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Archive for March, 2010


Marketing, the Small Business Success Index, and You

March 19th, 2010 ::

Network Solutions and the Center for Excellence in Service at the University of Maryland’s Robert H. Smith School of Business released the findings of their Small Business Success Index survey on February 16.  The index is designed to track the competitive health of the small business sector over time, and the results are always interesting.  Scores in 6 categories are graded; marketing and innovation got a C-.  Let’s see why: 

From celestehodges on Flickr[S]mall businesses perceive themselves at a disadvantage in marketing and innovation.

That statement surprised me, because one of the key findings of the survey was that small business owners have embraced social media: social media usage has increased from 12% to 24% in just 12 months.  Since social media is widely seen as an excellent tool to level the playing field between big, multi-national companies and small, me-myself-and-I businesses, it would seem to me that the small business owners who are using Twitter, Facebook, and LinkedIn (the most popular social media sites) are doing something right with their marketing strategy. 

But then I read this: 

Common marketing methods for reaching potential customers include print advertising (37%), email marketing (24%), social media marketing (19%), telephone sales (18%), direct mail (17%) and broadcast advertising (14%).

I honestly do not understand why so many small businesses still use print and broadcast advertising.  I considered advertising in a local magazine for business women last year.  But then I realized how tiny the chance was that potential customers would not only see my ad but remember it, too.  I’d have to invest a lot of money to run that ad every month. Think about it: what if your potential customers don’t have time to read that newspaper issue, or listen to the radio that week because they’re on vacation, or watch TV because they lost cable during a big snowstorm?   You just spent all that money, and what kind of leads did it generate?  If you’re getting a great ROI using traditional advertising methods, good for you, but if you’re not, time to talk to a marketing strategist, who will save you time and money (in the long run).

Back to social media:

The majority of small business owners who use social media (58%) feel the medium has so far ‘met expectations.’  Another 12% feel it has ‘exceeded expectations’ but twice as many, 26%, feel it has ‘fallen short of expectations.’ 

The fact that 70% of small businesses are finding new customers, engaging with current customers, and generating awareness with social media is encouraging, as it proves that integrating social media into your marketing efforts is worthwhile.   

Half of users, though, said social media has used up more time than expected.  Yes, it does take time, but it is time well-spent.  Being able to so easily connect with people who want, need, and/or use your company’s product or service is an amazing opportunity that was not possible just a few years ago.  Embrace technology, don’t run from it.     

I am active on Facebook (professionally only—I do not use it for my “regular” life), Twitter, and LinkedIn, and I write blog posts for Grow Smart Business.  You need not be active on a handful of sites, though.  Pick one or two and stick with them.  There are lots of guides, white papers, and articles online that contain valuable information on how to use social media effectively.  Spend an hour or two on research, and either put together a new marketing strategy yourself or, like I said above, hire an expert to help you.

Building Your Personal Brand, Part 2

March 18th, 2010 ::

by Patti Nuttycombe Cochran

branding irons

http://www.flickr.com/photos/simonbleasdale/ / CC BY-ND 2.0

Welcome back! Where did we leave off? Oh, yeah, I was driving home the Power of Your Personal Brand and the importance of your Personal Brand’s messaging being clear and consistent, and positive.

Why? Check out this YouTube video. There are some mind-blowing statistics included in this video that one cannot ignore.

Forget “Big Brother”… the WORLD is watching you! One must be vigilant … even militant … about protecting one’s Personal Brand. But don’t get paranoid; get PROACTIVE! Having a constant awareness of one’s Personal Brand offers an on-going opportunity to:

  • define ourselves…
  • redefine or reinvent ourselves…
  • evolve…
  • enhance…
  • add value…

All these actions are POSITIVE and allow us to be nimble and involved in the development of our Public Image. Taking control of your Personal Brand involves identifying the qualities or characteristics that make you distinctive! Ask yourself: What makes me stand out? What’s my greatest strength? What’s my most noteworthy quality?

