Small Businesses and Middle Market Companies Agree Growth is the Top Priority, Says American Express Business Growth Pulse
July 14 2016 - 8:00AM
Business Wire
Companies Seek Additional Financing in Pursuit
of Long-term Growth
Small businesses and middle market companies in the U.S. are in
growth mode, according to the American Express Business Growth
Pulse. The survey found that ninety-two percent of middle market
firms ($10M -$1B in revenues) and eighty percent of small
businesses (with less than 100 employees and at least $250,000 in
revenue) say growth is the top priority for their firms. A greater
number of middle market companies anticipate their businesses to
grow in the next quarter, with more than one-in-five of these firms
(22% vs. 7% of small businesses) saying they expect their companies
will be “expanding by leaps and bounds.”
However, the road to growth is not free from obstacles.
Challenges exist regardless of business size and vary accordingly.
Although the biggest hurdle to growth is acquiring new customers
for small businesses (22%), middle market companies’ biggest
challenges encompass issues that are outside their control,
including managing the rising costs of doing business and
increasing competition (each, 14%).
“Although small businesses and middle market companies are both
focusing on growth, they are taking different paths to expansion,”
said Susan Sobbott, president, American Express Global Commercial
Payments. “Small enterprises will look to grow by acquiring new
customers while middle market companies will look to expand by both
acquiring new customers as well as making infrastructure and
equipment investments in their business.”
While acquiring new customers presents a challenge to growth for
many, small businesses view this action as their primary path to
growth (39%). Middle market companies however are saying that both
acquiring new customers and increasing investments in
infrastructure and equipment would most help them grow (each,
15%).
Cash Flow Proves a Challenge; Middle Market Concerns Linked
to Growth
Cash flow issues present another obstacle as businesses manage
their day-to-day operations and strive for long term growth. Cash
flow concerns are higher among middle market companies (65%) than
small businesses (49%), with one-in-five middle market companies
(20%) saying they are ‘very concerned’ (versus 8% of small
businesses).
Middle Market Companies:
- Over the last quarter, nearly half of
middle market companies (46%) say they experienced a cash flow
crunch and nearly three-in-ten (28%) attribute their cash flow
issues to investments in the business.
- Looking ahead, nearly four-in-ten (39%)
middle market companies expect the ability to invest in long-term
growth to be their greatest cash flow concern next quarter.
Small Businesses:
- Small business cash flow concerns are
more likely to be related to day-to-day management of the business
rather than plans for growth.
- Looking back several months, more than
one-quarter of small businesses (27%) say they experienced a cash
flow crunch. They attribute their cash flow issues in the previous
quarter to an unexpected decrease in sales (28%).
- Further, small businesses (25%) expect
collecting accounts receivable to be the biggest cash flow worry
next quarter.
When they experience a cash shortage, the primary method middle
market businesses (23%) will use to obtain funds is to take out a
business line of credit. Small businesses will dip into cash
reserves (23%).
Long Term Growth Drives Financing Hunt; Middle Market Most
Likely to Seek Financing
Growth is the main driver behind business’s quest for financing.
According to the survey, the main reason small and middle market
businesses would consider securing additional financing for their
companies is in order to pursue a long term growth plan (31%). The
top three reasons to seek additional financing vary by size of the
business:
Small businesses say they would consider seeking additional
financing in order to:
- Pursue a long term growth plan
(26%)
- Get through short-term seasonal
swings/business downturns (20%)
- Take advantage of a short term growth
opportunity (19%)
Middle market firms’ reasons for considering additional
financing include being able to:
- Pursue a long term growth plan
(41%)
- Take advantage of a short term growth
opportunity (33%)
- Invest in marketing, advertising or PR
(33%)
- Hire new employees (33%)
- Offer a new line of products or
services (33%)
- Make capital investments the company
has been putting off (32%)
Significantly more middle market companies (60%) compared to
small businesses (25%) anticipate the need to pursue financing in
the next 12 months.
When evaluating different business financing options, the most
important decision-making factor for small businesses (74%) is the
rates/fees charged. Middle market businesses say the most important
decision-making factor when evaluating business financing options
is ensuring that their data is protected against security breaches
(61%), followed closely by full disclosure of loan details and
rates/fees (60%).
Survey Methodology
The American Express Business Growth Pulse is the first in a
series of surveys examining topics related to business growth for
both small businesses and middle market companies. The study is
based on a nationally representative sample of 1,000 U.S. small
business owners/managers, defined for the purposes of this survey
as companies with fewer than 100 employees and annual revenues of
$250,000 or greater, and 501 middle market companies, defined for
the purposes of this survey as companies ranging in size from $10
million to $1 billion in annual revenues. The anonymous survey was
conducted online among financial decision makers, owners and
managers by Teneo Strategy May 18-27, 2016. The poll has a margin
of error of +/- 2.6% at the 95% level of confidence for the total
combined sample of 1501, a margin of error of +/- 3.1% at the 95%
level of confidence for the small business sample of 1000 and a
margin of error of +/- 4.4% at the 95% level of confidence for the
sample of 501 middle market companies.
About American Express Global Commercial Payments
Through its Global Commercial Payments division, American
Express offers a suite of payment and lending products that
help businesses and organizations of all sizes gain financial
savings, control and efficiency. Global Commercial Payments
provides solutions for travel and everyday business spending, cross
border payments, global currency solutions, and business
financing.
To learn more about Global Commercial Payments visit
business.americanexpress.com.
To learn more about American Express OPEN, which provides
products and services for small businesses and entrepreneurs in the
United States, visit www.OPEN.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20160714005020/en/
M BoothRyan Walker, 212-388-7677ryanw@mbooth.comorAmerican
ExpressMelissa Filipek, 212-640-8658melissa.j.filipek@aexp.com
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