Kabbage data shows SMBs undervalue their revenue growth

New data released by small-business loan provider Kabbage demonstrates why small businesses need appropriate resources to analyze and compare their cash-flow performance against their peers.

Polling more than 600 U.S. small business owners, the research reveals the majority of small businesses believe their revenue growth underperforms their peers.

Specifically, 60 percent of respondents ranked their revenue growth below the 50th percentile of similarly sized small businesses.

Yet, when comparing the respondents’ true cash-flow and revenue data with the analysis drawn from 200,000 companies in the Kabbage Small Business Revenue Index, the data reveals the vast majority of respondents have healthy revenue performance.

In fact, 74 percent of respondents in the survey met or exceeded the overall Index revenue growth of small businesses over the three month period prior to conducting the survey.

Small Business Owners Generally Fail to Accurately Evaluate Their Business

The research also showed small businesses generally have difficulty accurately comparing their businesses to others.

Less than 11 percent of small businesses were able to correctly estimate the decile ranking of their revenue performance among other respondents.

Together, the findings suggest small business owners may carry unwarranted self-doubt about the financial health of their businesses, and a lack of proper insights into their market or industry may influence why small businesses skew toward underconfidence.

“Having studied the effects that confidence levels have on decision-making for over 20 years, I’ve found entrepreneurs are often overconfident. However, this study shows the potential for small business owners to err on the side of under-placing their performance when comparing themselves to others.”

 

UC Berkeley-Haas management professor Don A. Moore

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