Optimism is high among small business owners, with revenue and staff growth on the mind of many in the U.S. This was one of the findings of TD Bank’s annual Small Business Survey, which found 53% of small businesses planned to grow in 2018, up from 46% in 2017. The number of small business owners planning to recruit more staff increased from 9% to 22% in the same year.
The survey examined data from 578 small business owners and decision makers in companies with an estimated annual income of less than $5 million. The participating businesses covered a broad range of industries, including construction, IT, retail, health care, finance, manufacturing, social services and real estate, among others.
To sustain growth, almost half of the respondents said they have applied for credit during the last 12 months, with 71% of the respondents reporting confidence that if they did apply for credit, they would be approved. A minority of 16% of Small Business Owners said they have been declined credit in the past due to their revenue being too low.
The research also examined where small businesses plan to source credit, with financial institutions being the primary choice for 71% of small business owners. When partnering with a financial institution, 42% of respondents said the most important consideration is that the lender understands their business. A significantly lower proportion of small businesses (45%) said they use credit cards as a means of sourcing credit.
Jay DesMarteau, Head of Commercial Specialty Segments at TD Bank, spoke of the confident small business climate in the recent announcement of the survey findings.
DesMarteau said, “It is encouraging that a large portion of small business owners plan to seek credit this year and expand. Banks can work with business owners on solutions that make sense for their needs and provide insights into how business and personal credit and income can impact their financial future.”
The survey also showed small businesses feel confident when handling their finances and accounts, with 45% saying they were “extremely confident” about managing their finances. Such confidence is also felt among small business owners in relation to knowing when to hire new staff, with 41% saying they were extremely confident about when to take on new employees.
Such confidence however, isn’t reiterated when it comes to marketing, with just 30% of small business owners feeling extremely confident about the marketing tactics of their small business venture.
The research also explored the location of small businesses in the U.S., confirming growth in home-based businesses. Previous studies have found more and more American employees are working remotely, and that flexible scheduling and home working opportunities are high on an employees’ list of priorities when deciding to take on or leave a job.
TD Bank’s survey shows small businesses are recognizing the growing demand for flexible working arrangements, with nearly half of small businesses operating from home. However, this decreases the more profitable a business becomes, with just 5% of businesses with $1 million or more in annual revenue being home-based. The second most popular small business location is a permanent office, workshop or factory, with 21% of small businesses operating from these locations.
Planning for retirement and the challenge of what to do when entrepreneurial years come to an end was another key focus of TD Bank’s survey. The survey found 52% of small business owners don’t yet have a plan in place for their businesses when they retire. Almost 30% say they expect to pass their business on to family or coworkers in the wake of their retirement.
“The fact that more than half of the small business owners surveyed admit to not having created a retirement or business succession plan should serve as a warning,” said DesMarteau.
“Business owners shouldn’t count on today’s growth to fund them in retirement or allow the daily challenges of running a company [to] stand in the way of long-term, strategic planning. Working with experts for all financial decisions — from start-up phase to retirement — can help put a small business on the best path to success,” DesMarteau advised.
The survey paints a rosy picture of the small business climate in the U.S. but one that is not without its challenges. The message from the survey is clear; comprehensive planning is vital for achieving the sustained growth in small businesses in the U.S. aspire to reach.