The small business community feels their local and U.S. economy are strong. This according to the annual Small Business Pulse Survey from SunTrust. But only 49% of the respondents in the survey said they have a clearly stated plan for business growth.
Considering the strong economic sentiment small businesses expressed, not having a growth plan is somewhat counterintuitive. But it also highlights the need to educate small business owners on the importance of creating a growth plan.
Business Growth Plan
Even if a small business doesn’t go through with the actual plan, the process of creating a plan is a great learning opportunity.
Reggie Davis, head of Business Banking at SunTrust Bank, explained how a plan can provide insight into a business. In the press release Davis said, “By developing a growth plan and discussing it with partners and advisors, an entrepreneur can gather insights that inform decisions, increase their confidence, and create a positive impact on their business, employees and community.”
The annual SunTrust Pulse Survey looks to identify small business sentiment and find solutions with the challenges they face. This year decision makers from 515 U.S. small businesses took part in the survey from February 26 – March 8, 2019.
The businesses in the survey generate annual revenue between $100,000 and $5 million.
A Strong Economy
According to SunTrust, the small business community feels strongly about their local (68%) and U.S. economy (65%). And their positive outlook in the economy has translated into improved business operations.
Sixty-seven percent said their business is strong, while 85% stated their financial wellbeing is the same or better than last year. The respondents said the result has been less work-related stress.
With such a strong outlook, why are not more small businesses taking advantage of the economic environment and expanding?
Planning and executing the expansion of a business is challenging. For small business owners without the expertise to make it happen, it is more problematic. And the data in the survey in part points this out.
Half or 49% said they had no plans for growth. But of those that do, only 33% have shared it with their external business partners. And only 27% have shared their plan with an advisor.
In the report SunTrust says not having a plan can have negative consequence on the business, such as cash shortfalls. When a business monitors its cash flow properly, it can have a better picture of its financial health.
Davis said, “Monitoring cash flow is critical to the health of a small business and 30 percent of business owners report they need to improve in this area.”
On the issue of cash flow, 37% said they experienced a cash shortfall in the past year. And 3 in 4 or 75% faced cash flow variations due to seasonality (36%), expenses (28%), and customer loss/gain (20%).
When these cash shortfalls take place, business owners use personal and business resources for the cash infusion. They use personal assets (36%), business cash reserves or line of credit (26%), forgo salary (25%), and take personal loans (19%).
In conclusion, SunTrust recommends for business owners to prepare for growth and understand the financial options available to them. This includes controlling cash flow, protecting your assets, increasing profitability, and planning for business transition.
A growth plan is essential as with a continuity plan. This is to ensure that the business remains stable in the years to come.
Nicely written Michael. Most small business owners have no growth plan. Some have a starting plan and the majority have no plan.
The most common approach taken by budding entrepreneurs is to “take it as it comes.” Stephen Covey has rightly said, “Begin with the end in mind”. Of course, things will never go as planned. However, you at least know that things are not going as per the plan. Without a plan, you don’t even know whether you are heading on the right track or not.
Most new entrepreneurs have a strong skill in one area, which is the technical area. They find it unnecessary to learn other aspects of growing their business. Unfortunately, this behavior leads to their demise.
Thank you very much.
Great to hear your insight on the matter.
I am glad you addressed the “budding entrepreneur.” If they are able to implement what you suggest early in their development, they won’t have to wait until their second, third, or more ventures before they learn from their mistakes.