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.
2. 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
3. Contents
Table of Contents
â–ş Key Findings 4
â–ş Impact of the Recession 5
â–ş Management Resilience
Vulnerability: Loss of Leadership 9
Vulnerability: Marketing/Financial Planning 14
â–ş Infrastructure Resilience
Vulnerability: Critical Data 18
â–ş Small Business Resilience Indicators 23
â–ş Recommendations 28
â–ş Methodology and Demographics 29
Cite as: CDW Report on Small Business Resilience, November 2009 3
4. Key Findings
Key Findings
â–ş 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
5. 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
6. Sales and Profitability
Sales and Profitability Impact of the Recession
â–ş 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
7. Marketing and Competitive
Impact of the Recession
Factors
â–ş 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
8. Leadership Impact of the Recession
â–ş 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
9. 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
10. Leadership Management Resilience
â–ş 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
11. Knowledge Management Management Resilience
â–ş 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
12. Leadership Management Resilience
â–ş 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
13. Leadership Management Resilience
â–ş 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
14. 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
15. Cash Flow Management Resilience
â–ş 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
16. Marketing and Competitive
Management Resilience
Factors
â–ş 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
17. Marketing and Competitive Management Resilience
Factors
â–ş 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
18. 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
19. Network Resilience Infrastructure Resilience
â–ş 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
20. Network Resilience Infrastructure Resilience
â–ş 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
21. Network Resilience Infrastructure Resilience
â–ş 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
22. IT Support/IT Security Infrastructure Resilience
â–ş 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
23. Small Business
Resilience Indicators
So, what does business
resilience look like?
Cite as: CDW Report on Small Business Resilience, November 2009 23
24. Small Business
Resilience Indicators
Business Resilience
â–ş Resilience leads to longevity
â–ş Profitability is a prerequisite for longevity
â–ş 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
â–ş 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
â–ş 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
â–ş 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
25. 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
26. 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
27. 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
28. Recommendations
How can a small business increase its resilience?
â–ş 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
29. Methodology and
Demographics
Methodology and Demographics
â–ş 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:
â–Ş Title/Role: â–Ş 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 â–Ş 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
30. 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