Then, reflect on this list of qualities and ask the legacy question:

What do I WANT to be known for?

This should take some serious contemplation…good luck and enjoy the powerful introspection and reflection!

NOTE: Want some advice on what I see when I look at the brand you’ve created for yourself online? Email your name and links to your online presence to our editor. She’ll forward the information to me and I’ll choose one or two of you and do a Personal Brand evaluation for you in an upcoming blog post.

Patti Nuttycombe Cochran is Vice President-Client Services Consultant at Right Management, a global provider of Career Transition services and consulting expertise on Talent Management, Leadership Development, and Organizational Effectiveness. Patti is an avid networker interested in building the region’s business and philanthropic communities.

The Math of Sponsorships: Making Sure They Benefit Your Business

March 18th, 2010 ::

There are always plenty of events out there that need sponsorship. On the surface, a sponsorship can be a great marketing opportunity for a business, whether it’s big or small. A sponsor gets direct access to the event’s attendees and, depending on the event, it may be possible to leverage a sponsorship into some media attention. But if you don’t choose the right event, the cost of that sponsorship may just not be worth it. Telling the difference is the key to finding a good sponsorship opportunity.

Who’s the Audience?

The biggest question when agreeing to sponsor the event is who will be attending it. Your business may be offered a sponsorship that directly relates to what your company does — maybe for an industry event. But are the people in your industry also your customers or clients? If not, it can take a lot of work to make a sponsorship really pay off. The best sponsorships offer you access to attendees who will be specifically interested in your product or service.

Finding out who will be attending the event isn’t just a matter of talking to the organization about who they expect to attend. If it’s a reoccurring event, take a look at last year’s demographics. Check out social media: who has mentioned that they’re going on Twitter? Who has posted photos from last year’s event on Flickr? You can even get specific names, whether or not the event organizers can provide them.

How is the Event Promoted?

While it isn’t always a guarantee, the better job the event organizers do at promotion, the more likely you are to get a mention in the media as a result of your sponsorship. Not all events are particularly well promoted: it’s generally better to work with an organization that is going to promote the event as much as possible and, along with it, your company. However, there are a few situations where promoting the event yourself can pay off.

Even a few press releases can help the media realize the importance of an event that otherwise might not get a lot of attention (such as an event put on by a small non-profit). It doesn’t hurt that such promoting will typically earn your company additional media mentions.

Saying No to Sponsorships

When you look at a sponsorship opportunity closely, it may not be such a good deal for your business. You can ask the event organizer to try to explain how the sponsorship can benefit you, but due to the expense of most sponsorships, there are just situations in which you won’t be able to justify it financially. There may be situations in which finances aren’t the only consideration — if there’s a cause that is near and dear to your heart, you don’t have to get anything out of a sponsorship for it to be worth the price. But it’s also okay to turn down the chance to sponsor events if it’s not the right fit.

Image by Flickr user Josh McConnell

Money, Money, Money! Profit Planning for Your Small Business

March 17th, 2010 ::

At every networking event I go to, I feel like I meet a coach of some sort, whether it’s a business coach, sales coach, elevator speech coach, speaking coach, etc.  After a while, they all kinda blur together into one big bunch of dark suits.  I always think, “Coach?  I don’t need a coach!  I am doing just fine, thankyouverymuch.”    

Monopoly

From DavidDMuir on Flickr

Last month, I met yet another coach, but he stood out.  He was totally low-key, easy to talk to, and interesting (meaning, he didn’t talk about himself the entire time).  I told him about the Grow Smart Business blog and how I needed to come up with finance-related topics to write about.  He said he had lots of experience with finance and would be happy to share some advice and ideas.  So we set up a meeting, and on a cold, rainy afternoon, I learned the basics of profit planning.  For someone who hates numbers, I must confess that I was fascinated by the whole process.

In his pre-coach life, David MacGillivray had quite the career.  He founded, operated, and sold a $7 million import/export business, was CEO of a $60 million import/export business, and was a Partner with Ernst & Young.  Obviously, he knows business finance.  He is now affiliated with ActionCOACH business coaching.   

