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CDW Small Business Resilience Report
 

CDW Small Business Resilience Report

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The CDW Report on Small Business Resilience examines management and IT infrastructure factors that contribute to business resilience against the backdrop of the current economic recession.

The CDW Report on Small Business Resilience examines management and IT infrastructure factors that contribute to business resilience against the backdrop of the current economic recession.

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    CDW Small Business Resilience Report CDW Small Business Resilience Report Presentation Transcript

    • Upwind in The Storm: CDW Report on Small Business Resilience November 2009 © 2009 CDW Corporation 1
    • Background Background The CDW Report on Small Business Resilience examines management and IT infrastructure factors that contribute to business resilience against the backdrop of the current economic recession. In July 2009, CDW surveyed 613 small business owners and senior managers to answer the key question: How can a small business increase its resilience? Cite as: CDW Report on Small Business Resilience, November 2009 2
    • Contents Table of Contents ► Key Findings 4 ► Impact of the Recession 5 ► Management Resilience Vulnerability: Loss of Leadership 9 Vulnerability: Marketing/Financial Planning 14 ► Infrastructure Resilience Vulnerability: Critical Data 18 ► Small Business Resilience Indicators 23 ► Recommendations 28 ► Methodology and Demographics 29 Cite as: CDW Report on Small Business Resilience, November 2009 3
    • Key Findings Key Findings ► Only 45% of small business owners and senior managers are optimistic* about their chances to grow and prosper in the next five years; and from their own feedback on management and IT systems, their caution is justified by more than economic stress: Leadership: Small businesses are acutely aware they are highly reliant on their top executives. Three-quarters of all small businesses believe their business would be in jeopardy if their top executive was forced to take a six-month leave of absence. And, many are falling short on steps to reduce reliance – too few are implementing knowledge management systems, business continuity plans and company-wide IT networks Planning: To combat the recession, small businesses are shifting marketing and operating strategies. But, many are flying blind, without marketing plans or defined marketing budgets. Additionally, too many are failing to monitor progress against plans Critical Data: Nearly all small business owners believe they can recover their data in the event of a loss. Drilling down, however, they lack key supporting processes *Selected 8-10 on a scale of 1-10, with 10 being completely confident Cite as: CDW Report on Small Business Resilience, November 2009 4
    • Impact of the Recession Impact of the Recession Knowing what they now know, small business owners and managers say saving money during good times, adjusting marketing investments and cutting expenses quickly are key to resilience during an economic downturn. Cite as: CDW Report on Small Business Resilience, November 2009 5
    • Sales and Profitability Sales and Profitability Impact of the Recession ► Our economic growth engine is struggling. Employing half the U.S. workforce*, a growing number of small businesses are not profitable, and 30 percent have reduced their staff. In 2008 alone, nearly 600,000 closed, and more than 43,000 declared bankruptcy* U.S. Small Business Profitability Trends 2000-2008 79% are taking steps to address reduced profitability. 90% Most common measures: 88% 89% (on 86% Reduced operating expenses (other than cuts in staff, average) 84% 61% salary or benefits) 84% Percent Profitable 82% 35% Reduced marketing spending 80% 30% Cut staff 78% 22% Cut capital spending other than information technology 77% 76% 20% Reduced staff benefits/compensation without layoffs 74% 14% Invested in new technology systems to increase efficiency 72% 12% Cut information technology (IT) spending 70% 2000-2006 2007 2008 11% Reduced new product or service development efforts *Source: SBA, Office of Advocacy, http://www.sba.gov/advo/stats/sbfaq.pdf The Office of Advocacy defines a small business as an independent business having fewer than 500 employees Cite as: CDW Report on Small Business Resilience, November 2009 6
    • Marketing and Competitive Impact of the Recession Factors ► Small businesses are making significant changes to marketing programs as they work to overcome sliding profits Compared to last year, small businesses To balance out new investments, small report increased investments in the businesses are cutting back on the following tactics: following tactics: 56% Sales outreach 34% Print and/or broadcast advertising 48% Social media/Web 2.0/blogging 27% Direct mail programs activities 25% Sports/event advertising 47% Web site enhancements 44% E-mail marketing 39% Measuring marketing results 35% Promotional sales Cite as: CDW Report on Small Business Resilience, November 2009 7
