Hiring plans among small business owners are at their second lowest point in the seven-year history of the OPEN from American Express® Small Business Monitor, a semi-annual survey of business owners. This fall hiring plans among business owners have dropped, with three in ten business owners reporting plans (31%) to hire full and/or part-time staff in the next six-months. That is down from 34% in fall 2006, 37% in fall 2005, 35% in fall 2004, 34% in fall 2003 and 26% in fall 2002.
Healthcare is cited by one in five small business owners (21%) as the issue that will most sway their decision on the next president of the United States, followed closely by homeland security (cited by 19%).
Despite a lack of robust hiring plans, growth remains a top priority for entrepreneurs. More than one-third (37%) of small business owners report growing their business as their company’s single most important priority over the next six months, on par with 35% last fall. In fact, more than half (57%) of business owners are willing to take on risk in order to grow their business, unchanged from 2006.
“Small business owners are on the front lines, dealing with issues like healthcare, the housing market and interest rates, so they know first-hand where we are as a country,” said Susan Sobbott, president OPEN from American Express. “It says a lot about the attitude of small business owners that they remain optimistic in the face of this difficult environment, as evidenced by their plans for growth and investment.”
Entrepreneurs Adjust to Energy Prices, but Economy and Rising Costs Present a Challenge
According to the survey, business owners are adjusting to higher energy and gas costs. A much fewer number report having lost sales as a result of higher energy costs (17%), down sharply from fall 2006 (31%). Fewer entrepreneurs also report having to pay rising costs for the materials and products they need as a result of higher costs (65% down from 71% in fall 2006). One third of businesses in the South (31%) report rising gas and energy costs as having little impact on their business.
More business owners believe the downturn in the housing market and rising interest rates have negatively impacted their business. The survey found a 5% rise in the number of business owners who believe that the downturn in the housing market has had a negative affect on their business, compared to this spring. Half of all business owners believe rising interest rates have negatively impacted their business.
Rising costs and uncertain economic conditions (each 20%) are the biggest challenges entrepreneurs face in growing their business. Finding the right staff (19%) and being too busy satisfying existing customers (17%) present additional challenges.
Entrepreneurs are not letting the economy dictate their plans for growth. Over the next six months, nearly half (48%) of business owners expect their business to grow regardless of the economy. Three out of ten (28%) of business owners report the economy as the greatest determinant in growing their business.
Business Owners Plan to Invest in Technology and Marketing
Entrepreneurs plan to make capital investments as an avenue to business growth. The percentage of small business owners planning to make capital investments over the next six months remains on par with the previous fall (59% vs. 56%). Business owners will invest most heavily in the area of technology (45%). More are planning to make their next purchase in mid-priced equipment such as desktops, laptops, printers than a year ago (53% vs. 47%). Nearly one-in-five (19%) plan on making more substantial investments in major technology infrastructure such as software, servers or telephone systems. Slightly fewer (17%) plan to invest in modestly priced items such as PDAs or smart phones. In addition to technology, other investment areas include office equipment (21%), real estate (15%), manufacturing/production equipment (14%) and office furnishings (13%).
In addition to capital investments, business owners plan to invest marketing dollars as a way to grow. Entrepreneurs are taking advantage of online marketing techniques, with the company website being the most utilized online marketing technique (55%). Nearly seven in ten (69%) business owners believe their marketing dollars are well spent. Almost half (46%) of business owners report seeing a direct up tick in sales when spending money on marketing. Male business owners are more likely to agree that marketing dollars have a direct positive impact on sales (47% vs. 32% female owners).
Those with Hiring Plans Center on Growth; Males Most Likely to Hire to Increase Business
Although hiring plans over the next six months are near record lows, among those businesses that plan to hire, three-quarters (75%) say they need to hire to handle their growing business. Two thirds (65%) will hire to help increase business volume. This number is greater among male business owners as seven out of ten plan to hire for this reason (71% vs. 46% of female owners). Two out of five (43%) will hire because they have a new business venture, one-in-three say they will hire because they have finally found the right candidate for the position (33%), or need seasonal help (28%).
Business owners do not believe the increase in minimum wage is offset by small business tax breaks included in the law. Four-in-ten business owners (44%) disagree that the increase in minimum wage passed by Congress is offset by small business tax breaks included in the law. This number was even higher among male business owners (59% vs. 35% of female owners).
Healthcare Remains Top of Mind
The rising costs of doing business have not overridden the importance of employee well being. Seven out of ten bosses (69%) agree it is important to offer healthcare coverage to their employees. The number of businesses offering healthcare benefits to employees remains unchanged from last fall (71%).
Business owners are looking for ways to make healthcare coverage more accessible to their employees. Nearly eight in ten (79%) small businesses would consider proposed healthcare policy solutions as a way to make healthcare accessible. About two out of three (65%) support the solution to “create purchasing cooperatives for small businesses to make heath insurance affordable”. More than half support a plan that would “ensure every child in the U.S. has health insurance” (58%) or “provide tax credits to low income workers to help pay for healthcare” (54%). Less than half would support the proposed solution of a “universal healthcare system” (42%), or an “additional tax on tobacco and alcohol” to fund healthcare (38%). Three quarters (75%) of business owners believe healthcare coverage will be a problem for the next generation of entrepreneurs.
