New study: Despite the risks of running a small business, owners are confident and optimistic
You have to be pretty optimistic to take the leap of faith to start your own business. But what happens after you’ve been in business for a little while? Are current economic situations impacting small business owners’ outlook on the future? A new Hiscox study says despite risks, small business owners are remaining confident.
We asked 1,000 owners of businesses with fewer than 50 employees how they feel about the road ahead. We asked if they expect their businesses to fare better this year than in years past, whether they plan to expand, and if they are prepared if the economy takes a downturn. Their answers, as reported in the 2020 Hiscox Small Business Owner Risk Study™, show that small business owners in the U.S. are a confident and optimistic bunch. And here’s why.
Profitability should increase or remain constant
From a profitability perspective, the vast majority of small business owners expect their businesses to do as well as or better than they did last year. Over half (51%) said they expect their profitability to increase this year, while 45% said they expect it to remain consistent with last year. Just 3% expect their business’s profitability to decline, and 1% do not expect to stay in business through the end of this year.
The reasons for this optimism are varied, but the top three stand out
- 60% of small business owners said they expect to gain new customers in the year ahead.
- 47% said they anticipate steady or improved demand for their offerings
- 30% said they expect new products or services to contribute to profitability.
Most small business owners plan to seek funding
Two-thirds (66%) of small business owners plan to seek funding for their businesses in the upcoming year. Twenty-seven percent plan to use credit cards for funding, while 26% expect to get a bank loan and 23% will tap into their personal savings.
Small business owners will use this funding to focus on several different areas. The most popular area of focus is retaining and growing the customer base, cited by over half (55%) of respondents. Nearly half (48%) plan to increase productivity, and over one-third (35%) will focus on improving customer service.
Despite optimism, business owners plan for the worst
While most small business owners expect to do well this year, they’ve taken steps to prepare in case they don’t. They’re concerned about internal risks like not being able to attract new clients, cost increases that they have to pass on to customers, and getting late or partial payments from customers. When it comes to external risks, small business owners are concerned about taxes, national economic growth, and healthcare policy.
Two-thirds (66%) of small business owners feel they are prepared for an economic downturn, having taken steps that include reducing expenses, setting up an emergency fund, and increasing their marketing efforts. Nearly a quarter (22%) have set up a side hustle to earn extra income beyond what their primary business provides.
Protecting against risks a small business can’t see coming
All the confidence and optimism in the world can’t protect a small business owner if someone gets hurt, property is damaged, or they get sued. For these risks, nearly three-quarters (73%) have business insurance to protect themselves in these kinds of situations. And the rest are going to be taking that step soon - among those who are not insured, 60% plan to obtain coverage over the next 12 months.
Learn more about small business owners’ outlook for the coming year in the 2020 Hiscox Small Business Owner Risk Study™, including how optimism and preparedness breaks down by age group (millennials, Gen X and baby boomers).