Helping existing small businesses scale up offers enormous, 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 issued by Babson College.
The purpose of the report is to advance the small business owner’s perspective on how to grow in the U.S. business landscape in terms of 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 annual 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.
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% of their ask ($40,500).
- Respondents with 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% of survey respondents identify some level of difficulty understanding and managing government regulations and laws.
- On average, they spend four hours per week (over 200 hours per year) dealing with government regulations and tax compliance.
- 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% of respondents find it difficult to hire qualified employees.
- The reason is notably consistent: potential candidates lack the requisite skill sets—over and above competition for talent, salary requirements, and the provision of benefits.
Business owners value technology and are hindered by costs.
- Nearly 80% 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% of businesses feel ill-prepared, and nearly 25% have been victims of a cyberattack.
- 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.