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2011

Use thBusiness-Valuation-Article.jpgese valuation tips to calculate a small business’s worth.

 

by Sherron Lumley

 

One of the most important factors to consider in buying or selling a small business is how best to calculate what the business is worth. Without that critical calculation, it is impossible to determine a fair value for the business and negotiations on a potential deal will likely come to naught, regardless of whether you are buying or selling.

 

“The value of a business is in the eye of the beholder and can be satisfactorily determined only by negotiations between interested parties,” says Lawrence Tuller in The Small Business Valuation Book.

 

Just as no two people are the same, no two businesses are the same and no two valuations will be the same either. Keeping in mind that one method will not be appropriate for every business, there are a few major approaches to calculating business value. Three of the most widely accepted are called the Asset Approach, the Income Approach, and the Market Approach, and as their names imply, they focus in turn on assets, income, and market comparison. (For more details, check out this online primer on the three business valuation methods.

Business-Valuation-Pull-Quote.jpgA quick look at three types of small businesses will help to illustrate the three methods: first, an older family restaurant; second, a widget manufacturing firm; and third, a newer dog-grooming franchise. Income will be used to place a value on the restaurant, assets will be used for the manufacturing company, and for the newer dog-grooming business, a market comparison will work best.

 

Income Approach

The Income Approach focuses on the benefit stream, estimating future income to determine the value of the business. Some call this benefit stream cash flow and others prefer the more technical term Net Operating Income (NOI). One year of NOI will be converted into a present value for the business by applying a capitalization rate to account for risk factors. It’s a little bit country and a little bit rock and roll, as every element imaginable can go into determining a “cap” rate. What it boils down to is the desired rate of return in view of the riskiness of the investment. 

 

Let’s say that our restaurant in question is a risky business, times are changing, and the future is hazy. The riskier the business, the higher the cap rate and the lower the market value of the business. A solid and growing business could have a cap rate of 15 to 25 percent (.15 to .25), whereas a volatile business could have a cap rate between 35 and 50 percent (.35 to .50).

 

In the Income Approach to valuation, the market value (V) is the net operating income (I) divided by the cap rate (R).  It looks like this: V= I/R.

 

Asset Approach

If this hypothetical restaurant is failing, the tangible assets may be the primary consideration for value and the Asset Approach would then be the one to use. The Asset Approach to valuation assumes that the company’s assets could be easily liquidated if desired. It is going to provide a lower level of value to which adjustments can be made for such intangible factors like good will, the reputation of the company, customer loyalty, and business location.

 

Asset valuation is often used for manufacturing firms because of the high value of inventory, capital, and equipment. Using the Asset Accumulation method, all assets both tangible and intangible are considered, less all of the liabilities. Intellectual property and customer contracts are examples of assets not on the balance sheet that will be taken into account using this approach.

 

Market Approach

Finally, let’s look at the newer dog-grooming franchise. Here, the Market Approach, in which the target company is compared to a similar company, will work when the two companies in question are as alike as possible. This method examines value in the context of the competition—what similar businesses are worth—and works well for younger companies or high growth industries.

 

A few easy calculations can be made using the financial statements and particularly the balance sheet, which is a snapshot of the company at a given point in time. It shows what the company has (Assets), what it owes (Liabilities), and what is left over for the owners (Equity). For example, debt-to-assets is a quick ratio often used to compare businesses. It is found by dividing total debt by total assets, both of which will be stated clearly on the balance sheet. 

 

Other Valuation Tools

One of the most straightforward valuation tools involves using annual sales along with a predetermined multiplier. For example, if a business has sales in one year of $100,000 and the multiplier for that business is 50 percent of annual sales, the value of that business is $50,000. So where does one find the multiplier? The Business Reference Guide, a 754-page guide now in its 20th year, provides rule of thumb calculations for over 700 types of businesses. The Business Reference Guide Online database (BRGO) is available as a one-year subscription from the Business Valuation Resources Store for $285.00, which includes the book. The website does have some free resources.

