SBSI Wave-5
Small Business Financial Success
The year 2010 has proven to be much better for small business growth than 2009. And, the year finished better than expected when owners were asked to forecast how the year would turn out back in June. This situation is totally reversed from a year ago when businesses came in worse than the previous year, and the results were worse than expected.
Figure 23 reveals the share of businesses that indicated the revenue for the fiscal year did/would gain over the previous year, decline over the previous year, or remain unchanged. The Small Business Success Survey is updated about every 6 months, so when owners are asked this question in the middle of the year, they are asked to make a projection.3 Comparing the middle-year projection with the end-of-year reality tells a story of how small businesses try to predict the future and adapt to unexpected change. In June of 2010, 31 percent expected an increase in year-on-year sales and 23 percent expected a decrease (only 2 percent declined to answer). By January 2011, it was clear that the sales trend for 2010 came in much better than predicted by small businesses in June, with 38 percent reporting a gain and only 15 percent a drop in sales.
Figure 23
The implication of this gap between forecast and actual sales last year was that owners had to adapt to an unexpected uptick in sales. Based on past survey waves, we know that owners faced many challenges from the recession including: potentially being short-staffed from downsizing, drained financial reserves, and worry that the economy would not fully recover. We believe that one response to this unexpected but improving sales situation late last year was to return to technology investments: websites went up (for the first time, or being restored) and social media activity regained. The unexpected uptick may also explain why small businesses experienced problems with their workforce: they were trying to meet increased demand when staffing and morale were down.
The sales trends in Figure 23 (previous page) also reveal that small businesses are doing the best since the start of the recession. Comparing gainers with losers, the net sales performance for different years is as follows:
- 2008 was a no-growth year: 30 percent gained over 2007 and 29 percent lost revenue (see Dec/Jan 2009 Wave)
- 2009 was a shrinkage year: 24 percent gained over 2008 and 33 percent lost revenue (see Dec 2009 Wave)
- 2010 was a growth year: 38 percent gained over 2009 and 15 percent lost revenue (see Jan 2011 Wave).
In 2010, 52 percent of small businesses made a profit and only 16 percent lost money (see Figure 24). This is better than a year ago when 26 percent indicated a loss for 2009. When comparing what business owners projected in the middle of the year with what actually happened, it appears that 2010 roughly matched what owners expected in June, while 2009 came in worse than expected.
Figure 24
While the economy and the financial prognosis fluctuated over the past two years, an area of constancy is the degree of satisfaction with being a small business owner. Small business owner satisfaction has remained steady over the past year, with 61 percent of owners being highly satisfied and only 7 percent being dissatisfied, almost identical to a year ago (see Figure 25).
Figure 25
