Trends: “Small Businesses more Profitable after 2009 Recession?”
As consumers and businesses pulled the purse strings tighter during the trying economic conditions of 2009, conventional wisdom says small businesses everywhere felt the effects on their bottom line. In fact, our own data tells us that small businesses did take a revenue hit.
Looking broadly across all QuickBooks Online industries, 2009 small business revenue was down by more than 10%.
However, there’s a twist. It seems the tough times have caused businesses to become wiser about managing their expenses. Looking at the same broad data set across all industries, 2009 expenses declined by 12%, leading to a 2% increase in profit margin over the same period in 2008.
Effectively, small businesses were more profitable overall due to their ability to contain spending in the face of declining revenue.
How did your small business fair during the trying economic conditions of 2009? Does this analysis hold true? What actions did you take to remain profitable? Please post your comments below.
For QuickBooks Online users: To explore how your business compares to your specific industry, visit Trends from the Company Snapshot page under Reports.
Trends uses aggregated and anonymized QuickBooks Online data to compile stats across over 100 industries to gain insights into the health of small businesses. (Image from the Trends Application in the Intuit Workplace App Center http://workplace.intuit.com/AppCenter/)
March 3, 2010 at 12:36 pm
That is great that they learned how to buckle down but profits growth as a result of cost cutting is unsustainable. If companies want to continue bottom line growth they will now have to do it via continuous investment. This can either be done in the form of capital expenditures or hiring/training to increase capacity and continue to innovate.
March 3, 2010 at 1:04 pm
Ryan,
Great comment on the need to focus on top-line growth in addition to lean operations. However, I would imagine many small businesses still need to carefully monitor spending – any thoughts on creative ways to foster organic growth without large cash outlays?
March 6, 2010 at 10:01 am
I would appreciate thoughts on “organic growth” as well, as I am in exactly this situation. In January ’01 we eliminated a chronically money-losing segment of our business and as a result we’re seeing reduced costs across the board and improved profits.
That said, I understand that we now need to look at ways to actually grow, but as a very small business I don’t have much capital to invest.
March 8, 2010 at 6:32 pm
Hey Erin – growth is a hard thing. Money or no money, figuring out how to scale your business in a smart way is one of the toughest problems a business owner has to go through. I think you’re in actually a better situation now though – with a limited budget you’re prioritization of important ‘swings’ gets tighter. Focusing on lots of ways/initiatives is tempting, but with limited funding it is vital you pick the top 1 or 2 areas where you want to put your time and money.
Now here comes the trickier part – picking those one of two areas that will launch your business to the next level. My advice…brainstorm on the complete (exhaustive list) of things you are doing or can do to increase growth. Put ROI numbers next to them. Be brutal. Now brainstorm how you can test the new initiatives with little money. Want to start selling to a higher target customer? Start by testing your way in. Spending lots of money and then finding out it doesn’t work it the quickest way to get to Red. Hope that helps.
Kristen (QuickBooks Online Product Manager and former small business owner)
March 8, 2010 at 2:56 pm
If only government would do the same! It is frustrating to hear from so many organizations they simply “cannot cut”. Tough decisions were made by us the small business owners and government and non-profit organizations should have to do the same; not be bailed out, raise taxes, incur deficit spending or steal money from the stimulus bill to fund non-stimulus expenses.