) plan to simply maintain their current size. Only four in 10 (41%) say they will seek to grow their business, a drop from 51% in 2011.
Not surprisingly, small business hiring has slowed. Cautious about taking on new payroll expenses, most business owners (59%) have hired no new employees over the past year, and 67% do not expect to hire in the year to come.
A Silver Lining
While uncertainty and a slow economy certainly pose hurdles to small business owners, they can also have their upsides. Most owners responding to our survey said they've used recent down time to make positive shifts in their business, such as to cut costs, strengthen their client relationships, prospect for new customers and refine their business strategies. These measures have helped them find new operational efficiencies and position their businesses for growth in the future.
For now, the bottom line is increasingly important to most small business owners, and they're more cautious when it comes to taking business risks. (73% of those who responded to the 2012 study consider themselves cautious compared to 49% in the mid-year 2012 Pulse Survey). But they also tell us that success isn't solely about profit and growth. It's also about quality of life, and it's in those areas that small business owners find their greatest satisfaction.
1 Source: U.S. Dept. of Commerce, Census Bureau and Intl. Trade Admin.; Advocacy-funded research by Kathryn Kobe, 2007 (www.sba.gov/advo/research/rs299.pdf) and CHI Research, 2003 (www.sba.gov/advo/research/rs225.pdf);U.S. Dept. of Labor, Bureau of Labor Statistics.
Small Business Success Study Methodology
The Hartford Small Business Success Study was developed by The Hartford and fielded via telephone by Braun Research from August 2–14, 2012. The nationally representative sample consisted of 2,004 small business owners of companies with fewer than 100 employees and annual revenue of $100,000 or more that have been in business for at least one year. There is a margin of error of ±2.19% and results are reported at the 95% confidence level.
For more information on The Hartford 2012 Small Business Success Study, visit:
www.thehartford.com/successstudy
Tips to add value, strengthen client
relationships and grow your business
Small business owners are taking advantage of the slower economy by working to position their businesses for future success, according to The Hartford's 2012 Small Business Success Study. As their agent, you have a unique opportunity to add value by helping them assess how the changes they're considering could impact the solutions they need.
Jump-start conversations with small business customers about planning for their future with these insight-driven tips:
- Understand changes to your customers' business strategies
As businesses refine their strategies, they may not be thinking about how changes to their business models could impact their insurance needs. Review customers' business operations to help identify changes that may impact the type and amount of coverage they need.
Look for:
- Geographic expansion. Opening a new office in another state could mean insurance for a new facility and additional equipment. Also, consider state-specific laws related to workers' compensation coverage.
- Increased online presence. The Internet can be a powerful tool; however, business owners also need to consider the risks. For example, collection of sensitive customer data, like credit card information, can increase a business' risk of a data breach.
- Pursuit of new investors or contracts. Businesses considering new opportunities may need to comply with different insurance requirements, such as increased liability limits or errors and omissions coverage.
- Help business owners proactively minimize business risk
Business owners appreciate your guidance to help identify threats to their businesses and offer solutions to mitigate their risk. For example, a growing risk for small businesses is liability for the loss or theft of sensitive customer or employee data. Consider these facts:
- 71 percent of data breaches investigated in 2011 involved organizations with 100 employees or fewer1
- 95 percent of credit card breaches and 75 percent of medical record breaches involved small businesses2
- The average cost of a data breach in 2011 was $194 per breached record3 — that's nearly $200,000 for a breach involving 1,000 records.
- The cost of a data breach can vary significantly depending on how effectively it is handled.
With today's more stringent laws protecting consumer and employee data, the rise of mobile devices and more sophisticated hackers trying to obtain valuable data, the risk and potential impact of a data breach continue to grow.
Talk about purchasing The Hartford's data breach endorsement, which provides first party response expense and third party defense and liability coverages. Customers also benefit from access to services to help reduce the likelihood of a breach and the resources to assist if one occurs.
- Help customers mitigate the impact of the unexpected
Given the impact of recent weather events, business continuity planning is critical in helping to prepare for and recover from a disaster. Consider these statistics:
- One in five small business owners has experienced a loss or business interruption4
- 30 percent of small businesses say they closed their business for at least a day due to one or more natural disasters5.
- After a major disaster, approximately 25 percent of small businesses failed to reopen6
Encourage customers to conduct a risk assessment to identify potential vulnerabilities. Preparing in advance and helping to ensure customers have the right coverage can help minimize the impact of a loss and speed recovery.
It is also important to have coverage in the event of a business interruption. If a business suffers a loss of income due to damage to property at their premises, The Hartford offers business income and extra expense coverage with no waiting period.* The Hartford also offers Stretch® endorsements that include coverage for loss of business income due to an off-premises utility interruption and reimbursement for spoilage due to a temperature change. Coverage is typically available after 12 hours without power and can mean the difference between resuming "normal" operations or struggling to make up for the loss for weeks, months or even years to come.
- Remember that business owners think of their employees like family
Many business owners consider the ability to compensate employees well enough to live comfortably an important measure of success7. Help customers explore affordable options such as voluntary, or employee-paid benefits. The Hartford offers voluntary group life insurance for as few as four employees and voluntary disability benefits for businesses with 10+ employees.
According to OSHA, most work-related deaths, injuries and illnesses are preventable8. Encourage customers to take advantage of OSHA's safety resources for small businesses
.
If an employee does suffer a work-related accident, effective management of a workplace injury claim is critical to the injured worker's recovery and the health of your customer's business. Help your customer select a carrier that understands the connection between appropriate medical care and favorable outcomes for both the employee and the employer.
- Offer solutions that help business owners manage cash flow
The Hartford's XactPAY®** workers' compensation pay-as-you-go billing solutions enable payment of premiums based on actual payroll. This reduces a large down payment and mitigates audit surprises — helping to improve cash flow.
Committed to helping small businesses prepare, protect and succeed.
Click here for 5 Tips to share with your customers
1 Percentages are approximate based on the Verizon 2012 Data Breach Investigations Report.
2 Percentages are approximate based on the Verizon 2012 Data Breach Investigations Report.
3 2011 Cost of a Data Breach Study, United States, Ponemon Institute LLC, Report Date: March 2012
4 The Hartford's 2012 Small Business Success Study
5 National Federation of Independent Businesses — SB411 Facts
6 Institute for Business & Home Safety, "Leaders in Disaster Recovery Planning Announce Partnership to Help Businesses Prevent Loss", 9/30/04
7 The Hartford's 2012 Small Business Success Study
8 Occupational Safety and Health Administration, "Injury, Illness Prevention Programs," White Paper, January 2012.
* Except in cases of Civil Authority.
** Purchase of a Hartford workers' compensation policy is necessary to use XactPAY®
Certain coverages, features and credits vary by state and may not be available to all insureds. You should speak to a Hartford representative to resolve any questions. Possession of these materials by a licensed insurance producer does not meant hat the producer is an authorized Hartford agent. In the event of a loss, the terms of the policy issued will determine the coverage provided. All information and representations herein are as of November 2012.
