Advisors play an important role in the decision-making process of many small-business owners, according to a study released by the National Federation of Independent Business (NFIB) Research Foundation. More than two-thirds of small-firm owners rely on a single business confidante for such advice; the confidante is the most common and influential type of advisor, whom the owners typically consult prior to addressing a serious business problem or making a critical business decision. For those owners who do have a business confidante, 59 percent are an immediate family member, and most confidantes have served in this capacity since the firm’s founding.
A business advisor is anyone a small-business owner solicits advice or counsel from on a matter relevant to his or her business. Some advisors sell a skill; others sell an analysis or a thought process. Some sell their knowledge and information indirectly, rolling their selling price into sales of goods or services; and others simply give it away. Nearly one-quarter of small firm owners seek no external advice at all. Such enormous variation in business advisors and their use results in broad patterns of small-business owner and manager use of business advisors and counselors.
Notable survey findings include:
- While the majority of small-business owners do seek counsel in regards to business decisions, about one-quarter (23 percent) report that they rely exclusively on their own intuition and knowledge and do not engage any person or persons in their deliberations when confronting a difficult business problem or critical business decision. Engaging different people for different situations appears to be the most productive consulting style in terms of profitability and employment increase/loss of the three styles examined. Relying on confidantes appears less productive and not engaging anyone appears even less so.
- Forty-seven (47) percent of small employers did not seek out anyone with whom to discuss the year’s most significant business. The most frequent reason (56%) offered for pursuing this closely held course of action is that the owner knew what he/she needed to do as soon as he/she recognized the matter. The second most frequently cited reason was concerns with privacy (22%).
- Small-business owners who do seek advice from outside the firm most frequently solicit the counsel of accountants, insurance agents/brokers, other business owners, suppliers, bankers, IT consultants, including Web designers, and lawyers in that order. Thirty-five (35) percent consulted an accountant more intensively in the last 12 months than any other outside advisor. The median amount of time that a small employer or his/her designee spent with the firm/individual that he/she worked with most intensively the last year was 16 hours. The median amount of money spent on the advice last year was about $2,000. The most helpful advice paid consultants, vendors and suppliers typically provide is adding detail and depth to the owner’s basic ideas.
- Small employers who solicit advice tend to implement the counsel they receive. However, they also tend to filter it carefully, picking and choosing what they find useful, and discarding the rest. About two-thirds of those who solicited advice in the last 12 months were able to implement a majority of what they received. Within a week of discovering the single matter that required the year’s most critical decision, half of small-business owners began to pursue a corrective course of action.
- The subject matter of the year’s most critical decision varied widely – sales or marketing, 22 percent; operations or purchases, 21 percent; finance, 17 percent; and disposition or changing size of the firm, 13 percent. Fifteen (15) percent claim the past year’s most significant decision involved the existence of the business or their ability to keep it operating.
The latest NFIB Small Business Poll, Advisors on Critical Decisions, is available at www.nfib.com/advisorstudy. Today’s study is part of a series of reports intended to provide a window into the sector that creates nearly two-thirds of new jobs in America each year.