Special focus on business sentiment of entrepreneurs of color; they are more optimistic about the next 12 months than white counterparts and are taking active steps to grow diverse businessesKey findings from the report include:
- A large majority (89%) of business owners are confident about the future
- Most (60%) have discovered something positive from the pandemic they will carry forward
- Both small and large owners plan to invest in talent
- More entrepreneurs of color (57%) believe the U.S. economy will improve in the next 12 months than their white counterparts (47%)
- Entrepreneurs of color (49%) outpace white entrepreneurs (31%) in planning to make changes to support racial diversity
- Far more larger businesses than smaller businesses are revisiting strategic plans to adjust to changing times
WILMINGTON, DEL., October 29, 2020—A new survey from Wilmington Trust, in collaboration with experts from its parent company M&T Bank, finds that nearly 9 in 10 business owners (89%) are confident they can achieve their long-term business goals. They also remain optimistic about the success of their businesses over the next year, despite the many challenges they have faced in 2020. The quarterly report, Wilmington Trust Business Owners Outlook: Bouncing
Road to resilience: High levels of optimism lead to plans for investing in human capital
The survey grouped business owners into larger businesses ($5 million-plus in annual revenue) and smaller businesses ($1 million to $4.9 million in annual revenue). The majority in both cohorts expressed positivity about the state of their businesses and the larger economy. More than three-quarters (76%) of owners of larger businesses are very/somewhat optimistic about their business over the next 12 months. Nearly 6 in 10 (59%) owners of smaller businesses are equally confident.
The fact that so many business owners remain optimistic about their companies’ prospects is driving their operating plans. Almost no owners plan to cut their workforce or decrease hours for current employees, and two-thirds of owners of larger businesses (66%) plan to invest in human capital over the next six months, either by hiring additional staff, increasing hours for current staff, or bringing back employees who have been laid off or furloughed. The majority of owners of smaller businesses plan to do the same, with 56% of them preparing to invest in talent.
“These insights point to the resilience and ingenuity of America’s business owners. Despite all the headwinds, most owners are indeed bouncing forward,” said Stuart Smith, national director of business value strategies for Wilmington Trust and M&T Bank Emerald Advisory Services®. “They have pivoted their companies to ensure the immediate health of their business’s and personal finances. Longer term, it’s critical that all owners evaluate key areas in their business models, including their teams, cash flow projections, and operational sustainability. Their advisors can help them assess these areas and adjust their strategic plans where needed to keep their financial goals on track.”
The report also highlights several areas aside from talent, in which owners have been investing in their businesses to adapt to the new normal. These include greater use of digital technology to engage with customers, developing new products and services, and accessing ways to secure cash flow.
Bigger impacts for smaller businesses
While optimism is high across all business owners, the survey notes that the impact of COVID-19 on the revenues of small and large businesses has not been distributed equally. Smaller businesses are taking a larger financial hit than big companies. Only 4 in 10 (37%) large business owners expect a decline in 2020 compared to 2019, and just 8% foresee a significant decrease. Alternatively, among smaller businesses, more than half (55%) foresee lower revenues this year. In fact, nearly one in five owners (16%) predicts a steep revenue drop of 26% to 49%.
“Business owners must reimagine their operations, ensuring they have strong partnerships with a diverse team of trusted advisors to craft an agile business continuity plan to bounce forward,” said LaKendra McNair, minority and women-owned business development relationship manager, M&T Bank. “One learning from COVID-19 for most small business owners was the negative impact of not having a continuity plan for uncontrollable natural or economic risks to their operations. Owners must have a keen eye on how to proactively invest in resources, reserves, and people that will help protect what’s important.”
Entrepreneurs of color: more optimism despite more challenges
Additional challenges persist for entrepreneurs of color. The survey revealed the largest gap is in their knowledge of how to find new customers. Nearly one in three entrepreneurs of color (31%) cited this as an issue, while only 15% of white entrepreneurs did.
Over one-third of the entrepreneurs of color also reported higher hurdles in finding vendors to source needed supplies, which is 10% higher than white owners. The survey also noted a marked difference in challenges to financing, with nearly one-quarter of entrepreneurs of color (24%) saying their lower credit scores often lead to higher costs for financing, compared to just 15% of white entrepreneurs.
“Accessing capital has always been an important issue for entrepreneurs of color; the pandemic has only made this challenge more pronounced,” said John Campbell, director of business owner engagement, Wilmington Trust. “It’s vital for entrepreneurs of color to be able to connect with a community that can offer mentorship, networking opportunities, and strong banking relationships to help them access capital, plan for unexpected problems, and ensure they stay on course to achieve their business and personal objectives, including building a legacy for their families.”
The diversity gap: white entrepreneurs slower to embrace diversity in business
The report revealed stark differences between white business owners and entrepreneurs of color when it comes to making changes to increase diversity in their workforces or among their advisors. Only 31% of white entrepreneurs are considering hiring a more diverse workforce compared to 49% of entrepreneurs of color. The staff of businesses owned by white entrepreneurs consists of 32% people of color compared to 40% for businesses owned by entrepreneurs of color. Significantly, more than one-third of white entrepreneurs (37%) say they are making no changes to increase diversity in their businesses compared to only 17% of entrepreneurs of color who say the same. Finally, white entrepreneurs (51%) are far less likely to switch business advisors to increase diversity compared to entrepreneurs of color (69%).
A recent webinar hosted by M&T Bank and Wilmington Trust focused on the survey results and highlighted the stories and perspectives of four business owners and their advisors on how entrepreneurs have reacted to some of the most important economic and social issues our country is facing right now.
The webinar and full report can be viewed here: https://library.wilmingtontrust.com/z-featureditems/featured-1/3q-business-owners-outlook.
Survey methodology: Owners of businesses with annual revenue of $1mn+ were asked to complete an Internet-based questionnaire to ascertain their views on the U.S. economy, the state of their business, future plans for their business and impacts of the COVID-19 pandemic. The survey took place August 4 through August 19, 2020, among 1,007 business owners, with 227 of these being entrepreneurs of color.
About Wilmington Trust
Wilmington Trust’s Wealth Advisory offers a wide array of personal trust, financial planning, fiduciary, asset management, private banking, and family office services designed to help high-net-worth individuals and families grow, preserve, and transfer wealth. Wilmington Trust focuses on serving families with whom it can build long-term relationships, many of which span multiple generations.
Wilmington Trust also provides Corporate and Institutional Services for clients around the world.
Wilmington Trust has clients in all 50 states and numerous countries, with offices throughout the United States and internationally in London, Dublin, Paris, and Frankfurt. For more information, visit www.WilmingtonTrust.com.
About M&T Bank
M&T Bank Corporation is a financial holding company headquartered in Buffalo, New York. M&T’s principal banking subsidiary, M&T Bank, operates banking offices in New York, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, West Virginia and the District of Columbia. Trust-related services are provided by M&T’s Wilmington Trust-affiliated companies and by M&T Bank.