Even in the midst of the recession, some small businesses still managed to grow. Ever wonder how they do that?
A recent American Express OPEN Small Business Monitor survey offers some insights. Let’s take a look at four points we can learn from that survey about how the strongest small businesses are surviving and thriving:
(1) Customer-generated revenue is king. The majority of the strongest small firms – those designated as growth firms in the OPEN Monitor because they kept growing during the recession -- say they internally generate all the cash they need for working capital. Compare this with just 33 percent of firms who said they were just “staying afloat” or 13 percent of the firms who described themselves as “sinking ships”. So if you are tempted to pursue loans or investors, perhaps it would be better to put that effort on generating more sales. Tip: Better understanding of your sales funnel will give you insight into how to increase the number of sales you are generating.
(2) Use online invoicing and payment solutions. If you’re going to use customer-generated funds to fuel your growth, better make sure you get paid fast. One way is through online payment systems like PayPal. More of the growth companies say they use PayPal, than the “staying afloat” and “sinking ship” companies. This may be one reason why just 13 percent of growth companies complain they have waited longer to be paid during this economic downturn compared with 34 percent of “staying afloat” companies and 47 percent of “sinking ship” companies. Adopting online invoicing and payment solutions can be one way of making sure you are paid quickly and keep the cash flowing.
(3) Invest in tech improvements: If you are going to spend, let it be for technology, according to business owners. Technology can dramatically increase your productivity, resulting in more output without necessarily adding to your staffing expense. It’s no coincidence that of companies that plan to spend, technology is the biggest category of planned investment expense (39 percent). Office equipment comes in a distant second at 20 percent; office furnishings at 11 percent; manufacturing or production equipment at 8 percent; and real estate at just 5 percent. Tip: Investing in the right technology can help you take your business to new levels and develop and retain more customers. The key is to learn the principles of leveraging technology to make your business more effective.
(4) Watch costs, but get creative: The economy has caused 64 percent of businesses to rethink the way they run their business with a whopping 70 percent planning to cut costs over the next six months. Thirty-nine percent say cost cutting has eliminated spending on marketing and sales, the very place entrepreneurs need to be focusing in order to grow their cash flow and their business. But improving sales and marketing is not always about spending more. Many times it is about spending smarter... and getting creative. Tip: Even if you’re like the majority and have to cut expenses, rethink your processes and get more creative to keep marketing and selling aggressively and make up for lower expenditures.See the American Express OPEN Small Business Monitor survey for more details. The Monitor is conducted semi-annually. It is a survey based on a nationally representative sample of 734 small business owners/managers of companies with fewer than 100 employees.