2012 MID-YEAR ECONOMIC REPORT 1

Transcription

1 2012 MID-YEAR ECONOMIC REPORT 2012 MID-YEAR ECONOMIC REPORT 1 NATIONAL SMALL BUSINESS ASSOCIATION

2 FOREWORD The National Small Business Association (NSBA) is the country s longest-running smallbusiness advocacy group now celebrating its 75th Anniversary. Focused on federal advocacy, and operating on a staunchly nonpartisan basis, NSBA is a recognized leader of America s small-business community. In addition to our wide array of advocacy efforts, NSBA provides critical data on the small-business community. Throughout the year, we conduct a series of surveys and quick polls, chief among them are our two Economic Reports: the NSBA Mid-Year Economic Report and the NSBA Year-End Economic Report. These reports use NSBA survey data to provide a snapshot of how small businesses are dealing with the current economic situation. NSBA Chair Chris Holman The 2012 Mid-Year Economic Report shows that small-business owners are feeling less optimistic about the outlook of their own firms and the overall U.S. economy than in the previous six months. This dip in outlook and confidence underscores an ongoing cycle wherein small-business owners express higher economic outlooks and confidence levels in their own business at the start of a new year when the Year-End Survey is conducted. That confidence and positive economic outlook routinely erodes by the time July and August come around when our Mid-Year Survey is conducted. Six months ago, the Year-End Economic Report found small businesses more confident with notable drops in the number of small-business owners who anticipated a recessionary economy from 30 percent in July down to 14 percent in December. Unfortunately, that number has jumped back up to 34 percent the highest number of small-business owners predicting a recession since December Correspondingly, the number of small-business owners who anticipate economic expansion in the coming 12 months was cut nearly in half from 20 percent six months ago to 11 percent today. On a positive note, small-business owners long-term economic outlook is slightly better with 23 percent now saying that today s economy is better than it was five years ago, the highest it s been in four years. Unfortunately the near-term outlook is a gloomy one: the number of small-business owners saying the national economy is worse today than six months ago jumped from 31 percent in December to 44 percent today. NSBA President Todd McCracken Reflecting the negative outlook of the U.S. economy, there was an increase in the number of small-business owners who are not confident about the future of their own business, up from 25 percent six months ago to 40 percent today. This 15 percentage point increase is the largest six-month jump we ve seen since we began the survey nearly five years ago. When asked about growth opportunities, 55 percent down from 63 percent six months ago said they expect growth in the coming year or already are growing. While the lowest this indicator has been in three months, there still exists a majority of small businesses that predict some kind of growth this year. In terms of employment, there was a modest decrease the past six months from 22 percent who increased their employee size six months ago to just 19 percent today. The number of small-business owners who project increases in employee size in the coming 12 months dropped from 30 percent in December 2012 to 25 percent today MID-YEAR ECONOMIC REPORT 2 NATIONAL SMALL BUSINESS ASSOCIATION

3 FOREWORD Past and projected revenues also saw changes for the negative. There was a 10-point jump in the number of small-business owners who reported decreases in revenue over the past 12 months, and those small businesses projecting revenue gains in the coming year dropped from 56 percent six months ago to 45 percent today. Small-business owners continue to point to economic uncertainty (68 percent) as the most significant challenge to the future growth and survival of their business. Decline in consumer spending (42 percent), regulatory burdens (38 percent), cost of health insurance benefits (33 percent), the growing national debt (27 percent), federal taxes (26 percent), and lack of available capital (23 percent) also weigh heavily on the minds of small-business owners. It is worth noting that there was a jump in the number of small-business owners who picked federal taxes as a significant challenge facing their business from 19 percent in December to 26 percent today. Access to capital is an ongoing challenge for small businesses despite modest gains seen in the preceding six months. Today, 75 percent say they have been impacted by the credit crunch and 66 percent down from 70 percent six months ago say they are able to obtain adequate financing for their firms. The growing national debt is the number one thing small businesses thing Congress and the administration should address. Following closely is reducing the tax burden, reducing regulatory burdens, and simplify the tax system. When asked which deficit reducing proposals they support, 72 percent said reform and reduce entitlement spending and 62 percent said significant cuts for certain federal agencies and programs. Added as an option for the first time in this survey, 19 percent said they would support a tax increase for those making more than $1 million annually. Included in this report, you ll find a greater emphasis on the data and various charts and less text. We know your time is valuable and we hope you find this format easy and useful. Please contact NSBA s media office for inquiries at press@nsba.biz. Chris Holman NSBA Chair Michigan Business Network Todd McCracken NSBA President and CEO 2012 MID-YEAR ECONOMIC REPORT 3 NATIONAL SMALL BUSINESS ASSOCIATION

