Small business owners must improve productivity and differentiate their businesses to overcome continuing economic challenges and compete with larger companies, according to a new survey.
This is a key conclusion of The Guardian Life Small Business Research Institute, New York, which has identified six trends that small business owners are likely to face in 2012. The institute extrapolated many of the trends from research the organization fielded in October 2011, which surveyed nearly 1,100 business owners of various sizes.
In addition to identifying critical issues for small business owners in 2012, The Institute outlined six actions owners can take to prepare for likely challenges in the coming year. Among them:
● Develop and deploy integrated action plans. A short-term plan is most likely to succeed, the survey says, if it is part of a comprehensive, proactive long-term planning process.
The Institute’s research found that 4 in 10 small business owners (44 percent) believe that the economy is the “one thing that stands between where you are today and growing your company.”
● Consider where borrowed money can do the most for one’s business. In considering the cost of debt, business owners responding to the Institute’s survey offered the following priorities relative to borrowing money to fund their operations: upgrading equipment (91.2%); short-term cash flow (81.3%); investing in marketing (78%); and adding people (60.7%).
● Improve productivity. A difficult economy presents an opportunity to right-size a company for long-term success, the survey says. Small business owners should ensure they have the right people in the right positions so they can focus on growing the business.
According to Institute data, 14% (or one in seven) of small business owners surveyed said they would probably close down their companies were revenues to drop drastically over the next 12 to 24 months. For sole proprietors, the figure increases to 23.3%.
● Look for ways to meaningfully differentiate. Small business owners should seek ways to demonstrate how their company is more responsive to customers or able to provide more customized, localized or cost-efficient service. They can also consider partnering with complementary businesses to offer a broader range of resources to customers that traditionally prefer dealing with larger companies.
Larger companies will aggressively market to prospects considered “too small” in the past. Larger companies with which small businesses compete will be more likely to “poach” customers they have traditionally considered to be outside of their target market segment, the survey says.
● Be optimistic. If small business owners exude a sense of confidence, optimism and focus, their customers and employees will feel it and respond accordingly, the survey says. More than in most years, attitude in 2012 will be extremely important to success. Further, when it comes to future legislation, small business owners should not get distracted, but rather stay on their path.
Election-year campaign rhetoric will create an atmosphere of tension and negativity. Small business owners should expect that presidential candidates and members of the media will devote a great deal of time and attention to how “bad” things are, or how “bad things might be.” This negativity can further dishearten the customers, salespeople and workforce of small businesses.
● Cut deals that create certainty for vendors, customers and the business. Small business owners should offer vendors and large customers commitments in return for price reductions or better payment terms. This includes meeting with staff, advisors (accountant, attorney, financial planner) and key customers to do a “start from scratch” review of everything that costs—and makes —the company money.
The survey says that trade-offs and deal-making will characterize 2012. Vendors and service providers will be more willing to trade a degree of their profitability for the certainty of doing business.
More information about The Guardian Life Small Business Research Institute can be found here.