Introduction

The prolonged downturn is taking its toll on small business owners, forcing them to cut their pay and take steps to increase efficiency. This dire environment has not stifled innovation. The most successful small businesses are competing by offering superior service and creativity, and small businesses are rapidly embracing social media as a way of keeping them engaged with customers and tapping knowledge resources. The year ahead will be critical in determining the success of small business, and there is cautious optimism that the economic environment will improve.

Because of the importance of the small business sector, which accounts for over one out of every three jobs in the U.S., Network Solutions, LLC and the University of Maryland’s Robert H. Smith School of Business have partnered to track the competitive health of small businesses over time. The survey is conducted by telephone and the baseline survey wave (Wave 1) was fielded a year ago in December and January among 1000 small businesses. A second survey wave (Wave 2), was conducted in June with 500 small business owners, and a third wave (Wave 3) was completed in December 2009 with another 500 small business owners, providing six month trending increments for the past year. (The methodology is discussed in greater detail in the last section of this report, About the Small Business Success Survey.)

A central focus of the SBSI is competitiveness, which is defined here as the level of success a small business achieves in conducting the organizational activities critical to its short and long term viability. The more competitive a small business is, the more likely it is to meet the personal and business goals of its owners and show positive financial results. The Small Business Success Index (SBSI) is composed of 6 distinct dimensions that capture competitiveness, as shown in the report card in Figure 1.

The SBSI ranges from 0 to 100, and is currently 75, which can be viewed as a “solid C”. This level is unchanged from a year ago, and other data reported here suggest that the prolonged recession has restrained the ability of small businesses to improve their situation. While the overall numbers are largely unchanged, small shifts are occurring on selective indicators of success. For example, small businesses feel more successful in getting their customers to help find new business for them and in keeping their staff productive. It would seem that customers and employees alike are doing their best to help small businesses deal with tough times. This wave of the SBSI provides considerable detail on how the economy is affecting small businesses and how they are responding.

A major obstacle small businesses face today is in the highly important area of capital access, which consists of a small business’ ability to meet short and long range financial needs. The report for this wave sheds light on this problem, with details and trends on how small businesses finance their needs and how the capital crunch affects owners personally. This wave of the SBSI also provides depth on other issues and opportunities for small businesses, including the triggers of entrepreneurship, where small businesses get new ideas, the rise of social media as a marketing and management tool, and the global reach of small enterprises.