4 DEMOGRAPHICS How many total full-time personnel are currently employed by your business? Which of the following best describes the structure of your business? 0 1 to 5 6 to 19 4% 30% 33% CORPORATION PARTNERSHIP LLC SOLE PROPRIETORSHIP 45% 30% S-CORP 20 to to 499 6% 26% 10% 2% 13% Which of the following best describes the industry or sector in which your business operates? Manufacturing Construction Professional Services Retail Distribution IT (Software/Hardware) Professional Defense Insurance Agriculture Health Care Transportation Fabricated Products Finance Printing & Publishing Real Estate Biotech Chemicals Hospitality/Tourism 1% 1% 1% 4% 4% 3% 3% 2% 2% 2% 2% 7% 7% 6% 13% 10% 9% 8% 18% What were your gross sales or revenues for your most recent fiscal year? In what region is your business located? Less than $100,000 $100,000 - $250,000 $250,000 - $500,000 $500,000 - $1 Million $1 - $5 Million $5 - $25 Million $25 - $75 Million $75 - $150 Million More than $150 Million 4% 1% 2% 11% 8% 9% 12% 30% 21% New England 6% Mid-Atlantic 25% Great Lakes 15% Farm Belt 6% South 22% Mountain 10% Pacific 16% 2012 MID-YEAR ECONOMIC REPORT 4 NATIONAL SMALL BUSINESS ASSOCIATION

5 SMALL BUSINESS CONFIDENCE When compared with six months ago, would you say today s national economy is: 10 27% 24% 20% 16% BETTER OFF When compared with one year ago, would you say today s national economy is: 10 28% 24% 24% 21% BETTER OFF WORSE OFF WORSE OFF ABOUT THE SAME ABOUT THE SAME Compared to five years ago... Would you say the national economy is: 23% 21% 21% 18% BETTER OFF Thinking about the next 12 months, do you anticipate: 22% % 20% EXPANSION % 11 29% 44% 11 47% 52% 31% % 44% 48% 77% 72% 71% 68% WORSE OFF % 66% 58% 55% 12 FLAT ECONOMY 46% 43% 33% 40% 31% 31% 28% 25% 6% ABOUT THE SAME 13% 7% 30% 7% 14% 9% 34% A RECESSION What are the three most significant challenges to the future growth and survival of your business? (Please check the three most important challenges) Economic uncertainty Decline in customer spending Regulatory burdens Cost of health insurance benefits Growing national debt 68% 42% 38% 33% 27% Federal taxes 26% Lack of available capital Lack of qualified workers State and local taxes Cost of employee salaries Foreign competition Cost of employee benefits, not including health insurance Cost of technology Cost of training workers No major challenges 23% 10% 10% 8% 6% 5% 4% 3% 1% As has been the case in past reports, there exists a cyclical depression in confidence and economic outlook during summer months. Today, small-business owners are feeling less optimistic about the outlook of their own firms and the overall U.S. economy than in the previous six months. The number of small-business owners who anticipate a recessionary economy in the coming 12 months is 34 percent the highest it s been since December The number of smallbusiness owners who anticipate economic expansion in the coming 12 months was cut nearly in half from 20 percent six months ago to 11 percent today. From a financial perspective, how do you feel right now about the future for your business? CONFIDENT 2012 NOT CONFIDENT 60% 40% 75% 25% 64% 36% % 34% 2012 MID-YEAR ECONOMIC REPORT 5 NATIONAL SMALL BUSINESS ASSOCIATION

6 BUSINESS GROWTH Today, 55 percent of small-business owners either expect growth in the coming year or already are growing. While the lowest this indicator has been in three years, and down from 63 percent just six months ago, it is worth noting that the majority of small businesses have a positive growth outlook. Unfortunately, there was a 10-point jump in the number of small-business owners who reported decreases in revenue over the past 12 months, and those small businesses projecting revenue gains in the coming year dropped from 56 percent six months ago to 45 percent today. Furthermore, profits also experienced decreases: 40 percent of small-business owners cited decreases in profit, up from 31 percent in December Projections did not fare much better, with just 37 percent anticipating profit growth, down from 50 percent six months ago. Do you believe there will be growth opportunities for your business in the coming year? % 45% 14% YES NO ALREADY GROWING 47% 37% 17% 40% 45% 15% % 40% 15% Which of the following growth strategies will you use in the next 12 months? New advertising and marketing strategies % 47% 43% Internet / Expand E-commerce 32% 31% 36% Strategic alliance 29% 33% 26% No growth strategies will be used in the next 12 months 23% 22% 24% Hire new employees 15% 17% 21% Joint Venture 12% 17% 15% Investments in R&D 13% 13% 14% Other (please specify) 9% 11% 11% Expand operations to new facilities/add additional stores 7% 10% 10% Acquisition 6% 8% 7% Outsourcing 6% 6% 9% Merger 4% 4% 5% 2012 MID-YEAR ECONOMIC REPORT 6 NATIONAL SMALL BUSINESS ASSOCIATION

