NEW REPORT FROM BABSON COLLEGE FINDS U.S. SMALL BUSINESSES FACE CHALLENGES AND OPPORTUNITIES AROUND ACCESS TO CAPITAL, THE REGULATORY ENVIRONMENT, WORKFORCE DEVELOPMENT, AND TECHNOLOGY
Helping existing small businesses scale offers enormous, and largely untapped, potential in creating new jobs and generating economic development in the United States—this according to a new report, The State of Small Business in America (pdf)issued by Babson College.
“This Babson Small Business report shows that we all benefit if we are able to foster a vibrant entrepreneurial ecosystem that best supports ongoing small business growth and job creation in America,” said Babson College President Kerry Healey. “Public and private sectors must work together to support small businesses, which comprise 99 percent of all U.S. employer firms and which account for more than half of the private sector’s net new jobs over the past two decades.”
The purpose of the report is to advance the small business owner’s perspective on how to grow in the U.S. business landscape specifically around: access to capital, the regulatory environment, workforce, and technology. It is based on the feedback of over 1,800 respondents across the country, all of which have at least four employees and at least $150,000 in revenues.
The respondent pool consists of small businesses specifically identified as growth-oriented through participation in the Goldman Sachs 10,000 Small Businesses program, along with a comparative random sample of businesses by size and age criteria without any explicit growth identification.
Watch President Kerry Healey on Bloomberg
Obtaining capital remains challenging for small businesses
- Respondents rely on banks as their primary source of funding, and are about four times more likely to seek funding from financial institutions than any other source.
- Small businesses receive less than half of the amounts they request. Looking across all sources of capital, overall survey respondents apply for a median amount of $100,000, but receive only 40 percent of their ask ($40,500).
- Companies receiving a business and management education are more likely to obtain capital and secure a greater portion of their request.
- To facilitate access to credit, businesses are asking for more flexible loan terms.
Businesses owners find regulation both difficult and time-consuming
- Nearly 60 percent of survey respondents identify some level of difficulty understanding and managing government regulations and laws.
- On average, four hours per week is spent dealing with government regulations and tax compliance, which totals over 200 hours per year.
- For the vast majority of respondents, the owner is primarily responsible for dealing with regulatory issues.
The skills gap is overwhelmingly a small business owner’s No. 1 issue with respect to hiring
- Over 70 percent of respondents find it difficult to hire qualified employees.
- The reason why is notably consistent: potential candidates lack the requisite skillsets—over and above competition for talent, salary requirements, and the provision of benefits.
Business owners value technology and are hindered by costs
- Nearly 80 percent of respondents recognize the importance of technology to the growth of their businesses, while sharing concerns about awareness and affordability of resources.
- Cost-related issues account for nearly half of the most significant technology challenges currently facing these companies, ranging from the cost of new technology, to the cost of upgrades and maintenance, to training.
- Business owners desire and need better information about accessible and affordable technology resources.
Cybersecurity and protecting intellectual property are two significant areas of exposure for small businesses
- Over 40 percent of businesses feel ill-prepared, and nearly 25 percent have been victim of a cyber-attack.
- Small business owners are innovators, and an increased focus on protecting their assets can boost their productivity and competitiveness.
- Fewer than half of business owners know how to protect their intellectual property with patents.
The survey was administered by SSRS, a third party, independent research firm. Interviews with over 1,800 established small business owners in the United States were conducted via an online survey. The survey was administered to10,000 Small Businesses program participants, which is a population of business owners who are actively seeking growth (10KSB group), along with an unaffiliated sample selected by similar size and age criteria (control group). The goal of selecting the control group was to include small businesses that differed from 10KSB program participants only in whether they participated in the program or not. A total of 1,676 interviews were completed in the 10KSB group and 202 interviews were completed in the control group. The samples were weighted to allow for comparisons between the two groups.
About Babson College
Babson College is the educator, convener, and thought leader for Entrepreneurship of All Kinds®. The top-rankedcollege for entrepreneurship education, Babson is a dynamic living and learning laboratory where students, faculty, and staff work together to address the real-world problems of business and society. We prepare the entrepreneurial leaders our world needs most: those with strong functional knowledge and the skills and vision to navigate change, accommodate ambiguity, surmount complexity, and motivate teams in a common purpose to make a difference in the world, and have an impact on organizations of all sizes and types. As we have for nearly a half-century, Babson continues to advance Entrepreneurial Thought & Action® as the most positive force on the planet for generating sustainable economic and social value.