Entrepreneurs weathered the recession storm and are feeling confident again
The spirit of entrepreneurism is alive and well it seems. One of our business partners, The Hartford,
conducts an annual survey of small business owners, and this year’s results reflect optimism that their
companies will grow and prosper. However, those companies continue to be risk averse – that’s where
we can help.
Are You Successful?
The Hartford’s 2014 Small Business Success Study finds that 77% of business owners feel that their
companies are currently “successful.” That’s a significant increase from 2013 when only 70% felt that
way. Better still, 35% describe their businesses as “extremely or very successful.” That is a 52% increase
in the number of owners who were so enthusiastic since 2011 when fewer than 1 in 4 felt that way.
Of course, small business owners have a slightly different perspective on success compared to Wall
Street number-crunchers. For entrepreneurs, their lifestyles and personal satisfaction are most
important. The owners surveyed most often cited their companies’ ability to support their lifestyle
needs and allow them to work at a job they love as a component of that success, in addition to the
businesses’ profitability and growth potential. For example, 83% of respondents only needed their
businesses to make enough money for them to enjoy a “comfortable” lifestyle (up from 77% in 2013)
compared to 52% who included “making a lot of money” as a necessary component of success (up from
Yet, Lessons Were Learned in the Great Recession
Despite their feelings of success, small business owners have not forgotten the 2008 crash that
bankrupted so many of their competitors. Entrepreneurs tend to be risk-takers; however, they are not
reckless in that regard, and today, they are even less so as reflected in the 55% of respondents who
admitted that they are more financially conservative today because of the recession. Their reticence
shows up in other numbers as well:
Overall, 65% of small business owners have not added employees over the last year. Of those
respondents who felt their businesses were successful, that number is still high at 57%. Even less
encouraging for our job market was their response when asked whether they would hire if given
$100,000 to invest in their companies – only 8% would add new employees with the money.
Financing the Business
Before the recession, entrepreneurs were eager to tap the financial markets for new capital. For the
small business owner, that means a loan from a financial institution or the Small Business
Administration. Today, those owners are borrowing less, and when they do, it’s more often from
personal sources of funding, such as their own savings and 401(k) or loans from family and friends. As
recently as 2012, commercial loans were the primary source of funding for small businesses.
It’s not that capital markets have dried up either. Almost half of the owners believe it is not difficult to
obtain a business loan, an increase of 39% since 2012; however, only 31% have done so compared to the
36% who have accessed personal sources for necessary funding. And the lessons seem to have been
learned by younger entrepreneurs as well – 60% of those business owners have opted for personal
funding rather than the commercial markets.
The survey asked small business owners their opinion regarding an increase in the minimum wage, and
the results were not completely clear. On the one hand, two-thirds of the respondents favor increasing
the federal minimum wage. Yet, more than half admit that they would take no action if those wages
increases occurred. That’s probably due to the fact that 81% already pay their employees more than the
minimum wage – they may simply want the wage increase to make their low-cost competitors raise
wages. Owners understood that paying more than a minimum wage allows them to attract the most
A Bright Future?
Perhaps, it is too early to declare only blue skies and mountain scenery ahead for small business owners;
but from this survey, we get the sense that entrepreneurs believe the worst of the recession is behind us
and that they are ready to grow their businesses, when they see the opportunities to do so. At Nahai
Insurance, we would like to remind small business owners that being risk averse does not have to mean
that you take no risks at all. Our insurance products and business consulting services allow you to take
the risks that can be the difference between long-term success and failure. We’re available to discuss
your future today.