Running a small business and a marathon

OPEN, the small business portion of American Express that has released products such as the Plum Card and operates an on-line community for entrepreneurs called the OPEN forum, published its Spring Monitor in April. The Spring Monitor tracks current sentiments of small business owners in the U.S. through survey data.

The report is below in its entirety. The following statistics bring to light the real commitment and sacrifices that entrepreneurs must make in order to survive a tough economy. For those considering starting their own business, it’s important to ask ourselves if we’d be willing and able to do the following to keep our businesses up and running:

• 45% are open to bartering for new products and services with customers or suppliers
• 48% have instituted hiring freezes
• 30% are no longer taking a salary
• 27% have a family member working pro bono
• 25% are renegotiating leases and supply contracts
• 16% have cut benefits
• 18% work a second job

To counter these tough decisions, remember that there is a tremendous bright side to being a small business right now: the flexibility of small businesses makes them champs when the chips are down. This flexibility affords them the ability to delight customers and grow relationships with suppliers, actions that instill long-term loyalty at short-term costs.

Think of this trade-off like boot-camp – having to endure months of hard won accomplishment and learning binds people together. We survive in spite of difficulty and we thrive because of it. Training for a marathon and running that race damages our bodies – at the end of 26.2 miles, our muscles are torn up and we need to nurture ourselves to get back to the physical condition we were in prior to the race. A recession is no different.

The number one rule of marathon runners is to look around when they feel hope slipping away. In a marathon, the crowd and other runners keep everyone moving forward toward their common finish line. The OPEN forum does the same thing for entrepreneurs. You aren’t in this alone – there are million of people grappling with the same circumstances. Learn from them, partner with them, listen to them, and make a pact to be there for each other. The only way out of this recession is through it, and having others around who can empathize makes the journey that much easier and the odds of survival that much greater.

OPEN Spring Monitor:
ENTREPRENEURS SAY MANAGING THROUGH RECESSION MAKES THEM SHARPER BUSINESS OWNERS, ACCORDING TO THE AMERICAN EXPRESS® OPEN SMALL BUSINESS MONITOR

Thirty-seven percent feel the current economic environment
creates opportunities for their business

NEW YORK, April 15, 2009 – More than three quarters of entrepreneurs believe managing through the recession has made them better business owners, according to the American Express OPEN® Small Business Monitor, a semi-annual survey of business owners. Four in ten business owners have an optimistic outlook on near-term business prospects, on par with one year ago when the macroeconomic climate was significantly different. Nearly four in ten entrepreneurs feel the current economic environment creates opportunities for their business.

While optimism has stabilized, business owners are still managing their firms with caution. Capital investment plans are at their lowest level in the eight-year history of the Monitor, hiring plans are down significantly and many entrepreneurs are adjusting their own retirement plans. Forty-two percent of business owners plan to make investments as a way to grow their business over the next six months, down from 53% last spring. Just over one-quarter of entrepreneurs have plans to hire this spring (28%), which is among the lowest Monitor readings in its history.

"There is no doubt the struggling U.S. economy has tested business owners’ resilience, but the entrepreneurial spirit remains strong and innovative” said Susan Sobbott, president American Express OPEN. "It is a positive sign that optimism – often a leading indicator for business growth– is at levels comparable to last year, suggesting a rebound in business owners’ perspectives and their renewed focus on finding the opportunities even in our battered economy.”

Unprecedented times call for extraordinary action
Small business owners are not taking this recession lying down. Many are finding new resources to tap and new ways to manage costs beyond the traditional steps of laying off staff or cutting back on staff hours. Nearly half of business owners (45%) are open to bartering for new products or services with customers or suppliers and nearly one-quarter (23%) report their barter activities have increased due to the economic environment.

Additional steps include:
• 48% have instituted hiring freezes
• 30% are no longer taking a salary
• 27% have a family member working pro bono
• 25% are renegotiating leases and supply contracts
• 16% have cut benefits
• 18% work a second job

Among the 18% of entrepreneurs working a second job to manage through the recession:
• 43% are in the services industry
• 41% describe their location as a home-based business
• Have been in business for an average of fifteen years
• Have average annual revenues of $620,000
• Employ an average of seven people
• Are an average age of 48

The power of positive thinking
Not all entrepreneurs view the current economic environment as a hardship; a distinct group (37%) says that the current economic environment actually creates opportunities for their business. Among these opportunistic business owners, two-thirds have a positive outlook on the economy, half plan to make capital investments and just over one-third plan to hire. Nearly all of these glass-half-full entrepreneurs (92%) say that managing through the recession has made them a better business owner, compared to 77% overall.

The majority of this positive cadre of entrepreneurs (86%) has small firms between one and nine employees. Nearly half of these upbeat business owners (48%) are found in the services industry.

Retailers and manufacturers adjust six-month outlook
The American Express OPEN Monitor examines three key industry sectors that provide deeper insight into the economy: manufacturing, retail and services.