    • Leadership Impact of the Recession ► Looking back, how would you manage differently through a recession? “I would look at the operations daily, “[I would] diversify “[I would] better responsibility so the meet with managers weekly to get some prepare the 2nd in company is not so input of the operations in the field and command” dependant on certain ways to reduce costly mistakes. Reduce unnecessary spending on things that the individuals” company does not need” “[I would focus “[I would] build “I would have acted quicker to on] better reserves, reduce operating expenses strategic increase target and looked earlier at creative planning” marketing” ways to increase sales” Cite as: CDW Report on Small Business Resilience, November 2009 8
    • Management Resilience Vulnerability: Loss of Leadership Small businesses are acutely aware they are highly reliant on their top executive. However, they are hard- pressed to take measures that reduce dependence, such as capturing and sharing vital information about customers and the business (knowledge management), business continuity planning or capitalizing on company-wide IT networks. Cite as: CDW Report on Small Business Resilience, November 2009 9
    • Leadership Management Resilience ► Three-quarters of all small businesses believe a six-month leave of absence of their top executive would risk their company’s ability to operate If your company’s owner or top executive was forced (for health or other reasons) to take a six-month leave of absence, how would this impact the company? Minimum Impact: 23% Operations and sales would continue in a normal fashion Some Impact: Either operations or sales (or both) would suffer, but the 28% company would likely survive, with reduced profitability/sales Significant Impact: Either operations or sales (or both) would suffer 31% significantly, with a significant chance of company failure 30% of businesses with 1- Closing the Doors: 16% 19 employees report The company would almost certainly go out of business that they would have to close their doors Unsure 2% Cite as: CDW Report on Small Business Resilience, November 2009 10
    • Knowledge Management Management Resilience ► Despite significant reliance on the top executive, most small businesses are not doing all they can to capture and leverage management expertise and share it with other employees Those who do have a knowledge management strategy work to record and transfer the following to key employees: Information about customers/clients and 76% transactions with them Mandatory operating policies, practices 65% and procedures 62% of small businesses do not Informal information regarding how to do 65% things most efficiently have a knowledge management strategy or Definitions of roles, responsibilities and are unsure if they have one 59% organization structure Cite as: CDW Report on Small Business Resilience, November 2009 11
    • Leadership Management Resilience ► Likewise, many small businesses are operating without Business Continuity/Disaster Recovery (BC/DR) plans, decreasing the odds of surviving the unexpected – whether a fire, a hurricane or a CEO leave of absence Just 35% of all small businesses have a business continuity plan; 65% do not have a plan or are unsure: 20-99 employees 1-19 employees 19% 49% 51% 81% Have a Plan Do Not Have a Plan/Unsure Cite as: CDW Report on Small Business Resilience, November 2009 12
    • Leadership Management Resilience ► Planning makes a difference. Small businesses with a BC/DR plan are less likely to be impacted by a leave of their top executive, and more likely to be profitable Only a quarter (26%) of those with a BC/DR plan say 82% of businesses with a BC/DR plan were they would be significantly impacted by an exec’s profitable in 2008, versus 73% of those who do long-term leave, versus 61% without a plan not have a plan 84% 82% 80% 82% 26% 78% 61% 76% 74% 72% 73% 70% 68% With a Plan Without a Plan With a Plan Without a Plan Percent of small businesses significantly impacted by a long-term Percent of small businesses that were profitable in 2008 leave of the company’s top executive Cite as: CDW Report on Small Business Resilience, November 2009 13
    • Management Resilience Vulnerability: Marketing/Financial Planning No Map = More Wrong Turns Small businesses are modifying marketing and operating tactics to overcome the recession and turn around sliding profits. Many, however, are working without marketing or financial plans. Cite as: CDW Report on Small Business Resilience, November 2009 14
    • Cash Flow Management Resilience ► Investing in financial planning and tracking will help ensure dollars are allocated and spent where they are needed most The majority of small businesses have financial plans and review spending against the plans at least monthly. However, businesses with fewer than 20 employees should ensure they monitor spending closely – 34% are not reviewing spending against plans at least monthly 20-99 employees 1-19 employees 90% 72% have a plan but 28% have a plan but 34% are not reviewing are not reviewing spending against spending against that plan on a that plan on a monthly basis monthly basis Cite as: CDW Report on Small Business Resilience, November 2009 15
    • Marketing and Competitive Management Resilience Factors ► Many small businesses are also operating without a marketing plan or defined budget, increasing business risk Do not have a marketing plan: Do not have a defined marketing budget: 44% of all small businesses 57% of all small businesses 56% of companies with 1-19 74% of companies with 1-19 32% of companies with 20-99 41% of companies with 20-99 Cite as: CDW Report on Small Business Resilience, November 2009 16
