What Makes A Business Sucessful? How Do You Measure Up?

Network Solutions has released a substantive report, the 2009 State of Small Business Report. This report includes a Small Business Success Index (SBSI) which is a survey of 1,000 business.
Get the full report and compare yourself to other small businesses here: http://growsmartbusiness.com/
The report analyzes the five areas a business needs to succeed in to be a success.
The following are some highlights covered in this report, from the executive summary
The SBSI is made up of sub-indices, each explaining a different facet of success. The two most important are: Capital Access, which is the ability to finance business activities in the short run and invest in the long run; and Marketing and Innovation, which is the degree of success in activities related to finding new customers and coming up with new ideas for building a business.
A fourth (25%) of small businesses can be considered “highly competitive,” meaning they are sufficiently competitive on their SBSI score that they are able to realize success in long term goals such as growing, creating wealth and providing a successful lifestyle for their owners. A fifth (20%) can be considered to be “failing” as competitive entities.
The SBSI sub-indices reveal that the two biggest inhibitors of small business success today are in Capital Access and Marketing and Innovation, due to the high importance and poor performance in these areas. Small businesses show amazing strength in providing Customer Service, although this is not as critical to success as the two problem areas.
The SBSI provides details on the specific strengths and weaknesses of small business:

  • Capital Access: small businesses face a major problem with obtaining capital internally or externally to invest
  • Marketing and Innovation: while small businesses are reasonably successful in getting their own customers to provide referrals, they struggle to find efficient ways to advertise their businesses and convert leads into buyers
  • Workforce: small businesses have average success in this area; they are able to manage employee turnover, while their most serious workforce issue is providing attractive benefits
  • Customer Service: these organizations are successful in all aspects of service, particularly in answering questions and showing customers they care
  • Computer Technology: small businesses have moderate success in deploying and making technology work
  • Compliance: small businesses are highly successful in complying with laws and regulations, although they have a little more trouble keeping up with changes

Among 10 long-term business goals, small business owners are the most successful in minimizing costs (51% are highly successful) and reducing risks (50%). In all other goal areas in the study, less than half of owners consider themselves successful. Owners are the least successful in building personal wealth (30% highly successful, 23% failing) and growing business revenue (31% successful, 19% failing). Success in achieving these long-term goals is a direct consequence of scoring high on the SBSI, in other words, there is a strong statistical relationship between the SBSI and the 10 broad goal areas.
Among all small businesses, 30% project higher revenues in 2008 than in 2007, 29% project lower revenues, and 38% project no change. Businesses that are more competitive on the SBSI are more likely to have grown in revenues.
Small businesses rely on a range of internet business solutions and computer technologies to succeed. The most common include: online customer service via email (60% use), a company website (50%), online advertising in directories (38%), a shared computer network for employees (36%), and internal communications by email (33%).
Solutions and technologies with the fastest growth over the next two years include: adding a website, adding the capability to demonstrate products online, allowing customers to order online, general online advertising, adding online fulfillment, and adding a social media presence.
The degree of use of internet business solutions contributes to the overall competitiveness of a small business, but it takes more than just having a website. To illustrate, those that are “internet tech-powered,” meaning they use at least 6 technologies in the business, have a 31% chance of being “highly competitive.” The percentage who are highly competitive drops to 24% among those with moderate use of these technologies (2 to 5), and 19% among those with minimal use of internet technology.
The augmenting role of internet business solutions remains strong even when controlling for size. The pattern above holds when examining very small businesses with less than five employees. It would appear that even a very small
business can use such technologies as an equalizer to compete with larger firms.
The type of business makes a difference in the level of competitive success of a small business. The most competitive, per the SBSI, are financial/real estate businesses, while the least competitive are construction businesses. Businesses tend to be more competitive per the SBSI when they have larger revenues, more employees (at least 20), and multiple locations. Mature businesses tend to be more competitive than start-up/early growth businesses.
Owner traits are related to the degree to which a small business is competitive. For example, female business owners tend to have slightly more competitive businesses than male owners. In terms of age and experience, the worst place to be is in the middle, as the least competitive are 35 to 54 years of age and have 10 to 20 years experience. Younger/less experienced and older/more experienced owners tend to run more competitively successful small businesses.
Among all small businesses, 38% are in a growing industry, 31% are in mature industries, and 28% are in industries that are in decline. Not surprisingly, those in growing industries are more successful than those in mature industries, and even more so than those in declining industries.
A major backdrop for the first wave of this study is the current recession, which was in full force when the survey was conducted in December 2008 and January 2009. A full 36% of small businesses feel the economy had a high impact on their business in 2008. However, small businesses tended to believe the situation was worse for their competitors, with 47% believing the downturn highly impacted the competition. Businesses that were not impacted are more likely to be highly competitive and less likely to be failing on the SBSI. Either the economy weakened their businesses, their inner strength allowed them to minimize the impact of the economy, or both factors were at work simultaneously.
Close to half of small-business owners (48%) expect the economy to decline in 2009, although more competitive businesses tend to have a more positive outlook.
About four-in-ten small businesses (42%) expect to hold the line on discretionary spending in 2009. Another 31% expect spending to decrease and 25% expect it to increase. Some specific areas have a positive trend in projected spending, with more expecting to increase rather than decrease spending. The biggest growth areas are in professional development and internet marketing. In contrast, non-internet marketing has a negative trend, with more
expecting to cut spending than increase.