A Widening Focus: Setting Your Sights on Growth Companies
Tags: Business Information, Risk Management
Small and mid-sized customers are becoming a steadier source of profits for large companies so risk and credit management strategies at companies should be revised to improve evaluation of these prospects.
Finding the right business customers can be a balance of risk and reward. This is especially true in the small-business market, where evaluation is more difficult but is of even greater importance. The small-business market can be lucrative because of its size. It represents a large population of potential customers. More than 99.7 percent of U.S. businesses are classified as small, according to the U.S. Small Business Administration (SBA). However, the SBA also states that 49 percent of small businesses fail in the first five years of operation. Evaluating small-business risk can be tricky because small businesses tend to have less available data on which to predict future behavior. For large companies seeking to take greater advantage of the market opportunity among smaller firms, recent CFO Research Services reports hold some good news: small and midsize companies worked aggressively through the economic downturn to recast their cost structures and bring a new level of financial discipline to their businesses. Now, as the economy improves, executives at small and midsize companies say they remain committed to their renewed financial discipline. As a result, small and midsize companies are likely to be more reliable customers than ever - customers that are increasingly stable sources of orders, cash flow, and growth.