In business, planners win, pessimists don't
ASHLAND — When it comes to digging out of the recessionary mire, nothing works for small business operators like planning.
A report released today by consulting firm E-Myth Worldwide shows well-mapped-out business plans and owners who track company performance come out ahead in multiple ways.
"So many business owners think working harder will get them there," said Jed Bickford, E-Myth's marketing manager. "But those who step back and make a plan have a great advantage."
E-Myth surveyed 800 businesses in 47 countries, whose combined revenue topped $800 million. In broad terms, E-Myth's survey divided respondents into two camps: planners and pessimists. When companies combined vision, plans and analytical data, they saw revenue growth in 2011 and owners got more compensation and saw paths to future growth.
"Most business owners don't have a clear vision for where their company is going because they are buried in day-to-day tasks and what they have to do today," said E-Myth Chief Executive Officer Jonathan Raymond, whose firm moved to East Main Street in Ashland from Santa Rosa, Calif., last year.
The survey, Raymond said, is a tool for the company with 32 local employees, and another 15 globally, to help business owners get beyond the present task.
"It takes people with double-vision, to keep the lights on, pay the bills and what's in the current plan," he said. "But also for what's in vision for where they want to be."
The surveyed owners ranged from 20 to 90 with a median age of 46. Two-thirds of the respondents were men, with a median income of $85,000. Although women-led companies had greater revenue streams of $1.7 million compared to $1.5 million for men, their median income was $46,500. While growth patterns were similar in 2011, women-led companies expected 19 percent growth versus 16 percent for men.
Planners outperformed the pessimists in 2011, the report stated, and the gap was expected to widen significantly in 2012. The divide between the groups was reflected in anticipated year-over-year growth in 2012.
"We discovered owners tracking simple metrics are earning 60 percent more revenue than those who didn't track metrics on a monthly basis," Bickford said. "And those monitoring Web analytics grew 20 percent faster than business owners who don't pay attention to what's going on with their website."
MarketingSherpa studies over the past five years indicated websites and social media now hold down the No. 2 and No. 3 spots behind referrals in highly effective marketing. That translates, according to E-Myth, into opportunities and missed opportunities.
Businesses monitoring what their customers and employees say about them online grew twice as fast as their competitors, the report stated. "This was by far the strongest predictor of revenue growth in 2011," it said.
Companies with defined marketing plans and monitored lead generation saw 30 percent revenue growth in 2011.
E-Myth noted the biggest challenge reported by business owners was building the right staff and finding the right partner.
Just 3 in 10 companies surveyed used results-oriented role descriptions for all employees, but those companies outgrew their peers by 50 percent in 2011. The sampling revealed 60 percent of companies gave out raises of 2 percent or less and 40 percent gave no raises at all last year.
However, E-Myth noted: "As worker mobility and the battle for talent increases in 2012, we expect salaries to come under increasing upward pressure."
Companies operated as partnerships in 2011 produced larger median incomes ($76,000 versus $70,000) and produced an average revenue of $2.3 million compared to $927,000. Partnerships grew 14 percent versus 11 percent by sole proprietors in 2011, and the survey predicts the gap will grow this year.
The E-Myth study found no correlation between working more days and the growth rate of the companies. In fact, there were businesses growing at more than a 100 percent rate in which the owner took 30 vacation days.
"We coach small- and mid-sized-business owners to think like an owner instead of thinking like a technician," Bickford said. "It's the difference between an auto mechanic, the manager who orchestrates and the entrepreneur working as a CEO holding the vision."