The profit planning strategy he uses with his clients is called 5 Ways to Super Profits, which helps you plan numbers and identify strategies to achieve your goals.  First you look at what you made the previous year, starting with the number of leads you generated.  Then you work your way down to your profit.  To figure out your goals for the current year, you work backwards:  You figure out how much you want to make and work your way back up to how many new leads you need to generate. 

Here’s the formula, which is normally written down the page, but to save space I wrote it across: 

# of Leads x Conversion Rate = # of Customers 

# of Customers x # of Transactions/Customer x Average Sale = Revenue

Revenue x Margins = Profits

There are five things in the above formula you have control over: leads, conversion rate, number of transactions, average sale, and margins.  If you want to make more money, you need to increase one, some, or all of these things. 

Your target conversion rate should be 70-80% (didn’t know that), as it can take a lot of time and money to generate new leads (did know that).  Once you improve your conversion rate, you can decrease the number of leads you need.    

If you can believe it, there are over 300 strategies to help implement your profit plan!  I asked David if he put this all together, and he laughed and said no.  This is based on the book Instant Cashflow by Brad Sugars, who founded ActionCOACH. 

David and I finished up our conversation by talking about social media and social networking, which he doesn’t know much about.  We decided that I would help him with LinkedIn, Twitter, and Facebook, and he would help me refine my profit plan.  Seems like a fair deal, especially since we figured out I could make $108,000 in profits this year by making a few tweaks to what I am currently doing.  For someone in their second year of business, that number sure looks sweet!

You Have Questions… We Have Answers!

March 17th, 2010 ::

by Robin Ferrier

Question mark made of puzzle pieces

http://www.flickr.com/photos/horiavarlan/ / CC BY 2.0

I’ve said it before — in my “welcome” post and on our “about us” page — but I think it bears repeating: This blog is about you.

Why is this important? Because sure, we’re all experts at some level and can write about what we think you need to know. But you’re the ones out there every day living in this world of job searching, interviewing, etc.

So I want to encourage you to send us your questions. What do you want to know about this process? An etiquette question? Resume troubles? Cover letter confusion? No question too small!

So let us know. Email me your question and the appropriate blogger — or bloggers — will post your question (without your name) and a response. I promise!

Robin Ferrier is the editor of What’s Next, Gen Y? and Communications Manager for the Johns Hopkins University Montgomery County Campus. She is also the President of the Capital Communicators Group and the co-chair of the Marketing Committee for the Tech Council of Maryland. She has inadvertently become a frequent career / professional / job hunt resource for friends and colleagues due to a career path that has included five jobs in 12 years.

Putting Your Books in the Cloud: Your Options

March 16th, 2010 ::

Keeping your books may not be the funnest part of running your own business, but it is one of the most important. If you don’t have a good grasp on your money, you can wind up without a business very quickly. But bookkeeping is getting easier. There are now many web-based tools that make the process easier to manage: not only can many tools available import information quickly but they take care of details like backing up your files and even emailing out notifications about late payments. Here are just a few of the options that are now available online.

  • Freshbooks: More than a million users rely on Freshbooks to keep their books. The web-based application handles everything from time tracking to invoicing, providing easy-to-use tools for creating estimates and managing contractors.It automates many steps of the bookkeeping process. Freshbooks’ plans range in price from $19 to $149 per month.
  • Outright: Not only can you handle all your bookkeeping tasks in Outright, you can have the application generate your tax forms based on your books and create reports for your CPA or tax preparer. Even better, Outright is entirely free to use. The site even offers forums where you can ask questions about taxes and other financial issues.
  • Blinksale: Focused first and foremost on invoices, Blinksale makes tracking payments easy. If you’re already using tools such as Basecamp, you can automatically import client data. You can even automatically create follow up emails for such tasks as reminding clients of invoices or thanking them for their payments. Blinksale’s monthly plans start at $6 and reach up to $24.
  • Harvest: One of the key features of Harvest is its ability to track time. Even if you aren’t at your computer, you can use Harvest’s smartphone apps to keep track of the time that you’re spending on specific projects. The web application can translate that information into invoices, budgets and the rest of your books. It can even export all that data into Quickbooks if your tax preparer is one of those folks who requests everything in a Quickbooks file.Harvests’ plans range from $12 to $90 per month.