 

For more free information, Inc. magazine has partnered with the Business Valuation Resource to produce an online interactive chart for business valuation and a free database for general business values by sector.

 

These simple business valuation methods are just the first step. If a deal is on the table, contact an expert for outside valuation help. Appraisers, accountants, attorneys, and brokers are professionals who work in business valuation.

 

 

 

Additional Resources

  • Business Valuation for Dummies, by Lisa Holten and Jim Bates, 2008
  • Buying & Selling a Business, by Robert Klueger, 2004
  • The Small Business Valuation Book, by Lawrence Tuller, 2008

John D., a 50-year-old father of four, owns a six-person IT consulting business serving companies ranging from start-ups to the Fortune 500. He followed his dream of starting a small business that allowed him closer contact with customers – and more time with his kids– after leaving a senior management position at a major information services firm.

 

Kristen C., 42, created her own brand consulting company with more than $2 million of annual billing after 10 years of feeling creatively constrained at major Madison Avenue advertising firms.Small Business Owner.png

 

Suvit S., 50, who immigrated to the United States from India, left 20 years in banking to start a nutraceutical importing business based on his long-held belief in the value of holistic health and natural remedies.

 

Manuel S., 32, a Hispanic-American, realizes more financial independence as the owner of four T-Mobile franchises throughout Long Island than he did as a stockbroker with a major financial services firm.

 

Brendon N, 25, parlayed the web design and programming experience he gained at his father’s company into a lucrative file transfer service that allows large medical files to be sent safely and in compliance with HIPAA.

 

Harry H., 70, a recent retiree, started a new life in his twilight when, after leaving a 30-year career as a mechanical engineer at a Fortune 500 firm, he invented a hydraulic oil purifying system for large automotive and manufacturing firms.

 

While most people think of typical small business owners as men between the ages of 34 and 49, the individuals profiled above tell a different story. According to recent predictions from Intuit about the future of small businesses, “Entrepreneurs will no longer come predominantly from the middle of the age spectrum. People nearing retirement and their children just entering the job market will become the most entrepreneurial generation ever.” In fact, according to the Kauffman Foundation, Americans aged 55 to 64 create small businesses at a rate that is 28 percent higher than the adult average. And Generation Y, ages 5 to 25, has many of the traits needed to be a successful entrepreneur: They are critical and conceptual thinkers; value autonomy; embrace a networked approach to work and social life; and are willing to adapt or re-invent as needed.

 

Add in women, immigrants and minorities, and the small business landscape promises to look much different in the next decade:

 

There are many reasons women in midlife often start small home-based businesses; among them: they are seeking economic independence after a divorce, need a better work/life balance, realize that a second income would improve the family’s cash flow, or want to achieve more success than allowed by the “glass ceiling” they faced in the corporate world. Since they often hold advanced degrees, women small business owners tend to create small businesses in the financial services, education and health sectors.

 

Individuals who have immigrated to the U.S. – most often from India, the UK, Canada and Japan – are known for being high-impact, high-tech entrepreneurs. They are able to create successful small businesses because they are typically highly educated, experienced and have a strong network in their countries of origin. According to the U.S. Census Bureau, immigrants represent the fastest-growing segment of small business ownership today.

 

Entrepreneurial Generation.pngFinally, small businesses owned by minorities – particularly Hispanics like the T-Mobile franchise owner profiled above– saw strong job creation in 19 states during the pre-recession period of 2002-2006. Since many of these are smaller enterprises, i.e. with less than $50,000 in receipts, the minority small business sector is seeing more expansion and higher rates of job creation. Significantly, the total number of black-owned businesses is growing at a rate of more than four times the national average.

 

Many people look at successful small business owners like these and wonder how they got the courage to leave secure jobs at major corporations to pursue entrepreneurial ventures. To someone who values the predictability of being a salaried employee, the uncertainty of working for oneself might seem unthinkable. They may wonder how small business owners do it.

