Polling of more than 600 U.S. small business owners released today (February 19, 2020) by Kabbage, Inc., suggests that owners may be less confident in their performance than they should be. When data from the 600 owners are compared to the actual performance of 200,000 companies in the on-going Kabbage Small Business Revenue Index, a “perception vs. reality” gap appears.
60% | Percentage of small business owners who believe their revenue growth underperforms the growth of their peers.
74% | Percentage of small business owners whose growth actually exceeds the revenue growth of their peers.
Together, the findings suggest that small business owners may have unwarranted self-doubt about the financial health of their businesses. The comparison also reveals that small businesses may have difficulty accurately comparing their businesses to others.
There is a perception that entrepreneurs are often overconfident, says University of California-Berkeley professor Don Moore. “(But) this study shows the potential for small business owners to err on the side of under-estimating their performance when comparing themselves to others.”
11% | Percentage of survey respondents able to correctly estimate the ranking of their revenue performance.
“People who demonstrate underconfidence are more likely to opt-out of or choose to exit a competition when, in fact, they would have succeeded had they persisted,” says Moore. “Providing them access to benchmarking systems and analysis on par with what’s available to large and public companies may reduce anxiety and help them calibrate strategic business decisions.”
Why do small business owners underestimate themselves?
“The likely reason for this is that people tend to rate themselves below average on difficult tasks,” says Moore. “Simply put, people assume they’re worse than others when a task is hard. Running a small business (is a) difficult task, and respondents showed underconfidence.”