There are some drawbacks to keeping your books in the cloud. Before you choose any of these options, it’s important to make sure that the security measures meet your requirements. Depending on the type of business you run, you may want to take additional steps to ensure that your customers’ data is protected. It’s also important to make sure that the system you choose meshes well with the type of business you run. Some tools work perfectly for the way a consultant bills but may not be up to handling products. The opposite can be just as true, so take advantage of free trials to actually get in to a bookkeeping tool and see how it will work with your business.

Image by Flickr user edinburghcityofprint

How are dating and searching for a job the same?

March 15th, 2010 ::

by Allison Kapner

Let’s examine Step 1: Sourcing your date or job lead through the internet.

Doll at a computer

http://www.flickr.com/photos/kodomut/ / CC BY 2.0

Step 1: Finding the date, finding the Job….What’s the Difference? NOTHING!

So how do you go about finding a new job and a new mate? This post could really go on for days. In fact, I could probably do a PhD on the topic, but I’m trying to keep this fairly concise.

Back in the day you would pick up the newspaper every day, circle the classified ads that looked appealing, fax in your resume and hope for the best. (Believe it or not, in 2004, I actually got my first job this way!) Nowadays there are endless job search engines, job boards, recruiting agencies and other ways to find jobs using the internet. Talk about information overload!

Back in the day, parents set up arranged marriages, or maybe you and the neighbor across the street were stuck with each other because there were so few options for meeting new people. Dating wasn’t socially accepted the way it is today. Nowadays, there singles events, meet-ups, speed dating, online dating… and the world of online dating is segmented out for every type of person: fitness singles, eHarmony, Jdate, etc. The list goes on and one. Seeing a theme? Information overload!

The Internet: Broken out by effort level, where do you look?

Least amount of work – job search: The most common sites are obviously Monster, Yahoo! HotJobs, CareerBuilder, etc. You scroll, search around and stalk these boards and assume every single job that’s available in life will be posted there. (Hint: They’re not.) LinkedIn has become an obvious tool, and over the past few years, LinkedIn has really grown and been a huge asset when used correctly. Twitter and Facebook are now jumping on the job search bandwagon. My point? The jobs that are blasted to the public result in thousands of applicants for each job, and for some reason people apply to jobs no matter whether they meet the qualifications or not.

Least amount of work – dating: Post on Match.com. I used Match.com once in my life while in NY. The result? People of all shapes and sizes banging down my door. Why? Because it’s easy. You post a quick profile and picture and that’s that. People can contact you as long as you pay and you don’t have to do much work other than throw up a profile.

Large amount of work and focus – job search: If you are really focused – and truly want to be successful – you will go to specific companies’ websites, register (if needed), and stalk properly until they post your dream job, then wait for days, weeks, sometimes months until you watch the job disappear or you get that magical call. You’ll be targeted and strategic and put a lot of work and research into finding the “right” companies.

Large amount of work and focus – dating: Sign up for eHarmony or other sites that make you actually do work. I’ve used it, and wow do they put you through the ringer. If you think someone is attractive, chances are they are too “shy” to use the fast-track way of communicating, which means you go through about a 10-step process just to get to writing emails to each other. But eHarmony is more targeted. They send you matches based on a values profile you fill out. You hope that the system matches people who share similar beliefs and values….and I do have to say the work may be worth it sometimes.