Cash Flow Issues Keep Entrepreneurs Up At Night
Business issues are a cause for entrepreneurs’ insomnia. One in four (26%) entrepreneurs cited cash flow issues as what “keeps them up at night”, followed by ideas for growth (23%), customer service (16%), staff (15%) and competition (9%). Among those businesses in the North, 32% are kept up by ideas for growth.
Cash flow remains a constant concern for business owners. The number of entrepreneurs experiencing cash flow issues remains on par with the previous fall (49% vs. 47%).Among small businesses with cash flow concerns, 22% will access their personal or private funds, while others will obtain and use line of credit (20%), put off purchases (14%), use a credit card (12%) or short term loan (10%) in order to address these concerns.
Business owners handle on accounts receivable is not as good as they think. Nearly eight in ten (79%) entrepreneurs do not believe their accounts receivable are too high. Yet to improve cash flow, 25% are most likely to get aggressive in collecting accounts receivables. Others will look for special payment terms (13%), raise prices (12%), or offer customer discounts for early payment (11%) in order to improve cash flow. On average, small business owners are able to project cash on hand 5 months out. Business owners in the South are in the ideal situation with the ability to project cash on hand more than six months out
“It is not surprising that tightening purse strings put greater emphasis on cash flow,” said Sobbott. “Anecdotally, we see small business owners becoming more sophisticated in dealing with cash flow issues, pursuing solutions such as special payment terms like trade terms.”
Prosperity Signifies Growth; More Male than Female Entrepreneurs Have Plans to Grow
The majority of entrepreneurs plan to grow over the next six months; however views on growth diverge regionally and among the sexes. According to the survey, three-quarters of business owners plan for growth over the next six months. However, more male than female business owners have a plan to grow (82% and 64%, respectively). Overall, three out of ten (30%) small businesses measure growth by their profits. One out of five (22%) measure growth by the number of customers, this number jumps to nearly one in three (32%) in the West. One third (35%) of owners agree that ‘growth’ can be signified by prosperity; significantly fewer associate growth with achieving balance/wellness (23%), the freedom to choose (20%), and popularity (15%).
Being an Entrepreneur is as Fulfilling as Expected
Business concerns do not weigh on business owners’ sense of fulfillment. Despite an uncertain economy and concerns over cash flow, three out of four (74%) owners of small businesses find that being an entrepreneur is fulfilling, while only 46% agree that being an entrepreneur is harder than expected, this number rises to 53% in the West. Four out of ten (42%) agree they are an entrepreneur because they are a born leader. But leaving a lasting impression is what appears to matter most to entrepreneurs, as two out of three (68%) claim their business is an important part of their legacy. The vast majority of business owners (89%) in the North report this sentiment to be true.
More than Half of Entrepreneurs on Track for Retirement; Males Require More Money
Business owners are on track to meet retirement goals, although goals differ between the sexes. The average net worth business owners believe they need to retire is $1,286,000. Male small business owners desire an average of $1.5 million net worth in order to retire, compared to $1.2 million among female business owners. According to the survey, more than half (55%) of business owners report they are on track to save the funds they need for retirement, unchanged from last fall. However, six out of ten say they are worried about their ability to save for the retirement they want, on par with last fall (60% vs. 57%). Business owners in the South are in the best shape for retirement, nearly half (49%) are not at all worried about their ability to save for the retirement they want.
Entrepreneurs Show Concern for the Environment
Even as the impact of rising energy costs diminishes, business owners concern for the environment is still an action item. The majority of small business owners/managers (87%) have taken steps to make their business environmentally friendly. Half of business owners have taken steps to recycle waste products (51%) or follow environmental recommendations within their industry (48%). Less than half (46%) buy and use recycled products, offer eco-friendly products and services to customers (24%). Most agree that it is important to give back their community (87%), and take actions in business to reflect concern for the environment (79%).
Additional survey results are available by contacting OPEN from American Express.
The OPEN from American Express Small Business Monitor, released each spring and fall, is based on a nationally representative sample of 627 small business owners/managers of companies with fewer than 100 employees. The survey was conducted via telephone by International Communications Research from August 20-August 31, 2007. The poll has a margin of error of ±3.9%.
About OPEN from American Express
OPEN is the American Express team dedicated exclusively to the success of small business owners and their companies. The OPEN Team supports business owners with unparalleled service. With tailored products and services, the team delivers purchasing power, flexibility, control and rewards to help customers run their business. Specifically, business owner customers can leverage an enhanced set of products, tools, services and savings, including charge and credit cards, convenient access to working capital, robust online account management capabilities and savings on business services from an expanded lineup of partners. To obtain more information about OPEN, visit www.OPEN.com, or call 1-800-NOW-OPEN to apply for a Card or loan. Terms and conditions apply.
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