Primed for Growth: Bank of the West Small Business Growth Survey Reveals Sector is Showing Signs of Recovery
Technology investment is a key differentiator for growing businesses; New Index will track small business expansion year-over-year
SAN FRANCISCO, Sept. 10, 2015 /PRNewswire/ -- Following several years of lackluster growth, small businesses are now showing signs of recovery, are poised for growth, and technology investment has been identified as one of the key differentiators to achieve that growth, according to findings from the Bank of the West Small Business Growth Survey released today. The majority of those polled expressed optimism about their businesses as they maintain or improve their revenue, profitability and sales.
The Survey, which was conducted online by Harris Poll among 499 small business owners, highlights insights from the unprecedented journey of small businesses during this long economic recovery and identifies what growing, prosperous businesses have in common.
"While the small business sector was deeply impacted by the recession, this year's Survey findings illustrate a noticeable uptick in growth, even with the moderate pace of the broader economic recovery," said Michelle Di Gangi, Executive Vice President of Small- and Medium-Size Enterprise Banking at Bank of the West. "The Survey also indicates that while some businesses see technology as a way to improve their customer experience, it may also be an opportunity to propel small business expansion moving forward."
Tracking Small Business Sentiment
With this Survey, Bank of the West introduces the Bank of the West Small Business Growth Index, a new way to benchmark year-over-year growth sentiment of small businesses. The Index will track five key indicators (profitability, revenue, sales, investments, and cutbacks) through a series of questions to produce the final index number. On the scale of 0-100, less than 50 signals decline and greater than 50 indicates growth. This year's number, 54, illustrates the upturn in financials and reflects small businesses' focus on investing back into their businesses.
Di Gangi, added, "This new Index will identify key areas of growth and opportunity for small businesses and help document their recovery from a difficult economic environment."
Of those polled in the Survey, 72 percent said they plan to invest in the coming year, illustrating the importance of reinvesting profits back into their businesses. Nonetheless, many are still cautious about the economy.
Technology: A Key Differentiator
Consumer expectations have made an impact on small business investment in technology with businesses looking for ways to support the customer experience or risk falling behind. For more than half of small businesses, the pace of technology has made it difficult to determine which investments are worth making.
Small businesses experiencing growth agree that the importance of technology will grow over the next three years and investment in technology will focus on attracting new customers (49%), providing a better client experience (45%), and making internal processes more efficient (34%). For those challenged by technology, the biggest barriers are affordability and determining how best to integrate new technology solutions into their businesses.
Three key technology commonalities emerged from the Survey findings. Growing businesses:
- Understand the importance of technology: Those small businesses that are experiencing growth are nearly twice as likely as contracting businesses to say that investing in technology is extremely or very important to their business's success in the next year (51% vs. 26%).
- Half of growing businesses surveyed (55%) see social media as having a high potential impact on business profitability.
- Nearly half say mobile, fraud protection, and payment processing have a high potential for impact on their business.
- Invest in technology: Commitment to business growth requires identifying where best to invest.
- More than half of growing businesses (52%) indicate that they have increased their technology budget over the past 12 months, compared to only 15 percent of declining businesses.
- Leverage technology to improve customer experience: Growing businesses are more likely than declining businesses to invest in technology to deliver a better customer experience (50 percent versus 37 percent).
- With today's tech-savvy, on-the-go consumer in mind, many growing businesses plan on changing their point of sale technology in the next year by using mobile payment systems (43% versus 15%), tablets (27% versus 12%), or by purchasing EMV payment terminals (11 % versus 2%).
"Technology serves an important role in advancing the customer experience, while boosting profitability by streamlining operations and freeing up resources to pursue growth," added Di Gangi. "Small businesses that can keep up with the pace of change and pinpoint strategic technology investments will push ahead of the pack."
Investing for Future Growth
Understandably, over the last several years the economy and rising business costs made it difficult for businesses to grow. Even with these challenges, younger small businesses owners (<50 years of age) are more likely to prioritize investment in their business. In the last year, 88 percent of younger business owners made investments in their businesses compared to 70 percent of older business owners.
Common investment areas for growth
- Staff to support growth: To prepare for growth, one-third of small businesses plan to hire new staff in the year ahead. On average, businesses plan to hire five employees. Finding employees with the necessary skill set and experience prevents nearly a third of businesses from hiring the staff they need.
- Bolster marketing and expand offerings: In the last 12 months, small businesses made investments in new products (35%) and marketing (28%). These areas remain top priorities in the year ahead with 31 percent planning to add new products and a quarter looking to invest in marketing.
It is worth noting that not all businesses are able to invest in future growth. Thirty-seven percent of small businesses have made cutbacks, such as reducing employees' hours (12%), discontinuing products or services (12%), and cutting back on marketing budgets (11%). A quarter of respondents anticipate making cutbacks in the next year.
"Small businesses that have built a strong foundation for expansion through sound business financials and strategic investments appear prepared to seize the growth opportunity ahead," added Di Gangi.
About The Bank of the West Small Business Growth Survey:
The Bank of the West Small Business Growth Index is an extension of the company's annual small business Survey series, launched in 2012. This Survey was conducted online within the United States by Harris Poll on behalf of Bank of the West between April 10 and 27, 2015 among 499 U.S. residents who own a business with two or more non-owner full-time employees and less than $10 million in annual revenue, and which has been in operation for at least five years; additionally, these respondents have had an ownership role for at least five years The data have been weighted to reflect the composition of U.S. businesses with annual revenue of less than $10 million.
About Harris Poll:
Over the last five decades, Harris Polls have become media staples. With comprehensive experience and precise technique in public opinion polling, along with a proven track record of uncovering consumers' motivations and behaviors, Harris Poll has gained strong brand recognition around the world.
About Bank of the West:
Bank of the West is a regional financial services company chartered in California and headquartered in San Francisco with $72.5 billion in assets as of June 30, 2015. Founded in 1874, Bank of the West provides a wide range of personal, commercial, wealth management and international banking services through more than 600 offices in 22 states and digital channels. Bank of the West is a subsidiary of BNP Paribas, which has a presence in 75 countries with 185,000 employees.
Deposit and loan products offered by Bank of the West, Member FDIC. Member FDIC and Equal Housing Lender
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SOURCE Bank of the West