The latest survey by American Express OPEN Small Business Monitor reports similar results to the NFIB survey I wrote about earlier this month. Like the NFIB survey, this one also found entrepreneurs to be somewhat more optimistic, but still very cautious.
- More than half (55%) of entrepreneurs have an optimistic outlook on near-term
business prospects, up from 45% in March 2009. Keep in mind that this is a sample of small business owner still in business. Like I said earlier, who wouldn’t be a bit more optimistic if they have survived the rash of small business closings over the past few months! - However, only one
quarter (26%) report expanding opportunities for their business - Six in ten (63%) do not think the worst of the U.S.
economic woes are over — I agree! - Nearly one in six (17%) say they risk going out of
business in the next six months because of the economy.
As someone who teaches lots of aspiring and nascent entrepreneurs from Generation Y, I was interested in the survey’s findings about this group when compared to older entrepreneurs:
- They’re most likely to hire (36%, vs. 25% of Gen X and 20% of Boomers )
- They’re most likely to have capital investment plans (58%, vs. 41% of Gen X
and 39% of Boomers) - They’re most willing to take a financial risk (67%, vs. 52% of Gen X and 47%
of Boomers) - They’re least likely to have cash flow issues (53% versus 59% for Gen X and
64% of Baby Boomers) - They’re least stressed out by the economy (57% versus 72% of Gen X’ers and
71% of Boomers) - They’re most likely to implement employee-friendly policies to battle the
recession. Gen Y will allow employees to maintain a flexible schedule (44%),
Baby Boomers will institute a hiring freeze (41%) and Gen X entrepreneurs will
institute a salary freeze (39%)
Some of this is the optimism of youth and some may be due to the fact that they have never experienced a deep recession before. One of our learning goals in our program is to bring undergraduate students down to a more realistic understanding of the challenges and struggles they will face. This has become a key set of assessment items for our program’s effectiveness.
Entrepreneurship can be stressful enough during good times, but during tough times we see that the uncertainty and struggles resulting from managing the finances of a small business during the recession are taking its toll:
- Nearly seven in ten entrepreneurs (68%) are “stressed out” by the economy and
three in ten (31%) say that the current economy has caused them to question
their decision to become an entrepreneur. - 60% of those surveys are experiencing cash flow issues. The biggest
cash flow worry for business owners is the ability to pay bills on time (26%).
When cash flow concerns arise, business owners are most likely to dip into their
own pockets: 32% of business owners will use personal or private funds, and one
in four (25%) will put off purchases. Others will use credit or charge cards
(13%), obtain and use a line of credit (12%), lease rather than purchase
business equipment (4%), or get a short-term loan in order to improve cash flow
(3%). - Nearly half of entrepreneurs (45%) are looking to access capital from external
sources in order to run their businesses. One out of five business owners (19%)
say they are experiencing difficulty accessing capital. To secure the funds they
need, business owners are tapping a variety of sources, including using a bank
loan (14%), using business or personal credit cards (each 13%), tapping personal
savings (10%), borrowing from a friend or family member (3%), and private
equity/venture capital or home equity (each 2%).
I have been stressing the need to hunker down for some time. Entrepreneurs are becoming more conservative:
- Concentrating on current customers. Forty-one percent of small
business owners say their top priority over the next six months is maintaining
current sources of revenue. By comparison, only one quarter (26%) say they are
focused on growing their business, which is the lowest number for growth in
Monitor history. - Avoiding risk. Half (49%) say they are not willing to take on
financial risk to grow their business, an all-time high for the Monitor.