Study Links Business Planning to Increased Hiring and Revenue Growth

Eugene, Ore

Small business owners have high hopes for growth and hiring in 2014, but their optimism largely depends on how well they plan and track their financials, according to a study released today by Palo Alto Software.

The report, based on a survey of almost 400 small businesses conducted in January 2014, found that small business owners who regularly plan and track their business’ financial metrics expect more growth in 2014. According to the survey, 79 percent of companies with a business plan say they are better off financially compared to a year ago, while only a third of small businesses without a business plan can say the same thing. Additionally, nearly 75 percent of established companies that have a business plan in place expect to grow more than 10 percent in 2014, compared to only 17 percent that don’t have a business plan.

As the Lean Startup method quickly gains popularity among the high-tech startups of Silicon Valley, many entrepreneurs may question the necessity of a business plan. But statistics prove that businesses are overwhelmingly better off when they set goals and implement a plan for how to achieve those goals.

“Setting goals for your business is not as useful if you don’t you develop a plan for how you’re going to reach those goals and track your progress regularly,” said Sabrina Parsons, CEO of Palo Alto Software. “By setting your goals, communicating with your employees on how to achieve those goals, and then managing your actual results to those goals, you set your business up for success.”

The survey also found that the more often companies track their financials, the more likely they are to grow. Seventy-one percent of small business owners who check their key metrics at least weekly expect to grow revenue by more than 10 percent in 2014, compared to 59 percent who never compare planned and actual results.

An optimistic year ahead

Small business owners are also optimistic about the year ahead. A vast majority of small businesses with revenue expect revenue growth in 2014, and only a very small percentage expect a decrease. The survey found that:

  • While 91 percent expect an increase in revenue in 2014, 30 percent said they expect to grow by 50 percent or more
  • 69 percent expect to hire between 1 and 10 employees this year, and 8 percent expect to hire more than 11 employees
  • 81 percent are more optimistic about their company’s finances than they were a year ago
  • 75 percent said they are about the same or better off financially than they were 12 months ago

This optimism among small businesses is largely due to their desire to take matters into their own hands. The survey found that external political and economic factors have played a relatively small role. In fact, 69 percent of survey respondents said the implementation of the Affordable Care Act had no effect on their ability to plan and grow their businesses. The only thing that seems to hold SMB owners back is a lack of funding. Forty-one percent of SMBs say that access to capital has made it more difficult to grow their business over the past year.

“Small business owners are hungry to find ways to grow their business. Those that plan ahead can handle any economic setback that comes their way,” said Parsons. “They’re not optimistic only because of the improving economy, they’re optimistic because they’ve taken matters into their own hands, and understand what it takes to reach their goals.”

Download the full “Q1 2014 State of Small Business” report.