 

The answer is that small business owners, at least successful ones, are different in personality traits and temperament than the rest of the “nine-to-five” working population. Research suggests that they are willing to collaborate and delegate tasks to others, while they focus on the future, i.e. by making cash flow and succession plans. As optimists they often perform best in the face of adversity or extreme pressure, and are not cowed by obstacles like new competitors or economic downturns. And their optimism is often tempered by a healthy dose of cynicism and anxiety.

No matter where you are as a small business owner – thinking of becoming one, taking stock of your current situation, or looking to refocus for the future -- it is a useful exercise to do some self-assessment to see if you have what it takes for the long haul.

Touchpoint

Going, Going…GREEN

Posted by Touchpoint Jun 10, 2011

Environmental stewardship has evolved from a “nice to do” into a key priority for senators and CEOs and an important plank of corporate business strategy. In fact, a recent survey from Boston Consulting Group and MIT’s Sloan School of Management found that more than half of businesses surveyed are continuously increasing their investment in sustainability.Green Business.png

 

Encouraged by measurable cost reduction and reputational benefits, companies like IBM, Xerox and Intel have embraced green manufacturing processes, championed energy conservation and become major buyers of renewable energy. Goldman Sachs has pledged not to finance or invest in industrial development in certain environmentally sensitive areas. Bank of America has made a ten year $20 billion commitment to address global climate change.

 

For small businesses with more limited time and resources, significant investments in environmental initiatives may be perceived as a luxury. The MIT/BCG survey found that only 9 percent of companies surveyed with fewer than 1,000 employees were classified as “embracers” of sustainable business practices, compared to 34 percent of companies with more than 10,000 employees. However, with pressure from Congress mounting and more strenuous compliance requirements likely imminent, this is the right time for small business owners to consider initiating or enhancing green initiatives.

 

You should approach implementing a green program with the same methodical planning you would apply to any strategic business initiative. The first step is understanding your objectives. For example, is your goal to reduce energy use or support the use of alternative energy sources, cut down greenhouse gas emissions and/or minimize the environmental impact in your own region? Or perhaps your motivation is primarily business-based – cutting operating costs, improving employee health and productivity, or enhancing your business reputation.

 

Once you have a clear picture of what you’d like to accomplish, the next step is to gauge your company’s environmental footprint by assessing such factors as energy consumption, water usage and waste production. This will help you to determine areas of challenge and opportunity and enable you to measure progress.

 

The final part of the process is developing a consistent and attainable initiative that is right-sized to your business needs and budget. Depending on your goals and resources, you may want to start slow and build a more comprehensive program over time. The good news is that environmentally friendly actions don't have to be large to have an impact. Quantifiable cost, productivity and marketability benefits can be achieved with small, but steady changes. For example, something as simple as regularly making double-sided copies can substantially reduce costs, paper waste and greenhouse emissions as well as provide you with savings.

 

The following recommendations can help you jump start a green program of any size:

  • Investigate federal, state and local incentives for greening – The federal government offers a five-year payback until 2017 under a stimulus program for energy and green investments in addition to tax break incentives. The Small Business Administration (SBA) and various state and municipal programs provide funding support for sustainability programs.
  • Engage your employees – As with any other workplace initiative, performance and results hinge on staff commitment. Create a communications strategy to inform and remind employees of goals and to recognize achievements.
  • Identify some quick, easy wins – One example is setting paper use reduction targets where progress could be monitored and measured monthly or quarterly. Being able to see relatively immediate results will generate excitement and encourage employees to reach other program milestones.
  • Talk to your friends and colleagues in other businesses Many companies are working to tackle the same issues and will likely welcome and appreciate an exchange of ideas and best practices.