7 BUSINESS GROWTH How much did your gross sales/revenues change over the last 12 months? How much do you expect gross sales/revenues to change over the next 12 months? % 40% 22% 45% 24% 31% INCREASE DECREASE NO CHANGE INCREASE DECREASE NO CHANGE 46% 31% 24% 39% 37% 24% % 43% 18% 56% 14% 29% 49% 19% 32% % 19% 27% How much did net profits change over the last 12 months? How much do you expect net profits to change over the next 12 months? % 48% 21% 37% 31% 31% INCREASE DECREASE NO CHANGE INCREASE DECREASE NO CHANGE 36% 38% 25% 32% 46% 23% % 46% 18% 50% 18% 32% 43% 26% 31% % 24% 32% 2012 MID-YEAR ECONOMIC REPORT 7 NATIONAL SMALL BUSINESS ASSOCIATION

8 JOB GROWTH There were modest decreases in the past six months among businesses who reported hiring. Today, just 19 percent report increasing their employee size, down from 22 percent in December, while 25 percent report decreases in employee size, resulting in negative net employee growth. Looking ahead, the number of small-business owners who project increases in employee size in the coming 12 months dropped from 30 percent in December 2012 to 25 percent today. There was a commensurate increase in those who anticipate decreasing their workforce, however the net projected employee growth still remains at a positive. How much did the number of employees change over the last 12 months? How much do you expect number of employees to change over the next 12 months? INCREASE DECREASE NO CHANGE INCREASE DECREASE NO CHANGE % 25% 55% 22% 23% 55% 22% 26% 52% % 31% 54% 25% 12% 63% 30% 8% 62% 29% 12% 60% % 11% 64% 2012 MID-YEAR ECONOMIC REPORT 8 NATIONAL SMALL BUSINESS ASSOCIATION

9 SMALL BUSINESS FINANCING Has your business been impacted by the credit-crunch? NSBA repeatedly has warned that limitations on small businesses ability to garner capital will continue to hinder broad U.S. economic growth. Using NSBA data from as far back as 1993, there is a clear correlation to a smallbusiness owner s ability to hire and his/her ability to get financing. While the last four years have seen a small-business community struggling to stay afloat, we also have seen their ability to get capital diminish. (place by chart 34) YES NO 25% % 32% 68% The number of small businesses relying on bank loans continues to drop, to 46 percent today from a July 2009 high of 53 percent. There also were drops in the number of small businesses that use earnings of the business and vendor credit as sources of financing. There was a notable increase in smallbusiness owners who report using private loans (friends and family) from 14 percent in December to 19 percent today. 28% 73% 25% % Credit cards continue to be a key source of financing, even as a majority of smallbusiness owners continue to report worsening terms on their credit cards. However it is worth noting that, when asked to evaluate their terms over six months and five years, there is a lower incidence of worsening rates in the last six months. NSBA in June released its Small-Business Access to Capital Survey, which provides a detailed look at small-business credit markets. Please click here to view that survey. Have you experienced any of the following changes on any of your lines of credit or on your credit cards in the last six months? % 16% 73% INCREASE DECREASE NO CHANGE 12% 17% 71% 11% 24% 65% % 24% 62% 2012 MID-YEAR ECONOMIC REPORT 9 NATIONAL SMALL BUSINESS ASSOCIATION

10 SMALL BUSINESS FINANCING Is your business able to obtain adequate financing? What types of financing has your company used within the past 12 months to meet your capital needs? YES NO Bank loan 46% 47% 49% 45% 34% Earnings of the business 43% 46% 43% 45% 66% Credit cards 34% 33% 37% 36% Used no financing 23% 21% 23% 21% Private loan (friends or family) 19% 14% 21% 15% Vendor credit 18% 23% 25% 23% 30% Leasing 6% 11% 10% 9% 70% Small Business Administration (SBA) loan 6% 4% 4% 4% Other (please specify) 3% 6% 5% 7% Private placement of debt 3% 2% 2% 2% 36% 64% Selling/pledging accounts receivable 2% 3% 4% 4% For bank loans that are currently outstanding, which of the following has occurred in the last 12 Months? Terms have become less favorable to your business. 13% 17% 21% 22% 36% 64% Terms have stayed the same. 41% 40% 39% 38% Terms have become more favorable to your business. 9% 6% 7% 6% Do not have outstanding loans. 37% 36% 33% 34% 2012 MID-YEAR ECONOMIC REPORT 10 NATIONAL SMALL BUSINESS ASSOCIATION