Feeling lucky?
If you are feeling lucky with your job search, check out Craigslist. I’ve randomly heard people that have had found a great job posted there. (It is free after all, a lot of smaller companies tend to use it as a tool.) But watch out for sleazy sales jobs. They try to hit the masses with them. One small piece of advice: I’ve know someone who has tried to date through Craigslist. You probably won’t have the same good luck. I recommend staying away from the single classifieds.

To be continued…


Allison Kapner headshotAllison Kapner is a Relationship Manager in Career Services at the Johns Hopkins University Carey Business School where she is responsible for building partnerships with employers to ultimately create job and internship opportunities for students and alumni. She also advises and coaches students on job search techniques and brings a unique corporate expertise to assist candidates, as her past experience was as an Executive Recruiter in financial services in New York City.

Word of Mouth Is Supposed To Be Viral, But Here's Why It's Not

March 15th, 2010 ::

One of my favorite blogs to read is Duct Tape Marketing – they have a great small business blog that has some really great articles. One that I’d like to call out features renowned marketer Seth Godin. I’ve read many of his books, including Purple Cow, Tribes, etc and now he has 10 reasons why he believes that word of mouth simply isn’t making a difference in marketing. Let’s explore the 10 reasons here:

It’s embarrassing to talk about. That’s why VD screening, no matter how well done, rarely turns into a viral [ahem] success.

Is your product embarrassing to talk about? If it involves a subject that can be pretty sensitive for most people to freely talk about, then you need to understand that word of mouth simply won’t work for you. But if you’re selling the next mobile phone, then yes, WOM will work, but like Godin suggests, things like VD screenings won’t fly through the grapevine causing people to become interested…it’s just not that kosher to talk about openly.

There’s no easy way to bring it up. This is similar to number 1, but involves opportunity. It’s easy to bring up, “hey, where’d you get that ring tone?” because the ring tone just interrupted everyone. It’s a lot harder to bring up the fact that you just got a massage.

Like Godin says, there’s never the right opportunity to talk about something and have it spread via WOM. There’s a time and place and when you’re doing marketing or product management, you need to be aware of these things.

It might not feel cutting edge enough for your crowd. So, it’s not the thing that’s embarrassing, it’s the fact that you just found out about it. Don’t bring up your brand new Tivo with your friends from MIT. They’ll sneer at you.

Keep up with the trends and understand your audience. If you’re trying to sell sneakers to your audience and want WOM programs, make sure that they know that it’s something more than just another sneaker – it’s not a new invention. Don’t expect all the products to have the right surprised reaction – it just won’t happen.

Sometimes bloggers hesitate to post on a popular source or topic because they worry they’ll seem lazy.

Look at the bloggers and give them a good enough reason to write about it. Help them understand and be motivated to write about your product.

You might like the exclusivity. If you have no trouble getting into a great restaurant or a wonderful club, perhaps you won’t tell the masses because you’re selfish…

Do you want your product to be spread by WOM? Who is your target audience…do they want to have that exclusivity? Look at whether you have a luxury item or something that the everyman can own…is there a difference or a distinguishing feature that separates the two?

You might want to keep worlds from colliding. Some kids, for example, like the idea of being the only kid from their school at the summer camp they go to. They get to have two personalities, be two people, keep things separate.

Understand that there are some people out there that separate their work lives from their personal lives along with many other divisions. Is it possible to reach the right person while being aware of potential internal conflicts? I like to separate family from professional contacts and from other college friends, but I wouldn’t necessarily pitch my family on a product that I know my friends would be interested in. Even if my family is the right target, I may not want to be a part of your WOM campaign because I don’t like pitching family. Professional contacts, maybe, but probably not family. Just something to be aware about.

You might feel manipulated. Plenty of hip kids were happy to talk about Converse, but once big, bad Nike got involved, it felt different. Almost like they were being used.

Reassure your audience that it’s not about manipulation. In the end, everyone should realize that your goal, as a company, is to garner more awareness and gain the attention of influencers who will continue to spread news about your product, thereby driving traffic to your site and product.

You might worry about your taste. Recommending a wine really strongly takes guts, because maybe, just maybe, your friends will hate the wine and think you tasteless.