 

Building a Leaner, Greener Business

Regardless of the level of depth and breadth you decide to bring to your environmental plan, you can achieve immediate benefits by making adjustments in three critical areas:

 

 

1. Energy: U.S. government agencies estimate that energy costs small businesses roughly $60 billion each year. As demand for energy continues to increase, fuel costs are likely to remain high for the long-term. Small businesses that invest strategically can cut utility costs 10 to 30 percent and make significant contributions to a cleaner environment, without sacrificing service, quality, style or comfort. Some examples of easy and affordable fixes include:

  • Turn off lights when not in use and/or install lighting occupant sensors in proper locations
  • Power down equipment, especially computers, at the end of the day to generate substantial energy cost savings. U.S. workers waste a staggering $2.8 billion annually in energy costs by failing to shut off their PCs at the end of the work day. What's more, machines left on during off hours may emit up to 20 million tons of carbon dioxide (CO2) this year alone, roughly the equivalent impact of four million cars. Also, consider transitioning to power strips as equipment still draws electricity from a power outlet even when not in use.
  • Green Energy.png

  • Buy ENERGY STAR qualified computers. Also if possible, exchange desktop PCs for smaller, notebook computers. PCs alone can consume anywhere from 50 – 250 watts of energy, independent of the monitor! Laptops on the other hand use far less energy at around 45 watts and are way more energy efficient than your average desktop computer.
  • Regularly change or clean heating ventilation/air conditioning (HVAC) system filters for optimum performance, and install a programmable HVAC thermostat that can provide remote access, visibility and control HVAC usage
  • Replace incandescent light bulbs with compact fluorescent light bulbs (CFLs), wherever appropriate and switch to LED (light-emitting diode) exit signs
  • Use ceiling fans for lower cost comfort
  • Seal and insulate air ducts. This can improve the efficiency of your heating and cooling system by as much as 20% or more.
  • Consider solar panels, wind power and geothermal energy sources if you are prepared to make more a substantial investment into energy efficiency

 

2. Paper: The average office worker in the U.S. uses 10,000 sheets of copy paper each year, or four million tons annually. Minimizing paper consumption delivers substantial benefits for the environment and for business efficiency. According to The U.S. Environmental Protection Agency, roughly one ton of paper source reduction results in eight tons of greenhouse gas reductions, while GreenAndSave.com estimates that paper consumption reduction in the office can save up to $1,250 per year per employee. Small businesses can decrease paper dependence by:

  • Transitioning printed communications to digital formats which can save on postage and storage and deliver a more personal, interactive and trackable touch-point to your audience
  • Reducing fax-related paper waste by using a fax-modem that operates through the computer, which does not require a printed copy
  • Communicating by phone, email or in person whenever possible, and being judicious about printing files. When printing and copying is necessary, use the double-sided function. If your current printers do not have double-sided capabilities, you might consider upgrading your equipment as that could generate significant energy, paper and cost savings over the long-term.

 

3. Waste: Reducing, reusing and recycling are the basis of a comprehensive waste reduction program. The following are some examples of measures small businesses can take to whittle down waste while fattening the bottom-line:

  • Use refillable pens, rechargeable batteries and recycled paper and printer cartridges. This makes both economic and environmental sense, as these items tend to be cheaper.
  • Stock the office kitchen with reusable table settings, glassware, mugs, and table linens in the office kitchen. Every year, Americans throw away enough paper and plastic cups, forks and spoons to circle the equator 300 times.
  • Replace towel dispensers with hot air hand dryers
  • Rent infrequently-used tools and equipment and explore reupholstering/refurbishing office furnishings/equipment before contemplating a new purchase

 

The Green Halo Effect

Aside from the obvious benefits for your community and planet overall, going green has significant business upsides. First and foremost, consumers have altered their buying habits and are paying closer attention to the sustainability messages of the businesses they patronize. Environmental practices have also become an increasingly important criterion in procurement decisions. Green initiatives could serve as a platform to generate positive publicity, drive new business and strengthen relationships with existing customers.

 

Moreover, greening is an opportunity to engage employees in a good cause while building culture and strengthening the bond to the business. This is particularly true for young professionals (Gen X and Y), who place a premium on social and environmental accountability. Finally, reducing a company’s carbon footprint improves air quality and contributes to a healthier, more comfortable workplace, which can play a role in reducing sick days and improving productivity.

 

For more information, tips and solutions, visit www.SBA.gov and www.epa.gov/compliance/incentives/smallbusiness.

State-of-small-business-in-article.pngBy Reed Richardson.

