The U.S. Small Business Administration (SBA) defines a small business as an enterprise having fewer than 500 employees. These businesses continue to add more net new jobs than large businesses, with the Bureau of Labor Statistics (BLS) reporting that small businesses made up 39 percent of net new jobs in the first three quarters of 2014.
According to the SBA, almost all firms with employees are small, making up 99.7 percent of all employers nationally. New research from American Express OPEN indicates that the majority (72 percent) of small business owners are prioritizing growth. Roughly two-thirds of surveyed small business owners have created a formal plan for growing their business. Over 25 percent of business owners say that increasing customers is the most important aspect of business growth, followed by increasing revenue (24 percent) and increasing profits (23 percent). When looking at avenues, 33 percent cite expansion into new markets as a growth opportunity, while 33 percent consider diversifying products and services to be the key.
Recent studies focusing on this large segment of American businesses have revealed some interesting trends about small business growth.
Trend 1: Double Digit Growth
According to a survey by Bredin Business Information, Inc., 70 percent of respondents expect to grow their business this year, and of those, more than half expect to grow by more than 10 percent.
Source: Bredin Business Information, Inc.
Trend 2: Customer Relationships are Key
Small business owners and executive were asked to rank their sales objectives over the next 12 to 18 months, which revealed that external-facing metrics and strategies were considered most important across the board.
The top five sales objectives were:
Acquire new customers
Create deeper customer relationships
Grow the value of existing customers
Improve reputation with prospects and customers to that of a trusted partner or strategic advisor.
Internal-facing metrics, including account penetration or reducing sales cycle time, ranked near the bottom of the list, indicating that small businesses are focused on improving customer relationships.
Trend 3: Women-led Companies
According to the National Women’s Business Council, less than 30 percent of all U.S. Businesses are led by women, and only 15 percent of Fortune 500 companies are. However, of the small-business leaders surveyed, 40 percent were women.
Trend 4: Marketing, Sales, and Service
Respondents listed new business development – which is often considered a sales metric – as their top marketing challenge. Customer satisfaction, traditionally a service metric, is considered to be the number one performance indicator.
Traditional marketing concerns such as unique and original content, staying up-to-date with marketing technology and trends, web traffic, and lead generation were also among top areas of interest. A separate survey found that 56 percent of small businesses spent less than 3 percent of their total revenue on marketing and new customer acquisition in 2014.
Marketing Challenges for Small Businesses
Source: Bredin Business Information, Inc.
Trend 5: Alternative Capital Flows
It is well known that small businesses require cash to grow, but the traditional lending market is no longer working for everyone. Over the past year, there has been an emergence of new alternative flows of capital, which are disrupting the market. Square’s cash advance and new peer-to-peer lending products are examples of some of these alternatives.
Trend 6: The Internet of Things and Cloud The Internet of Things is no longer just for larger companies, and has an impact on even the smallest of businesses. Small businesses are turning to open programming interfaces that are designed to simplify the process of accessing data from Internet-connected devices and using that data towards business goals.
More and more small businesses are adopting cloud computing. According to Parallels SMB Cloud Insights, the global market for cloud services for small and mid-size business is projected to expand to $95 billion by 2015.
“As the U.S. economy has improved, small business owners are becoming more optimistic and are thinking about their next growth opportunity.” ~SVP and GM at American Express OPEN