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Small Biz: Should I Stay, Or Should I Go?

A small business never rests, even within a period of economic growth and stability. SMEs can take the cash flow breathing room in lucrative times and work out their strategy for expansion. According to the latest data from SunTrust Banks, not every SME in the U.S. is taking the same path to growth.

The bank’s latest Business Pulse Survey, released last week, found promising plans among the nation’s small and medium-sized businesses, with the vast majority of companies surveyed reporting confidence in the future of their businesses.

“Leaders are optimistic, with more than 80 percent saying their businesses are strong and they are confident about their company’s finances,” explained SunTrust Commercial and Business Banking Executive Beau Cummins in a statement announcing the findings.

But the ways in which these businesses plan to expand vary significantly, researchers concluded, creating a divide between the small and the medium in the SME population.

The report found 36 percent of mid-market firms — those with annual revenue between $10 million and $150 million — as looking to grow via mergers and acquisitions. That’s a 25 percent increase from 2015, said SunTrust.

Meanwhile, 41 percent of smaller companies with annual revenue between $2 million and $10 million said they are looking to launch new services or products — also a significant increase from the previous year’s figures, in which just 31 percent of small businesses said the same.

According to Cummins, access to financing is key to the development of a growth plan.

“Along with the belief that capital is accessible, this is changing the way companies are approaching growth over the next five years,” the executive said.

Small and mid-market companies in the U.S. are also showing a greater split in their projected expansion plans regarding where they expect to grow. For instance, researchers found, the interest in mergers and acquisitions among mid-market companies means these businesses are eyeing entities outside U.S. borders as potential business partners.

“We see interest in M&A on the upswing for middle-market companies and plans to grow organically significantly decreasing,” stated Cummins.

According to researchers, 29 percent of mid-market firms said they are looking to expand internationally over the next five years. On the contrary, their smaller counterparts are instead seeking growth within their home turf: 32 percent of small companies said they plan to grow domestically.

 

Cash Concerns

The findings weren’t entirely divisive among the small and mid-sized business population, however. Whether planning to grow at home or abroad, all SMEs reported significant focuses and concerns over finances.

SunTrust found that profitability remains the top priority among SMEs for 2016, with 27 percent citing this goal. One-quarter pointed to boosting customer satisfaction, while 19 percent cited investment in future expansion. Researchers added that employee retention was also shared among SMEs as a top priority this year.

Smaller companies, however, are reportedly more concerned with economic uncertainty and cash flow stability than their mid-sized peers, which more frequently cited cybersecurity and fraud protection among their greatest apprehensions for the year.

The findings may suggest that these companies will need to enter into more strategic financial management relationships along their growth projections.

Researchers last August at the Association of Chartered Certified Accountants revealed that high-growth SMEs share a commonality of an expansion of responsibilities for their financial officers and money managers. This, the report concluded, means CFOs are taking on a more flexible and expanded role within the corporation.

SunTrust’s Cummins made similar conclusions.

“Today’s business leaders expect their banker to have a deep understanding of their industry,” he said. “They want help developing short- and long-term financial plans coupled with impactful strategies to achieve their goals.”

“They are looking for a partner who can provide day-to-day solutions to manage interest rates, working capital and cash flow, while still helping to manage their evolving needs,” he added, “transition planning, employee benefit planning, M&A advisory or wealth management.”

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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