 

On the heels of national Small Business Month in May, we compiled a broad statistical portrait of the state of the nation’s entrepreneurs, using data drawn from a number of private and governmental sources. In Part I of our series, which covered the demographic and fiscal state of our nation’s small businesses, we learned that entrepreneurs were often battered but remained undaunted by the recent economic headwinds blowing against them and that they appear confident about turning the corner in 2011. This second part of the series picks up from there and examines the topics of small business hiring plans for the coming year and what other obstacles remain for entrepreneurs in the current economic climate.

 

Are you hiring yet?

“Small business employment is showing continued strength,” explains Susan Woodward, an economist quoted in the April 2011 Intuit Small Business Employment Index. “While we have a long way to go to full employment, we have seen continued improvement now for a year-and-a-half.” Continuing an uninterrupted streak of hiring increases that stretches back 18 months, the survey found 60,000 small business jobs were added in April of this year, a 0.3% state-of-small-business-Pull-Quote.jpgbump. Add in this latest increase and it translates into 845,000 jobs added to small business payrolls since October 2009, according to Intuit, which tracks more than 65,000 small businesses with 20 or fewer employees.

 

Monthly hours worked and compensation per employee also rose in April, Woodward points out in the Intuit survey. But because hourly wages have trailed behind hours worked in the scale of their rebound, she explains, “the small business labor market is still soft and employers have room to hire without pushing wages up.”

 

Other surveys report a similarly slow but steady improvement in the attitude of small business toward hiring for 2011, with the number of small businesses expecting to hire new employees this year rising to levels not seen since before the recession hit. The rough average from these surveys works out to just over one in four small businesses adding staff in the next year. That level of hiring interest may seem small, but could actually reduce the national unemployment rate by more than 25%, as Network Solutions’ “State of Small Business Report” notes.

 

And of the skilled positions most needed by small businesses, accountants, social media experts, and marketing and/or sales representatives, topped the list, according to the Spring 2011 Small Business Monitor survey.

 

            Small business employee work/pay profile [i]        

103.6 – average monthly hours worked by non-exempt employees (April 2009)

109.8 – average monthly hours worked by non-exempt employees (April 2011)

6.2 – increase in average monthly hours worked (April 2009-’11)

$2,562 – average monthly wage for all small business employees (April 2009)

$2,653 – average monthly wage for all small business employees (April 2011)

$91 – increase in average employees’ monthly salary (April 2009-’11)

 

Small business hiring expectations [ii]

28% – expect to add part- or full-time staff in the next 12 months

2.3 – average number of full-time equivalent jobs expected to be added over the next year by each small business that is hiring

3.78 million – estimated number of total jobs to be created by small business hiring in the next 12 months

2.4% – potential percentage point drop in the national unemployment rate as a result of expected small business hiring (from current rate of 9.0% down to 6.6%)

 

Small business most pressing hiring needs [iii]

14% – are most in need of an accountant/bookkeeper

9% – are most in need of a social media expert

6% – are most in need of a marketing or sales representative

 

What challenges do you face moving forward?

While entrepreneurial optimism for 2011 abounds, there remain a number of concerns and issues for small business owners, whether they’re trying to regain lost momentum for an established company or ignite the successful launch of a startup.

 

“The rising cost of gasoline and energy featured prominently on small-business owners’ list of worries, with one-third saying fuel prices will hurt their firms the most,” noted this recent Wall Street Journal article, which was based on a small business survey released in early May. These rising costs can often pack a dangerous double whammy of both higher overhead and lower profits, the Journal story points out, because “smaller businesses often lack the pricing power to pass on those costs to consumers.”

If topline costs like fuel and raw materials continue to mount and pricing fails to alleviate the pressure, small business owners increasingly fear being caught in a cash flow pinch in the near future, according to the Small Business Monitor survey. “This spring, cash flow concerns have risen to a historic high of 66% from a near pre-recession low of 53% just six months ago,” the survey explains. “Business owners’ desire to hire an accountant or bookkeeper may be a reflection of the challenges of managing cash flow.”