    • Marketing and Competitive Management Resilience Factors ► In some industries, lack of focused marketing or business development can lead to over-reliance on a few top customers. Small businesses do report that a significant portion of their income comes from their top five customers, increasing risk and decreasing business resilience Customer service is 51% 35% key: Small businesses of revenue generated by of revenue generated by report 65% of annual top five customers top five customers revenue comes from (1-19 employees) (20-99 employees) repeat customers Cite as: CDW Report on Small Business Resilience, November 2009 17
    • Infrastructure Resilience Vulnerability: Critical Data Recovery Reality Check? Almost all small business owners believe they can recover their data in the event of a loss. However, many disaster recovery plans lack key elements. Cite as: CDW Report on Small Business Resilience, November 2009 18
    • Network Resilience Infrastructure Resilience ► 99% of small business leaders believe they could recover their data in the event of a loss. Examining tools and processes in place, however, this seems unlikely. Businesses with company-wide computing networks* report many gaps in their BC/DR plans: Does your BC/DR plan: 45% Include a plan to evacuate vital records and/or equipment? 29% Provide for restoration of data and computer systems? 29% Include offsite data back up? 13% Include regular backup of critical data? 0% 20% 40% 60% 80% 100% Yes No *65% of small businesses respondents reported having a company-wide computing network Cite as: CDW Report on Small Business Resilience, November 2009 19
    • Network Resilience Infrastructure Resilience ► Even small businesses with company-wide computing networks* and BC/DR plans often have holes in their safety nets. Small business data centers need a lifeline to survive unexpected data loss Of small businesses with company-wide networks and BC/DR plans: 55% Do not have remote data center management capabilities 54% Do not have mirrored (real-time) backup data center with failover capability 52% Do not have backup telecommunications access to data center 29% Do not have backup power for data center and data storage In the case of a significant incident, small businesses say it would take, on average, 31 hours to restore their network. For most, this is just enough. The average small business believes it can operate successfully for 32 hours without its IT network *65% of small businesses respondents reported having a company-wide computing network Cite as: CDW Report on Small Business Resilience, November 2009 20
    • Network Resilience Infrastructure Resilience ► Many small businesses also do not protect themselves adequately against common IT security threats: 20% Do not have anti-virus software suites such as Norton or Trend Micro on every desktop/laptop 37% No company-wide SPAM filtering on the e-mail server 51% No new passwords administered periodically 61% No enforced policies regarding downloading software and apps to company PCs/laptops 67% No VPN or remote access client such as Citrix or Cisco 71% No Web filtering (restricts access to high risk Web sites) 0% 10% 20% 30% 40% 50% 60% 70% 80% 55% of those with a company-wide computing network do not have regular IT support, and just 46% have a BC/DR plan Cite as: CDW Report on Small Business Resilience, November 2009 21
    • IT Support/IT Security Infrastructure Resilience ► Improving use of company-wide networks would increase IT resilience and reduce dependence on individual executives by enabling preservation, protection and control of critical information Fewer than half of the smallest businesses utilize a Small businesses without a company-wide company-wide computing network computer network are also far less likely to have various IT security processes in place, leaving them even more vulnerable Percent using a company-wide network 90% With a Without a 80% 88% company-wide company-wide network network 70% New passwords 60% 65% administered periodically 59% 30% 50% 40% Anti-virus software suites 42% such as Norton or 30% Symantec on every 88% 68% 20% desktop/laptop 10% 0% Enforced policies regarding downloading software and 1-19 20-99 All small applications to company 50% 20% employees employees businesses PCs or laptops Cite as: CDW Report on Small Business Resilience, November 2009 22
    • Small Business Resilience Indicators So, what does business resilience look like? Cite as: CDW Report on Small Business Resilience, November 2009 23
    • Small Business Resilience Indicators Business Resilience ► Resilience leads to longevity ► Profitability is a prerequisite for longevity ► Therefore, CDW sorted, extracted and examined survey responses based upon the self-reported longevity and profitability of the respondents’ companies: Longevity sort – Group 1: In business longer than ten years – Group 2: In business five years or less Profitability sort – Group 1: Profitable every year since 2000 – Group 2: Profitable only inconsistently since 2000 ► CDW compared responses of each group to all survey questions and identified the areas of greatest difference between Group 1 and Group 2 under each sort ► This analysis produced eight factors, or indicators, that appear to associate with both greater longevity and consistent profitability, and therefore which can contribute to business resilience ► CDW does not assert that clear cause/effect correlation exists between these factors and true business resilience, but does encourage small businesses to consider how certain management and infrastructure attributes can strengthen their business advantage Cite as: CDW Report on Small Business Resilience, November 2009 24
