At the start of Q4 2008 we surveyed the Top Small Workplaces and Best Boss honorees to learn how they were weathering our struggling economy. Since the national economic climate has worsened, the political landscape has changed, and billions of dollars have been pumped into both the credit markets and an economic stimulus package, we sought a new read from these same people at the end of March 2009 on how they’re doing now.
Although frozen credit, especially for smaller firms, has dominated the news over the past six months, only 21 percent of respondents say that reduced credit lines or access to new credit are their chief war wounds from the credit crisis (compared to 20 percent in Q4 2008).
Why virtually no change here? The owners and leaders we surveyed are by and large relying on their cash positions and taking a measured approach to tapping extra funds. “We have been able to get our typical loans, but it has taken much longer to get accomplished,” one respondent said. “It is necessary to work way in advance of need.”
However, the chief hardship related to the recession is not credit, respondents say – it’s customers or clients who have trouble paying their bills. Almost a third of respondents (32 percent) said this was a big problem. Another 32 percent, however, said the credit crisis is having no effect on their business.
Difficulty in access to credit and getting customers to pay on time contributed to the changes in sales/revenue shown below that respondent companies reported over the last three months:
We asked respondents at what point in the current economic cycle the recession became evident in their business. As shown below, most said Q4 2008, while a sizable portion said Q2 2008 and Q1 2009:
Respondents report taking the following actions in response to the recession:
“Other” included the following:
- Creating more equity in the company
- Special offers on specific products to target audiences without discounting the overall product line
- Closed offices
- Selling new accounts
Based on where they are now and the steps they’re taking to weather the recession, respondents expect to see the following changes in profitability over the next 12 months:
Where we saw the most change from fall 2008 to now was in the actions these organizations are taking in response to the recession. Here’s a side-by-side comparison of some key strategies and how this has changed over the past six months among this group:
|Strategy||Q4 2008||Q2 2009|
|Cut discretionary spending||31%||75%|
|No action being taken||25%||4%|
It’s also worth noting that while last fall, 12 percent of respondents said they were not increasing salaries, this has shifted to 17 percent of them saying they’re cutting salaries to curb expenses while still keeping their people on board.
As expected, these small firms are doing more with less as a result of their bold cost-cutting measures. Here’s a breakdown of their strategies to solidify their business as the economy improves, from most to least common, as revealed in their qualitative feedback:
- Improve operational efficiencies: 27%
- (Tie) Launch new products/services: 23%; more aggressive selling: 23%
- (Tie) Retain top talent: 9%; Additional staff training: 9%
- Switch/renegotiate prices with vendors: 5%
“Exploring more efficiencies and putting everyone onto new business opportunities,” one respondent wrote. “All hands on deck.” Another wrote, “We are just trying to maintain. However, we did review our costs and negotiated new prices with our vendors or switched vendors. This action saved us a lot of money!”
The last qualitative question we asked in our survey of these small business leaders was literally a wish list one: If you had a genie in a bottle that offered three wishes for your business today, what would they be? Here are their responses, starting with the most common:
- Quick economic recovery (31%)
- More top talent (19%)
- Less customer hardship (19%)
- Higher profit margins/market share gains (19%)
- More customer leads (13%)
- Employees in a better mood/better equipped (13%)
- Bankers more flexible (13%)
- More government action (13%)
- Stable commodity pricing (6%)
- Cheaper airfares to promote travel (6%)
- Less gloom by press (6%)
It’s clear from our survey that these enterprises are down, but they’re certainly not out. A focus on their core business was a recurrent theme in their strategies to weather this recession. As they now “cash out” the dividends they’ve amassed from their foci on supportive work cultures and significant employee training and development, they stand poised to come out of this downturn steadier, leaner and smarter than ever before.