 

In addition, large-scale business plans, like finding financing for a business expansion, and long-term personal goals, like saving for retirement, have reappeared on many entrepreneurs’ radar screens as points of worry now that they’ve moved past simple survival mode. And finally, despite increasing adoption by small businesses, social media tools continue to be a source of both confusion and disappointment, with many entrepreneurs saying their online investments have failed to meet their expectations.

 

Small business external pinch points [iv]

15% – say general inflation

18% – say rising cost of raw materials

33% – say increased cost of gas or energy

 

Small business financial concerns [iii]

29% – say access to capital is harder to find in the last six months

23% – worry about paying all the bills

14% – worry about getting paid by customers

14% – worry about having enough money to win new business

7% – worry about making payroll

7% – worry about the capacity to accurately track cash flow

 

Small business online profile [ii]

56% – currently have a company website

31% – currently have a social media presence

            Of those small businesses with a social media presence:

            • 27% – use Facebook

18% – use LinkedIn

8% – blog

8% – use location-based services like Yelp or Foursquare

7% – use Twitter

2% – use deal-of-the-day sites like Groupon or LivingSocial

18% – currently allow customers to pay for products/services online

 

Small business social media benefits/drawbacks [ii]

5% – say social media “hurt more than it helped”

9% – say their social media experience “exceeded expectations”

36% – say their social media experience “fell short of expectations”

40% – report seeing customer criticism on company social media sites

56% – say social media “used up more time than expected”

63% – say social media helped them engage with customers and build brand loyalty

15% – report losing money on social media efforts

25% – report making a profit on social media efforts

 

Small business owner retirement status [iii]

81% – worry about their ability to save for retirement (was 71% in 2008)

52% – say they will need $1 million or less to retire

$1,205,000 – average estimated amount needed to retire

 

If you haven’t already checked it out, Part I of this series dove into the data to find out what today’s small business owners look like and how well they’re doing in today’s economic climate.

 

i – Small Business Employment Index, April 2011, Intuit

ii – “State of Small Business Report,” February 2011, Network Solutions and Robert H. Smith Graduate School of Business at the University of Maryland

iii – Small Business Monitor survey, Spring 2011, American Express

iv – Small Business survey, May 2011, Citibank

The-state-of-small-business-article.pngby Reed Richardson.

 

Often, small business owners can feel like they’re alone on their own little island when, in fact, they’re experiencing many of the same triumphs and setbacks as other entrepreneurs around the country. So, on the heels of national Small Business Month in May, we thought we’d compile a broad statistical portrait of the state of the nation’s entrepreneurs, using data drawn from a number of private and governmental sources. The following is Part I of our two-part series and it focuses on the current demographic and financial state of our nation’s small businesses. (you can read Part II here)

 

Overall, two primary lessons can be drawn from these surveys. One, entrepreneurs are a hardy lot, since small business activity increased in many respects during what was the worst economic downturn in seven decades. And two, most small businesses are now tentatively moving out of survival mode and focusing more on growth and long-term success.

 

Turning that entrepreneurial optimism into actual success has been anything but easy over these past few years, something that Scott Shane, professor of Entrepreneurial Studies at Case Western Reserve University, says was to be expected. “Decades of data show that interest in entrepreneurial activity is highly correlated with the ‘misery index,’ which is measured by adding the unemployment rate to the inflation rate,” Shane explains. (The misery index reached 12.72, a 20-year high, in December 2009.) “Still, a recession is no friend to entrepreneurs.”

 

Pull-Quote.pngShane’s observation is backed up by quarterly tracking data from the Bureau of Labor and Statistics, which show that private sector business “deaths” have outpaced business “births” throughout the recession, with the churn rate bottoming out in the first quarter of 2009, when the number of businesses closing outnumbered those opening by 63,000. Since then, the business launch rate has held relatively steady—between 170,000 and 180,000 new companies each quarter—while the number of closures has slowly decreased to a level of 200,000 last fall. In addition, financial data indicate that many small businesses stalled out during the recessions first full year of 2008, lost ground in 2009, regained stability last year, and, finally, are poised for growth again in 2011.

