The FINANCIAL -- Maintaining and increasing sales is the most important
short-term business issue for 74 percent of small business owners, 41
percent of whom cite lackluster consumer spending as the root cause,
according to the Citibank Small Business Pulse released.
Both the cause and effect of weak sales lead to cash flow concerns. According to the survey, 50 percent of respondents have experienced a sudden cash crunch in the last 12 months. Despite the need for careful cash management, 78 percent of small-business owners have given payment extensions to customers.
"We admire and support the resilience and commitment shown by small-business owners who find ways to move their companies forward," said Jerome Byers, head of Citibank Small Business. "In recent years, companies have tightened belts, gained efficiency and reinvented their businesses to survive in a tough economy."
Cash Flow is King -- Managing cash flow is a job most small-business owners won't trust to anyone but themselves. Nearly three quarters (73 percent) say they are "on top of it" and manage their cash flow daily. Thirty percent of respondents say the greatest challenge to managing cash is slow/delinquent receivables and bankruptcies, while 24 percent blame late or non-payments for a sudden cash crunch in the last 12 months. As Citibank reported, yet 23 percent of respondents find making a collection call the most uncomfortable business finance challenge – second only to reducing staff (35 percent). Referring to the need for sales, 28 percent report that their sudden cash crunch was due to sales that did not pick up as expected.
"A slow economy forces the small-business owner to focus on daily finances," said Byers. "That's a difficult balancing act with the need to think broadly and strategically about business plans."
Business Conditions Affecting Sales -- Despite a quarter-to-quarter reduction in confidence, small businesses report slightly better business conditions than a year ago. In August 2012, 38 percent of respondents found business conditions positive, increasing from 34 percent in August 2011. Another 25 percent say business conditions are poor, relatively flat from the last survey in May (23 percent), but reduced significantly from 31 percent a year ago. Still concerned about the future, 85 percent of those surveyed believe the economy may experience another downturn. That number is slightly lower than the 90 percent who expected it a year ago.
When asked about their own business situations, owners report similar quarterly and yearly trends, with 34 percent claiming that 2012 will end up better than business was last year, but only 27 percent saying they have seen that improvement by August. Comparing short-term frustration to full-year results, 43 percent project actual sales growth for 2012 over last year. In fact, 42 percent of respondents expect 2012 business sales or revenue to meet their goals and 14 percent expect to exceed goals.
Reinvention to Remain Relevant -- Consistent with last quarter, more than half of respondents (52 percent) have reinvented their businesses to stay afloat or be more competitive in today's marketplace. In August, 60 percent of respondents said they have added or changed the products they offer. Another 51 percent of "reinventors" overhauled their technology infrastructure, including replacing networks, computer systems and software systems. Among those who made changes, 40 percent say the initial trigger for reinvention was simply a feeling that something needed to change. Based on that gut reaction, they recommend research and to "get educated" as the first step in making those changes happen.
"Intuition can lead many small-business owners to success in their quest for growth, because they remain close to their customers, the marketplace and operations," says Byers. "While they often feel the need for change, they consistently reinforce that feeling with up-to-date knowledge to keep their business thriving. They even suggest research, education and following market changes to other business owners who plan to make significant changes."