We might not take part in a WOM campaign because we have a lot of self-doubt. Like will this particular blog post become viral? I’m thinking maybe not because I doubt that my blogging standards are meeting the expectations of the reader…if it was, then there’s greater promise that it will be spread virally.

Understand that people talk about you (or not talk about you) because of how it makes them feel, not how it makes you feel.

It’s always about your customers and clients…never about you.

Godin leaves a parting thought on how you can change the game and I think it’s very spot on: What will change the game is actually changing the game. Changing the experience of talking about you so fundamentally that people will choose to do it.

This means that you can’t just simply send out messages and press releases that you want people to pay attention to. Understand the factors why someone will make your product become viral. It’s like how something can be a viral video on YouTube – you can’t force it, but make a good enough video that draws the audience in, and there’s a greater chance of that. Understand your audience and give them reasons why your content and product is interesting – then your message might be spread.

Source: Duct Tape Marketing

Shopping for a Bank, Part II: The Regional Bank

March 12th, 2010 ::

As I recounted in Shopping for a Bank, Part I, I hate math, numbers, accounting, the whole shebang.  Since the March Grow Smart Business theme is small business finance, I was not sure what I would write about, as my posts are normally about marketing.  Then a light bulb went on: Since I am currently bank-shopping, I would use my experience as blog post fodder.   I already wrote about the upside of doing business with a small community bank; specifically, Access National Bank, which is headquartered in Reston, VA and has five branches.  I now turn my sights on a regional bank; next up will be a huge national bank.  My goal is to figure out which type of bank would be most convenient, easiest, and most fun to do business with.

Without further ado: the regional bank.

BB&T LogoI met Mike Moore, Assistant Vice President at BB&T, through networking.  He is a really nice guy, and if you read enough of my blog posts, you know that the simple act of being nice earns huge points in my book.  We sat down together recently, and he gave me some background on the bank.  It was founded in 1872 in Wilson, NC and is now headquartered in Winston-Salem, NC.  Their territory stretches from Maryland down to Florida and over to Texas (after first leap-frogging over Mississippi and Louisiana).  They have 1800 branches, and their bank is in the top ten in the US in terms of size.  They also own the sixth largest insurance brokerage firm in the US, and they have a merchant services company under their umbrella as well.

Just as I asked Access National to run down a list of what makes them unique, I asked Mike to do the same.  Here’s what he said: 

  1. Over the past 18 months, BB&T’s focus has shifted to servicing small to mid-sized businesses rather than just personal accounts.  As a result, Mike and his colleagues are not strictly lenders anymore but rather small business advisors who build a collaborative relationship with their clients.
  2.  Not only does Mike put together banking and financing plans for his clients, but he also meets with and speaks to his clients on a regular basis to find out if their needs have changed.  He is also easily reachable via email or his direct office line.
  3.  “We’re as big as you want us to be, and we’re as small as you want us to be.”  BB&T offers all of the products and services the huge banks do, but only if you need them.  In other words, credit cards, mortgage refinancing, special car loan rates, etc. are not pushed on BB&T clients.
  4. Though BB&T is fairly large, decision-making is done locally, allowing Mike and his colleagues to make quick decisions on behalf of the bank for their clients.  The fact that the employees are empowered to make decisions that put the bank at risk (lending is a risky endeavor, after all) speaks volumes about the leadership at the bank.  It is extremely important for me to work with people and institutions who view trust as a two-way street.
  5. Because BB&T has its own insurance brokerage firm and merchant services company, they can offer lower rates on certain services.
  6. BB&T is still lending money to small businesses, even start-ups.  Mike said the fact that the media constantly talks about restricted access to capital is wrong, and he gave me examples of loans he has recently made to clients.  I wonder if it’s only the huge, TARP-dependent banks that are not lending money?