 

But there’s a lot here to digest, so dig in and see where your small business does or does not match up with its peers

 

Who are you?

According to the 2011 “State of Small Business Report” (click for full PDF report), which is jointly conducted each year by Network Solutions and the Robert H. Smith Graduate School of Business at the University of Maryland, today’s small business owners form an increasingly diverse cohort, making the idea of a “typical” small business owner obsolete. Still, the study notes that compared to the general population a small business owner is usually “older, more likely to be male, highly experienced, and relatively affluent.” (This survey defined small businesses as those private companies with less than 100 employees that provide their owners with more than 50 percent of their annual income—an estimate that includes just less than 6 million companies nationwide.) Here’s a numerical index of what this year’s “State of Small Business Report” found:

 

Small Business Profile

1 – typical number of locations (86% have a single location)

1.7 – typical number of owners (57% have a single owner, 32% have two, 11% have three or more)

3 – median number of employees (30% have just one employee, the owner)

13 – percentage which are minority-owned (30% by African-Americans, 30% by women, 22% by Hispanics, 17% by those of Asian/Pacific origin)

15 – median age of existence, in years (22% have operated for 5 years or less)

38% – report gross annual sales of less than $125,000

43% – are home-based businesses

48% – are considered “mature” companies by their owners

49% – are in some sort of transition

Of those:

         5% – are startups

         10% – are in the process of closing, being sold, or transferred

         34% – are relatively young, early growth companies

$186,200 – median annual revenue

 

Small Business Owner Profile

10% – report earning at least $200,000 a year

17% – are 65 years or older

24% – are 44 years or younger

28% – are women

50% – have at least a four-year college education

         Of those owners without a four-year degree:

         2% – have less than a high school degree

         17% – have only a high school degree

         29% – have attended a trade school, some college, or have a two-year degree

60% – have worked in their industry for 20 years or more

61% – report earning less than $100,000 a year

80% – founded their current business

 

How are you doing now?

For most small businesses, a roundup of surveys shows that 2010 represented something of a bounce-back year, with many reporting increased revenue, and, according to the “State of Small Business Report,” a slim majority returning to profitability. This marks a dramatic turnaround from the zero or negative growth years of 2008 and 2009, respectively. And while the ugly statistics from those years make the recent, year-over-year positive numbers appear a bit over-inflated, it’s becoming clear that much of the small business sector is slowly beginning to climb out of the deep economic hole.

 

Indeed, even though roughly two-thirds–68%–of small business owners rated the current market conditions as fair or poor, according to this recent survey (also covered in the Wall Street Journal), a large majority of them also report feeling confident that the worst is over and are cautiously optimistic about their prospects in 2011.

 

 

Small Business Profitability Index[i]

• 2009 – +21% (47% reported making money, 26% lost money)

• 2010 – +36% (52% reported making money, 16% lost money)

 

 

Small Business Revenue Index [i]

• 2008 – +1% (30% reported gaining in annual revenue, 29% lost ground)

• 2009 – -9% (24% reported gaining in annual revenue, 33% lost ground)

• 2010 – +23% (38% reported gaining in annual revenue, 15% lost ground)

 

Small Business Owner Satisfaction Level

55% – say ‘being your own boss’ is entrepreneurship’s biggest benefit  [ii]

61% – are ‘highly satisfied’ with their choice of being an entrepreneur [i]

76% – would still start their small business again based on what they know now [ii]

 

Small Business Confidence Level [ii]

69% – report their business is in the same or better shape than in 2010

81% – expect 2011 to be equal to or better than 2010

 

 

For more on the current state of small business, click here to read Part II of our series; it focuses on small business hiring prospects and the challenges facing entrepreneurs as they move forward in a still uncertain economic climate.

 

i – “State of Small Business Report,” February 2011, Network Solutions and Robert H. Smith Graduate School of Business at the
     University of Maryland

ii – Citibank Small Business survey, May 2011

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