NFIB Research Foundation Study: Internal Constraints are Minimal for Small Business Owners; Hurdles to Expansion Are External

NFIB’s Research Foundation studied internal impediments to small business growth and found that by overwhelming margins,small firms want to double their sales and increase their workforces within the next five years. According to the Growth – Internal Factors report, most owners report some internal constraints to growing, such as increased reliance on outside actors, but the study results affirm that the largest hurdles to business growth do not develop within the business, but from outside the business (see related study on external factors limiting growth). Read the study and press release below:

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Executive Summary:
 

  • Small employers consider business growth a good thing. Eighty-three (83) percent, in fact, think that doubling their sales in five years would be mainly positive; 73 percent think it would be very positive. Just 4 percent think that doubling sales would mainly be negative.
  • Most small employers think that there will be relatively few consequences to doubling sales. The three consequences most commonly seen as resulting are 1) increases in owner disposable income and/or benefits, 2)the ease (or lack of) in surviving a business crisis, and the 3) risk in achieving that outcome. Most agree that growth would yield greater owner income, but they split on whether larger or smaller firm size would increase the chances of business survival in a crisis and whether an effort to double sales would be risky. Another substantial group foresees increased dependence on outsiders.
  • Small-business owner assessments of growth’s separate consequences, such as an increase in the number of hours an owner must work, are typically not associated with their overall assessment of growth’s desirability. This is particularly true of those who own firms employing 10 or more people.
  • The smallest employers (those with fewer than 10 employees) associate a more positive work environment for employees and a greater capacity to survive a business crisis with doubled sales (growth) being a very good thing. However, those in the group who think growth is desirable also think its consequences will include fewer hours worked on their favorite work tasks and greater dependence on outsiders, such as suppliers.
  • Most small employers do not think that efforts to double the size of business sales in the next five years are a risk to the survival of their business. A plurality terms efforts to double sales “neither risky nor safe” while 35 percent term them “safe.” Just one in four (24%) deem such efforts as risky.
  • Doubling sales would not necessarily translate into doubling employment. Ninety-four (94) percent of those employing 10 or more people assert that doubling sales would require fewer than twice as many employees, often many fewer suggesting significant potential increases in labor productivity. However, just 68 percent of those employing fewer than 10 people project similar productivity gains accompanying doubled sales.
  • Three in four small employers want to grow their firms. Thirty-six (36) percent claim the prospects of reaching their desired firm size (in terms of employment levels) are “highly likely” or “likely” and another 36 percent think they are possible. Twenty-seven (27) percent think they are “unlikely” or “very unlikely.”
  • Owners most optimistic about their prospects to reach their ideal size are those who want to increase employment most(in absolute terms). Those most pessimistic are the ones who would prefer to contract their firms’ size. The latter effectively foresee difficulty shrinking their businesses.
  • Nineteen (19) percent of small employers expect not to be operating their venture five years from now. However, most expect their businesses to survive in someone else’s hands. The primary factor associated with anticipated exit is the owner age, the older the owner the more likely the exit.

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