High-growth small businesses are better prepared for adverse or unstable market conditions. They are also diligent about building up cash reserves and establishing line[s] of credit, according to a survey released this week by the Guardian Life Small Business Research Institute.
Small firms that were able to increase their revenues in 2011 shared many common practices, some of which included contingency planning, professional counseling, strategic use of borrowed funds, managerial development and a clear vision of business growth.
"Growing revenues during the recession was no small feat," said John Krubski, research advisor to the Guardian Life SBRI. "However, insights from The Institute's most recent index provide a fresh understanding of how higher-growth small business owners achieved their success."
Last year's most successful small ventures were alike in leveraging credit to finance research and development. More than half of these high-growth enterprises – 58 percent – reported that investing borrowed funds in R&D yielded the best returns, compared to only 38 percent among revenue-flat companies and 16 percent of revenue-declining firms.
Successful companies were also more active in leveraging credit to open new offices, build production facilities, enhance services and add staff.
In regards to contingency planning, small business owners who increased their revenues over the last two years were much more likely to retain cash reserves and pre-establish their lines of credit, as opposed to reacting to challenges whenever they emerge.
"For example, 47 percent of higher-growth companies in the sample had cash reserves that enabled them to weather tough economic times," [the] Guardian reported in a statement, "whereas only 35 percent of companies that just maintained their revenues were able to rely on such financial resources."