When compared to Access National, BB&T offers the same highly personalized service.  I would not be a number with them, something I really appreciate.  Naturally, they offer more products and services, but one product in particular is a big deal for me: BB&T offers a credit card, while Access only offers a debit card.  However, Access is across the street from me, while I’d have to drive to BB&T.  Again, not a huge difference, but an important one.

Next up: the huge national bank (and yes, they received TARP money!).

Show Me the Money, or at Least Where I Can Get Some

March 12th, 2010 ::

Remember the film Jerry McGuire? In the film, Cuba Gooding who plays the star football player and only client of sports agent Jerry McGuire, played by Tom Cruise. As he is negotiating for his client, they start trading the mantra “show me the money” and increase in volume until it is a cry for getting the most for what you do.

For the past two years, small businesses have been challenged about getting banks to “show them the money “and get loans or other sources of capital to run their business. Over the last year the Network Solutions and the Center for Excellence in Service at the University of Maryland’s Robert H. Smith School of Business has released the findings of their Small Business Success Index survey. The index is designed to track the competitive health of the small business sector over time, and the results are always interesting.  Scores in 6 categories are graded; on February 16, the third edition came out and capital access got even lower marks this quarter with a D+. We are going to dive in and see what the challenges are facing small businesses with getting access to capital.

Everyone Talks About a Tough Economy. Are We at the Bottom?

If you listen to some news reports, the economy is a major factor holding back the success of small businesses. The economic outlook deteriorated in the first half of the year, and has not improved between June and December.

From the SBSI report, “Has the economy hit bottom? Half of small businesses – 50 percent – have been highly impacted by the downturn in the last 12 months, compared to only 36 percent a year ago. In the past six months, the recession has touched more small businesses. In June, one out of four small businesses (25 percent) had been minimally impacted by the recession, but by December, less than a fifth (19 percent) had been minimally impacted”.

Another interesting factor from the report is that “half of small businesses – 50 percent – have been highly impacted by the downturn in the last 12 months, compared to only 36 percent a year ago”. This data was supported from the fact that in the past six months, the recession has touched more small businesses. In June, one out of four small businesses (25 percent) had been minimally impacted by the recession, but by December, less than a fifth (19 percent) had been minimally impacted.

Getting Creative to Get Capital to Make It Through

The sources of funding relied on by small businesses has changed markedly in the past 6 months as cash reserves and traditional funding sources have disappeared. The following are steps taken in the past two years and how this has changed since the last survey wave in June:

  • Almost half of small businesses (46 percent) have met their capital needs by cutting their own pay; just six months ago, only a third (33 percent) had resorted to this step
  • 42 percent have had to take a loan from owner savings, compared with only 32 percent six months ago.
  • 39 percent have relied on credit cards (compared to 33 percent in June)
  • 33 percent used a business line of credit (compared to 31 percent in June)
  • 21 percent used a bank loan (20 percent in June)
  • 14 percent took out a home equity loan (10 percent in June)

The SBSI survey found that few have relied on outside investors (5 percent) or SBA loans (4 percent), and only a fifth report having relied on no special funding sources in the past two years. Bank loans have become increasingly scarce. A fifth (18 percent) of all businesses indicate the source has gotten scarcer in the past year, compared with just 13 percent noting this in June; among those who took out bank loans, 43 percent believe the source is getting scarcer.

There is a light at the end of the tunnel. And it is not a freight train.

Despite all these challenging issues, companies are learning to be lean and do without making their balance sheets primed and ready as the economy improves. Granted, we do need lines of credit and other sources of capital to fill in gaps when customers don’t pay exactly on time but small businesses must meet payroll and keep the lights on. The economy is improving although not as fast as we would like it to, still there is a light at the end of the tunnel and it is not a freight train. It is a sunnier day and a positive P&L report.

Download the SBSI Report Right Now

If you are reading this on the web site, GrowSmartBusiness.com, you should see a link to the report or if you don’t or a looking at this in a feed reader, you can get the report at http://growsmartbusiness.com/wp-content/files/SBSI_February_2010.pdf