Retailers have emerged as the most optimistic group of business owners. This spring nearly half of retailers (47%, on par with 48% last fall) maintain a positive outlook, versus just one-third of manufacturers (34%, down from 52% in fall 2008). Although retailers’ outlook is more optimistic they still find themselves faced with challenges:

• They are the most likely sector to find themselves sacrificing personal finances (67%) and most likely to stop taking a salary to deal with the recession (42%)
• Many are concerned with cash flow (59% vs. 56% last fall), due in part to less-than-stellar holiday sales last season and larger than necessary inventories
• Less are likely to have capital investment plans (32% down from 37% six months ago) versus other industry sectors

However, one-third of retailers identify themselves as “Opportunists,” those that make the best of a bad situation (30%).
Compared to the broader community of business owners, optimism is higher among business owners in the services sector as well:
• They are more likely than retailers and manufacturers to have capital investment plans such as technology investment (49%, up slightly from 45% last fall) and hiring (30%, vs. 26% of retailers and 19% of manufacturers), which provide the backbone of services businesses
• They are less likely than retailers and manufacturers to have experienced cash flow issues (54%, on par with 52% last fall), perhaps due to the fact that their businesses are not dependent on a product and associated costs
• Many say the recession has made them a better business owner (79%) and the current economy creates new opportunities for their business (41%)
• They identify themselves as “Survivors” (38%)
While business owners in the manufacturing sector also identify themselves as “Survivors”, they reversed their outlook of six months ago:
• Just 34% of manufacturers have an optimistic outlook, down significantly from six months ago (52%)
• The manufacturing sector is more likely to experience cash flow issues (71%, up dramatically from 47% last fall), due in part to their resistance to cut expenses (they were the least likely industry group to do so)
• They are the least likely to have hiring plans (19%, down from 30% six months ago)

Cash flow concerns stable, despite economic uncertainty
Cash flow continues to be an issue at the top of the priority list for small business owners, but even now in the midst of the recession it is well below its spring 2002 zenith (86%). The number of entrepreneurs experiencing cash flow issues this spring (57%) is on par with both the previous fall (55%) and spring (56%).
Among cash flow concerns, the biggest worry for business owners overall is the ability to pay bills on time (17%). One-quarter of business owners in the retail sector (27%) are concerned about the ability to pay bills on time (versus 16% of manufacturers and 10% of services companies). Additional concerns for businesses include accounts receivable (15%), having enough cash to win new business (10%), the ability to meet payroll (9%) and the ability to accurately track cash flow (7%). Less than one-quarter of all business owners (24%) believe their accounts receivables are too high; however, six-in-ten entrepreneurs (61%) are concerned about having cash available to pay bills over the next six months.

Retirement plans on hold
Forty-one percent of business owners indicated they were on track to save for their own retirement, down 10% from spring 2008. The number of business owners concerned about saving for retirement has risen to 79% from 73% last spring and only 38% report having a succession plan for their business. A contributing factor to the change in retirement savings may be an increase in the number of small business owners tapping personal finances to help fund their enterprises: 60% are tapping personal finances.

Small business owners still value healthcare coverage for their employees
As entrepreneurs look to cut expenses, those that offer healthcare coverage appear to be protecting it. Traditionally, small business owners have kept healthcare coverage safe. Two-thirds of business owners (66%) offer healthcare coverage to their employees, unchanged from last spring. The number of bosses who agree it is important (64%) to offer healthcare coverage to their employees is on par with last year (65%).
Manufacturers are far more likely to offer healthcare benefits. Three-quarters (75%) offer healthcare coverage to their employees (vs. 66% of services companies and 55% of retailers). As manufacturers are the most likely to have cash flow concerns, it is not surprising they are also more likely to have shopped for a new insurance carrier (23% vs. 16% of services companies and 9% of retailers) or required their employees to pay a larger share of healthcare costs (9% vs. 8% of retailers and 2% of services companies).

Additional survey results are available by contacting American Express OPEN. Fact sheets on regional data, women entrepreneurs and key business sectors are available on request.

Survey Methodology
American Express OPEN Small Business Monitor, released each spring and fall, is based on a nationally representative sample of 727 small business owners/managers of companies with fewer than 100 employees. The anonymous survey was conducted via telephone by Echo Research from February 24- March 9, 2009. The poll has a margin of error of +3.6%.

About American Express OPEN
American Express OPEN is dedicated exclusively to the success of small business owners and their companies. OPEN supports business owners with exceptional service. With tailored products and services, the team delivers purchasing power, flexibility, control and rewards to help customers run their business. Specifically, business owner customers can leverage an enhanced set of products, tools, services and savings, including charge and credit cards, convenient access to working capital, robust online account management capabilities and savings on business services from an expanded lineup of partners. To obtain more information about OPEN(SM), visit OPEN.com, or call 1-800-NOW-OPEN to apply for a card. Terms and conditions apply.

American Express Company www.americanexpress.com is a leading global payments, network and travel company founded in 1850.