    • Small Business Resilience Indicators Eight Resilience Indicators Management Resilience Infrastructure Resilience Indicators Indicators Marketing Management On-staff Support Client Management IT Network Customer Concentration Business Continuity Leadership IT Security Cite as: CDW Report on Small Business Resilience, November 2009 25
    • Small Business Resilience Indicators Management Resilience Indicators Non- In In National Consistent Area Indicator Average Profit consistent Business Business Profit >10 yrs <5 yrs Marketing Business has a defined marketing budget 43% 47% 40% 45% 33% Management Client Business has a comprehensive client database 78% 84% 74% 83% 66% Management Customer Top five customers generate 30% or less of total revenue 48% 57% 40% 53% 35% Concentration Top executive six-month absence would have minimal Leadership affect on the business, operations and sales would 23% 29% 18% 30% 5% continue in a normal fashion Score Scores normalized according to the 2009 national average 1.00 1.15 0.88 1.13 0.64 - + Less resilience 2009 National Average: More resilience Management Resilience Cite as: CDW Report on Small Business Resilience, November 2009 26
    • Small Business Resilience Indicators Infrastructure Resilience Indicators Non- In In National Consistent Area Indicator Average Profit consistent Business Business Profit >10 yrs <5 yrs On-staff Business has dedicated full-time on-staff IT support 22% 28% 18% 27% 14% Support Business utilizes a company-wide computing network that IT Network includes a server for application/data storage, a LAN or 65% 71% 61% 72% 45% WAN and multiple PCs Business Business has a written BC/DR plan 35% 42% 30% 40% 26% Continuity Blended score based on presence of separate security measures for servers, e-mail and network connections, IT Security 52% 56% 48% 56% 36% periodic new passwords, company-wide SPAM filtering on e-mail servers and VPN/remote access client. Score Scores normalized according to the 2009 national average 1.00 1.16 0.87 1.14 0.70 - + Less resilience 2009 National Average: More resilience Infrastructure Resilience Cite as: CDW Report on Small Business Resilience, November 2009 27
    • Recommendations How can a small business increase its resilience? ► Small businesses can model the success of resilient leaders and improve their odds of surviving difficult times by: Defining Operational Plans and Budgets: – Identify business goals and available/needed resources/investments – Require all departments (marketing, IT, etc.) to develop business cases for planned investments – Track and review marketing Return on Investment (ROI) – determine which tactics produce the most bang for your buck Protecting Against the Unexpected: – Implement a knowledge management system to ensure that essential information, company procedures and best practices are on file and accessible, even if you lose key employees or partners – Design a Business Continuity/Disaster Recovery plan to protect your employees and maintain critical functions and information – Invest in a VPN or other remote access client to enable secure business operations from any location Reinforcing Infrastructure: – Use a company-wide computing network to preserve, protect and control vital information resources – Employ regular, off-site back up for your data center and data storage; utilize remote data center management capabilities – Strengthen IT security – restrict access to high risk Web sites, enforce policies regarding software downloads and administer new passwords periodically Cite as: CDW Report on Small Business Resilience, November 2009 28
    • Methodology and Demographics Methodology and Demographics ► CDW conducted the online survey of 613 small business owners and senior managers in July 2009. The sample size equates to a margin of error of +/- 3.9% at 95% confidence for the group: ▪ Title/Role: ▪ Organization Size: - 67% Owner/Partner - 50% 1-19 employees - 6% CEO - 50% 20-99 employees - 10% CFO or Finance Manager - 4% CIO, IT Director or Manager, IT Administrator ▪ Years in Business: or other IT staff - 64% More than 10 - 13% General Manager or Equivalent - 17% 5-10 years - 19% Less than 5 years Industry: - Legal: 152 respondents - Financial Services/Banking: 155 respondents 26% Professional Services 5% Retail - All Other: 306 respondents 17% Architecture/Engineering/Construction 4% Personal Services 9% Real Estate 4% Hospitality/Travel/Tourism 8% Media/Entertainment 3% IT/Telecom 6% Manufacturing 2% Insurance 5% Transportation 11% Other Cite as: CDW Report on Small Business Resilience, November 2009 29
    • Contact Information Thank you. For all media questions and inquiries, please contact: Kelly Caraher CDW Corporation 847-968-0729 kellyc@cdw.com Martin Nott O’Keeffe & Company 585-271-1141 mnott@okco.com Cite as: CDW Report on Small Business Resilience, November 2009 30