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?
Small businesses have created 65% of net new jobs over the past 17 years and employ half of the private sector workforce.¹
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.
Only a third of small business owners are optimistic that the national economy will strengthen this year.
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%).
According to 57% of small business owners, improved demand for products and services was a major contributor to their success.
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.
59% of small business owners have not hired in the last 12 months.
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 Study). 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.
When asked to rate the overall level of risk they are currently taking, 73% of small business owners indicate they are conservative.
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.