Well, in case you needed statistics to prove it, entrepreneurs really are crazy little bunch. It turns out we love the nutty ride of building our businesses and at the end of the day, we think all of the sacrifice is worth it.
More than eight in 10 small business owners (82%) say they put everything they have into their business, according to the second annual Bank of the West Small Business Growth Survey, released today – and an overwhelming majority (86%) say that all they’ve sacrificed for their business has been worth it.
The survey, conducted online by Harris Poll among a national sample of 505 small business owners and an additional 207 California small business owners, delves into the journey of the small business owner, identifying the unique challenges they face and benefits of the job that drive them to persevere through hardships. The survey also spotlights California, and sheds light on unique advantages and challenges felt by women small business owners.
Additionally, this year’s index number (55) and results from the survey show that small businesses have experienced growth and are optimistic in the future of their businesses amid an uncertain economic and political climate. Further, 70 percent of companies surveyed were in growth mode – up from 64 percent last year. The index tracks four key indicators over the previous 12 months: profitability, revenue, investments, and reductions. On the scale of 0-100, a composite score of higher than 50 indicates growth and less than 50 signals decline.
What Weighs on the Minds of Small Business Owners?
According to the Small Business Administration, only half of new businesses survive through the first five years, but based on the results of this year’s survey, small business owners continue to feel motivated to forge ahead against the odds. Running a small business is not for the faint of heart; small business owners cite the biggest challenges as: living with the uncertainty that comes with owning a business (52%), always being on the job (43%) and avoiding burnout (40%). Small business ownership also comes with a number of personal and professional financial worries: making and saving enough to retire (41%), ensuring their families are financially comfortable (35%) and managing cash flow (31%) are the top financial issues keeping small business owners up at night.
Reaping the Fruits of Their Labor
Although times can often be challenging, for the vast majority of small business owners, the benefits outweigh the negatives. Small business owners cite a level of freedom and flexibility not afforded by a traditional 9-to-5 job as unique benefits of the career: 94 percent say that owning their own business puts them in charge of their own destiny, 91 percent love the freedom that comes with owning a small business, and 83 percent said running their company makes them feel empowered.
Not only are small business owners able to gain personal and financial independence, but they feel they are better able to connect with their local towns and neighborhoods. Eighty-four percent say owning a small business allows them to contribute to the local economy and 80 percent say their small business helps them make a positive impact on the community.
Family matters play a large role as well: 70 percent of small business owners say their small business provides them with opportunities to connect with their families and 67 percent feel they’re providing a legacy for their families through their small businesses.
“Small business owners are the backbone of the American economy, working hard day-in and day-out to realize the benefits of their effort and perseverance, not just for themselves, but also to create a lasting business legacy for their families,” said Michelle Di Gangi, executive vice president of small- and medium-size enterprise banking at Bank of the West. “Small business ownership isn’t always a financial decision – an even bigger draw is the flexibility and independence to chart your own path and create a business that can be passed on to the next generation. These are benefits that many other career paths simply do not offer.”
Leadership Qualities Are Key to Success
How can individuals looking to start their own small business improve their chances of success? Plenty of entrepreneurs have high business acumen – but small business owners say the essential ingredients for success are personal leadership qualities, with passion for work (70%) and self-confidence (64%) rising to the top of the list, above more business-centric qualities such as a clear vision for the business’ future (49%) or tangible assets such as offering an innovative product or service (38%).
“Tenacity, charisma and determination are what push businesses into high gear. Those who don’t just lean in—but go all-in—are better positioned to overcome the odds and chart their own professional course,” Di Gangisaid.
The top five pieces of advice that current small business owners would give to those just starting out are:
- Make time for your family (62%)
- Don’t be afraid to ask for help (58%)
- Separate your business finances from your personal finances (57%)
- Stay objective; don’t take things personally (55%)
- Be a lifelong learner (54%)
Businesses Maintain Confidence Amid Economic and Political Uncertainty
This year’s survey shows that the sacrifices and hard work that small business owners put in are paying off. They are emboldened, despite their lack of confidence in the general economy and an uncertain political climate. While 40 percent have a negative outlook for the economy in the year ahead (up from 35% in 2015), an overwhelming eight in ten (81%) have maintained a positive outlook on their own businesses over that same timeframe.
Business financials over the past year show a stable growth trend across the small business sector, as seen in the Bank of the West Small Business Growth Index score – at 55 for 2016, up slightly from last year’s 54. In fact, seven out of 10 small businesses in this year’s survey fall into the Index’s growth category – reflecting a combination of increases in profitability and/or revenue, as well as investments back into their companies.
Small business owners are more optimistic about their companies’ financial future. In the near term, 91 percent expect their business’s profitability to either increase or stay the same over the next 12 months. Looking ahead, more than half of small business owners (52%) say their business is poised for significant expansion in the next year, up from 47 percent in 2015.
“While a volatile economy and political uncertainty impact their business growth plans, small business owners remain resilient,” Di Gangi said. “With a realistic eye toward the business climate, they are cautiously confident in their near-term business success, and continue to invest the time and resources to get there.”
California is a Bright Spot for Small Business Growth
California small businesses are more likely than national small business owners to cite talent acquisition (60% versus 51% nationally) and the minimum wage (49% versus 40% nationally) as significant barriers to growth. Low unemployment rates in the state are making it difficult to fill vacant positions and new significant minimum wage increases are a challenging cost to shoulder for many small businesses across the state. Still, Californiasmall businesses are outpacing their counterparts nationwide, with more companies in growth mode (79% versus 70% nationally) and a particularly bright outlook for the U.S. economy (75% versus 60% nationally). The 2016 California-only Index score is 57, compared to 55 nationally.
Regionally, California businesses tell two slightly different stories. Southern California’s Index has plateaued on the heels of a growth spurt, with a local Index score of 56, down from 57 in 2015. Northern California is experiencing a modest uptick toward stronger growth with a local Index score of 57, up from 55 in 2015, with nine in 10 expressing a positive outlook for their business over the next 12 months.
This year’s Small Business Growth survey found that women are more likely than men to report certain benefits of the small business owner lifestyle. One in three female small business owners say that being able to “have it all” – both a rewarding career and family life – is one of the best parts of being a small business owner (32% versus only 22% of men). Women also are more likely than men to cite spending more time with their families (46% versus 36%) and connection with community (38% versus 27%) as some of the best parts of being a small business owner.
On the flip side, women are more likely than men to point to the work-life juggle, citing competing demands on their time (64% of women versus 55% of men) as a significant barrier to the growth of their company.
Do you feel the sacrifice is worth it? Weigh in below.