There is no better teacher than experience. One of the exciting components of this year’s McElvy Partners Small Business Sentiment Survey is that experienced business owners took the time to respond – 86 percent of those surveyed have been in business more than four years.
When we surveyed, we asked these businesses to tell us how long they had been at it. The choices were one to three years, 4-10 years, 11-20 years, or more than 21 years. We managed to survey nearly 50 businesses that have been around more than 20 years. That age group was our largest response. By comparison, we surveyed 17 businesses open three years or less.
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Why is this a good thing? Because we are in an uncertain time. In the last year, there have been major changes in government and a global pandemic that has rocked economies. The whole survey reflects the great uncertainty that is pervasive in our nation and that uncertainty has trickled down to small businesses.
About half of the respondents said they want to hire in 2021 but about half will not add staff. Very few surveyed plan to make a capital purchase in 2021. And while those are negative trends, those surveyed do expect their revenues to grow, which moves the needle from negative to uncertain.
Experienced business owners know struggles
What we like about the experience level of those surveyed is that they have seen these times before. It is likely the majority of those we surveyed have ridden out and survived the following: the Y2K scare, the dot com bubble, the September 11, 2001 attacks, and the Great Recession of 2009.
The trend in business media is to focus on new companies. People like new things and often those forming new companies are Millennials, which are a large part of America’s population. Thus stories about those young companies and people attract the attention of young readers that are coveted by advertisers.
But these new companies weren’t around the last time things were tough. In fact, most small businesses don’t see their fifth birthday even in good times.
A plumbing company in business for 25 years and employing a dozen people is not exciting from a media perspective but what the ownership and management of that company knows is important if you want to make payroll and survive.
So what are these sage and experienced owners and managers telling us? In two words: Be careful.
They are telling us they think the wrath of Covid-19 will pass soon and that business will begin to return to normal. We know this because they expect revenue to grow in 2021. But they also tell us not to pursue that growth aggressively. The majority of those surveyed plan to spend the same on advertising and marketing as they did in 2020.
This sounds moderate but it is actually conservative because marketing budgets were not robust in 2020.
An experienced business owner is often buoyed by a cadre of key employees who have been employed several years at the company. Such employees give the business efficiencies through knowledge and skill that a young business can’t match.
These key employees tend not to leave their employer. They are where they want to be in their career and like their work. The owner knows if he or she can keep enough work coming in to keep these folks on board, the owner can ride out a tough stretch. That’s is probably a reason why 47 percent of those surveyed plan not to hire this year. The core team is in place.
If you are a young business, be building that core and try to keep them.
But 53 percent say they will hire. We think this response is from owners looking out and seeing that business will pick up and new people will be required to handle that work beyond the core. Also, an experienced and well-run business is always weeding and seeding. This means weaker employees are being managed out and better prospects hired.
Our more experienced businesses came of age during a simpler time as it relates to advertising. They can remember placing an ad in the phone book and people came in the door with money and the phone rang. Today, that’s not the case and often a customer never touches a phone or a car key before buying. Instead, the only thing they touch is the screen of a smartphone.
That’s confusing to older businesses and when we asked those surveyed in what area do they need the most help, they said managing their website and marketing.
This tells us more experienced businesses are at risk of losing market share if they can’t get their marketing and advertising figured out. Likely, their clients are older and may one day not need their service. For the business to continue, it will have to market to find new customers. That can be expensive as digital advertising no longer means low cost.
And finally, our veteran businesses are saying don’t go out and make a major purchase. By a 3-1 margin they don’t plan on making a capital purchase in 2021. Such often means borrowing and these business owners know about the strain of debt and making payments.
They don’t see enough growth in sales in 2021 to justify the cost. We also think these experienced businesses bought during the good times that began in 2016 and those times were quite favorable for small companies.
Robb Reeves is the vice president of McElvy Partners, a company that specializes in print and digital marketing solutions for small businesses.