The US economy continues to flourish. But data shows tariffs beginning to weigh on businesses of all sizes.
Yet, 74% of small and medium-sized businesses seem willing to take big risks this year to ensure their success. The data comes from the third annual Global SME Pulse: Smart Strategies to Improve the Bottom Line. Oxford Economics carries out the study on behalf of American Express.
The global survey looked at 3,000 companies with 10 to 250 employees in 12 countries and 16 industries. Senior executives took part in telephone interviews. And they discussed opportunities and threats, business prospects, strategies and investments. The survey also looked at how changes in regulation, financing and government support could better serve small and medium sized businesses.
The data in the survey shows businesses around the world deal with similar challenges. It also demonstrates how this is especially the case when you take into account the industry. Proper planning, innovation, and hiring the best talent remain important regardless of the location.
In a release, Vice President of Strategy, M&A and Alliances for Global Commercial Services at American Express Antonio Gagliardi, said the following:
“When planning for the future, it is also important that SME leaders don’t forget about other routes for boosting business performance.”
“Our study has found that when it comes to innovation, employing talented innovators and fostering an innovative culture are the top drivers for improvement,” Gagliardi added. “To retain their edge, global SMEs should continue to invest in ways of attracting and retaining top talent for their organizations.’’
2019 Small Business Outlook Survey Results
The report says the world’s small and medium sized businesses forecast slower revenue and profit growth. But the report also shows small business owners creating strategies to maintain their top and bottom line.
Globally, sustaining their bottom lines remains the biggest challenge for these businesses in 2019.
In the US, 87% reported the problem of growing revenue also exists. But building their companies’ reputations preoccupied 56% of business owners.
The priority for US firms has changed since last year when the top three concerns were profit margin growth (62%), revenue growth (57%), and building a company’s reputation (41%).
For now, small and medium sized businesses around the world are preparing to scale down. On average they foresee annual revenue growth to drop from 6.9% to 5.2%. Respondents expect profit margins to decrease from 5.7% last year to 4.7%.
What are SMEs Doing About it?
The problem of slow revenue growth is linked to customers. The SMEs in the report said understanding customer demands remains the most important strategy. Sixty-seven percent of the respondents in the US identified this very issue for 2019, a growth of 11% from 2018.
Seventy one percent of small to medium sized businesses are addressing the problem with long-term plans. These plans take into account technological, demographic, and economic changes over the next 5-10 years. They also said they have to take advantage of their small size, which makes them more flexible, as part of their strategy for revenue growth.
The long-term plan also includes delivering increased productivity and operational efficiency. To make this happen, SMEs are forecasting labor productivity to improve by 3.7% a year over the next 3 year.
Productivity and operational efficiency will come if companies are willing to invest in innovation, talent, and technology. In 2019 SMEs said they are more confident in applying the latest technology compared to 2018.
Almost a quarter or 23% of the respondent said they plan on using machine learning, smart algorithms, and artificial intelligence technologies in the next three years.
Adopting these and other technologies come with cyber and data security challenges, which make up one of the tops three concerns for SMEs. Economic uncertainty (63% globally and 63% in the U.S.) and changes to policies, laws and regulations (65% globally and 66% in the U.S.) have topped the list for the past three years.
With the statistics about the failure rate of new businesses, every SMB owner has already taken a huge risk just starting a business. I’m not surprised at all they’re willing to take more big risks to keep it going.
I think that you’ll never really find something great until you take some risks.