The Economist:Small Businesses Optimistic Worldwide

Small business executives remain optimistic about the long term despite global recession

Yet most remain very worried about the short-term outlook and say that governments are doing too little to support them, according to a survey by the Economist Intelligence Unit

It is nice to get a worldwide perspective on the state of small business from time to time. We believe that the worst is over here in Northeast Florida and recent studies like this one are bearing this out. the Economist Intelligence Unit is a part of the venerable publication, The Economist.

Growth is a challenge for any business, but never more so than during a downturn—especially one as severe as the global recession currently under way. Despite this, 83% of small business executives report that they are optimistic about their company’s long-term ability to rebound when the economy improves. In fact, 65% expect their company’s market share to have increased by the time the recession ends, and 73% expect revenues to have increased. These findings are the result of a new study, Understanding growth priorities at small and medium-sized businesses, an executive summary published by the Economist Intelligence Unit and sponsored by Verio.

This optimism is somewhat surprising—and perhaps overly inflated—given respondents’ sobering views on the short term: Only 37% of respondents expect their companies to do better this year than last. This is in line with Economist Intelligence Unit forecasts, which predict a contraction of global GDP in 2009 of 1.8%, and only a modest expansion of 1.9% in 2010.

Furthermore, 48% report that local government is “unsupportive” or “not at all supportive” of their business, and 39% say the same of national governments and lenders, respectively. Reasons cited for the lack of support include “mid-size businesses do not attract enough attention,” (39%) “the public at large perceives large companies as more important than small and mid-size companies” (28%), and “small and mid-size businesses have fewer advocates than large companies” (24% globally).

“While it is not clear if small and medium-size firms believe they would benefit from a greater focus from governments and non-profit agencies, the data suggest a call to action for the public sector to think about programs that may offer greater aid to these companies during this difficult economic period,” says Debra D’Agostino, Deputy Director in the Americas, Industry and Management Research at the Economist Intelligence Unit.

Other findings in the report include:

  • Only 6% expect the quality of talent in their organisations to decrease once the economy improves and 38% expect it to increase. The data suggest that when it comes to attracting and retaining skilled people, small and medium-sized firms are in adequate shape.

  • Reaching new customers was cited as the biggest obstacle to growth; 56% of respondents are actively acquiring new customers through new means, such as entering unfamiliar geographical markets. Yet only one-third cited customer service when asked to name the main ways their firms could prepare for economic recovery, signalling a possible disconnect in strategy.

  • Once the economy improves, 65% of respondents expect their firms will enter new geographic markets. Marketing is seen as the most critical means of helping firms prepare for an improvement in the economy, according to half of respondents. The data suggest that firms are not retrenching, but are actively pursuing new growth opportunities.

  • Fifty-seven percent agree or strongly agree that that technology will be a critical competitive advantage in bringing their business out of the recession, yet only 20% plan to invest more heavily in innovative technology as a means to outpace competitors. Internal IT departments will be most important in helping their firm achieve these goals, but external or outsourced service providers are also key: 35% ranked outsourced providers of managed IT services and external technology consultants (systems integrators, value-added resellers or application developers) as most important in achieving IT objectives; one-third said the same of outsourced IT services providers (managed services).

Understanding growth priorities at small and medium-sized businesses
is available free of charge at www.eiu.com/verio/smbpriorities

About the survey

In April 2009 the Economist Intelligence Unit conducted an online survey of 328 executives from small and medium-sized businesses worldwide to understand how they are approaching business strategy during the global recession. Of the respondents to our survey, 45% held CEO, president or managing director titles; 66% of all respondents held c-level titles. About 27% were directors, department heads and other managers. Worldwide, 29% work at companies based in North America, 29% in Asia-Pacific, 19% in Western Europe, 10% in Eastern Europe, 9% in the Middle East and Africa, and 5% in Latin America. Forty-eight percent work at firms with less than $5m in annual revenues; 31% have revenues between $5m and $50m; 21% have revenues between $50m and $500m. Respondents represented a range of industries.


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