DNA of an American Entrepreneur: Hiscox study reveals signs of growth and innovation
Majority of U.S. small business owners are optimistic for the year ahead and plan to launch new products
- Optimism leads - 51% of U.S. small business owners are optimistic about the year ahead.
- Sales are up - Half of all small business owners experienced growth in revenue in the past year and 57% saw growth in new customers.
- Innovation coming - Although only 22% of entrepreneurs developed a new product or service last year, the majority (66%) plan to launch a new product in the year ahead.
- Death of the family business? - The majority of small business owners (67%) have no plans to exit their business within the next five years. But, most of those that will (68%), are planning to retire and close their operations.
- Still not crowdfunding - Despite growing awareness and continued struggles to find funding, only 8% of all small business owners have considered using crowd funding.
New York, September 9, 2014 – Hiscox, a global specialist insurer that provides U.S. small businesses with the simplest way to purchase customized business insurance directly online or over the phone, announced today the U.S. findings of their sixth annual DNA of an Entrepreneur report. The study includes insights from 500 small and medium-sized U.S. business owners on the financial pressures, stresses, opportunities and challenges currently faced by entrepreneurs. This year’s findings reveal that entrepreneurs are looking to the future with increasing confidence after experiencing a year of growth and are seeking new opportunities for innovation in their business.
More than half of all U.S. small business owners (51%) are optimistic about the year ahead, up 6% since 2011. Half of all small business owners experienced growth in revenue over the past year and 57% saw growth in new customers. Although only 22% of entrepreneurs reported developing a new product or service in the past year, the majority (66%) plan to launch a new product in the year ahead.
“Businesses both in the U.S. and abroad have weathered the storm of recent years and are looking forward to the year ahead with increasing courage and confidence,” said Ben Walter, CEO of Hiscox USA. “The overall sentiment, as seen both in the survey and our daily conversations with small business owners, is a positive one bolstered by renewed signs of growth and opportunity.”
Challenges still remain
The biggest concerns for small businesses are not being able to attract new clients (43%), having to pass cost increases on to customers (36%) and facing rising costs of debt (31%). Another area that continues to keep small business owners up at night is financing. Thirty-one percent of respondents worry about not having the financial resources to keep their business going, while 65% report obtaining financial funding for a new business continues to be difficult. Yet, despite growing awareness, 92% of all small business owners have not considered using crowdfunding.
The U.S. tax system does not favor someone wanting to set up their own business, according to the majority of small business owners (66%). In fact, their number one demand from U.S. government is reduced taxation. However, American small business owners spent the least amount of time dealing with government red tape, at 88 minutes per week, of all the countries surveyed (U.S., U.K., France, Germany, The Netherlands and Spain).
Women close the gender gap
Over the last 12 months, women have considerably narrowed the gender gap, reporting more new customer growth than their male counterparts (62% vs. 53%) and equal growth in number of employees (14%). Women owned businesses have also shown a 17% increase in new customer growth, a 5% increase in revenue, and a 2% increase in number of employees over the past year.
There still remains a large gender divide in exit plans between men and women. Male small business owners are more than twice as likely to have plans to sell their business and profit from their hard work compared to female small business owners (25% vs. 12%). Overall, the vast majority (67%) of small business owners have no plans to exit their business within the next five years, but the majority of those that do are planning to retire and close their business (68%).
American small business owners may be turning a corner, but today’s small business owners are still reporting symptoms of burnout from the recovery. Forty-one percent of all small business owners polled said that the economic climate has caused them to suffer from increased levels of stress, down from 50% in 2011. In this year’s study, however, only 28% of respondents said the economic climate is making them work more efficiently, as compared to 40% last year. Additionally, only 24% report that the economic climate has made them stronger and more determined to succeed, as compared to 30% last year.
What constitutes work?
The majority of small business owners (53%) reported working less than 40 hours per week. However, millennials and baby boomers showed widely different conceptions of what actually constitutes “work.” While 72% of millennial small business owners under 30 years old believe attending networking events after business hours is work, 40% of those over 60 years old disagree, seeing this as part of their career development. While millennials are known for always being connected online, 80% of those under 30 believe reading emails after hours is work, as compared with 45% of those over 60 who disagree.
Small business owners in the U.S. continue to remain digitally savvy, utilizing social media for communications, PR, and marketing (26%) and for customer service (30%). Although small business owners are utilizing social and digital media, they are particularly vulnerable to cyber attacks and most don’t have adequate risk management processes in place. Only 38% of respondents reported that passwords are always changed when an employee leaves the company and only 33% say they require current staff to change their passwords regularly. Additionally, only 27% say that secure information is sent by encrypted email. Despite these glaring vulnerabilities to cyber threats, only 15% of small business owners reported having cyber risk insurance.
“This past year the American small business owner has shown increased confidence in spite of the continuing challenges of obtaining funding, dealing with government regulations and taxes and protecting their data,” said Walter. “Hiscox is proud to provide small businesses the specialized and affordable risk management tools they need to grow and benefit from the broader macroeconomic recovery.”
Hiscox specializes in insurance for small business owners, such as professional liability (errors and omissions insurance) and commercial general liability customized for a range of fields including IT, consulting, marketing, photography, real estate, beauty and health. Hiscox offers business insurance quotes direct and online in real-time along with other liability insurance products, such as business owners policies. Since launching their ground-breaking online service in the U.S. in 2010, Hiscox has received an average customer service rating of 4.8 out of 5 and 96% of those surveyed would recommend Hiscox (Feefo customer surveys).
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Sample and methodology
This study was conducted for specialist insurer Hiscox by The Survey Shop. The sample was drawn from online panels contacted between 28th May and 6th June 2014. There is statistical accuracy of +/- 1% to +/- 2% for the whole sample of 3,500 and +/- 2% to +/- 4% for each country’s sample except the UK which is - +/- 1% to +/- 3%. Some figures may not add up to 100% due to rounding.
The findings are based on responses from 3,500 owners or partners in businesses with fewer than 50 employees (1,000 respondents from the UK and 500 from each of the following countries: France, Germany, the Netherlands, Spain and the US).
Hiscox USAHunter Hoffmann
About Hiscox Small Business Insurance
Hiscox, the international specialist insurer, is headquartered in Bermuda and listed on the London Stock Exchange UK:HSX +0.22%. Hiscox is the first company in the U.S. to offer insurance for small businesses direct, online, and in real-time. We provide professional liability, general liability and business owner's insurance, underwritten by Chicago-based Hiscox Insurance Company Inc., which is rated 'A' (Excellent) by A.M. Best Company. Additional information can be found on the Why Choose Hiscox? page. Coverages are subject to underwriting and may not be available in all states.
Hiscox also provides professional liability, property and specialty insurance to U.S. businesses through US-based brokers. This communication does not constitute a solicitation of business by Hiscox's syndicates at Lloyd's, London.