11 SMALL BUSINESS FINANCING Percentage of Small Businesses Carrying Any Debt Please estimate your small businesses total debt, including loans, credit cards, property mortgage, ` invoices owed, etc 5 YEARS AGO 2 YEARS AGO TODAY 80% Debt 1 to 50k 28% 27% 25% Debt 51k to 100k 9% 14% 15% 101k to 500k 29% 26% 29% 501K to 1mil 12% 14% 12% More than 1mil 22% 19% 19% 5 YEARS AGO ` Average debt among those that do have debt 78% $1,604,934 5 YEARS AGO $1,342,279 2 YEARS AGO $1,099,615 TODAY If capital availability is a problem for your business, what is the effect on your operations? 2 YEARS AGO 73% Unable to grow business or expand operations Reduced the number of employees Unable to finance increased sales % 34% 36% 16% 20% 18% 18% 16% 18% Reduced benefits to employees 9% 11% 12% Unable to increase inventory to meet demand 11% 10% 10% Closed stores or branches 2% 3% 2% TODAY Other 6% 2% 3% 2012 MID-YEAR ECONOMIC REPORT 11 NATIONAL SMALL BUSINESS ASSOCIATION

12 SMALL BUSINESS FINANCING Do you believe that the terms of the credit cards you use for business have improved or gotten worse over the last five years? 7% % 37% IMPROVED GOTTEN WORSE NOT SURE 7% 54% 39% 7% 60% 33% % 58% 35% Do you believe that the terms of the credit cards you use for business have improved or gotten worse over the last SIX MONTHS? 6% % 57% IMPROVED GOTTEN WORSE NOT SURE 6% 40% 54% 5% 49% 45% % 48% 45% 2012 MID-YEAR ECONOMIC REPORT 12 NATIONAL SMALL BUSINESS ASSOCIATION

13 SMALL BUSINESS FINANCING ` CORRELATION BETWEEN AVAILABILITY OF CAPITAL AND EMPLOYMENT GROWTH Able to get financing Increased Employment 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Feb. 08 Aug. 08 Dec. 08 July 09 Dec. 09 July 10 Dec. 10 July 11 Dec. 11 July 12 Since 1993, when NSBA began asking these questions, there has been a direct correlation between access to capital and job growth when capital flows more freely, small businesses add new jobs MID-YEAR ECONOMIC REPORT 13 NATIONAL SMALL BUSINESS ASSOCIATION

14 PUBLIC POLICY When asked to rank to top items that Congress and the administration should address, the number one issue is reducing the national deficit, followed by reducing the tax burden, reducing regulatory burdens, and simplifying the tax system. Health care reform continues to weigh heavily on the minds of America s small businesses, however there is growing understanding of how the law will impact their business. Unfortunately the smallbusiness tax credits continue to pose confusion and or exempt large numbers of small businesses. NSBA believes firmly that the ongoing debate and lack of a clear, long-term solution to the growing deficit has added dramatically to small-business owners concerns and has contributed to the overall negative outlook for the U.S. economy. The growing partisan rancor surrounding the elections and rapidly diminishing days before the socalled fiscal cliff is only exacerbating the problem. If you qualify for the small-business health care tax credits, how much will they help your business? Significantly 3% 5% 4% 3% Moderately 6% 6% 7% 6% Just a little 10% 13% 13% 11% Not at all 19% 18% 19% 17% I do not qualify 26% 20% 22% 20% I m not sure if I qualify 36% 38% 35% 43% How well would you say you understand how the new health care reform law is going to impact your business? 23% 63% 14% CLEAR UNDERSTANDING 2012 LIMITED NO UNDERSTANDING UNDERSTANDING 19% 60% 21% 19% 63% 18% % 53% 32% In what ways have you coped with rising health care costs? Increased deductible 45% 59% 50% 55% Held off on salary increases for employees Increased employee share of premium 47% 45% 50% 45% 41% 50% 46% 42% Reduced employee benefits 36% 48% 42% 37% Held off on hiring a new employee 27% 27% 32% 24% Switched insurance carriers 20% 25% 28% 25% Delayed purchase of new equipment Held off on implementing growth strategy 21% 20% 26% 17% 23% 25% 24% 18% Laid off an employee 9% 7% 13% 8% Dropped insurance 8% 9% 9% 5% 2012 MID-YEAR ECONOMIC REPORT 14 NATIONAL SMALL BUSINESS ASSOCIATION

15 PUBLIC POLICY Which of the following deficit-reducing proposals would you support? Reform and reduce entitlement spending Significant cuts for certain federal agencies and programs An across-the-board budget cut for federal agencies Eliminate all tax credits and deductions in conjunction with dramatically lower income tax rates Eliminate certain tax credits and deductions even those which may benefit my business Greater authority of the administration to reduce Congressionally-approved spending A tax increase for those making more than $1 million annually % 73% 72% 70% 62% 61% 62% n/a 48% 53% 56% 70% 40% 40% 36% 40% 31% 37% 26% 24% 33% 26% 24% 29% 19% n/a n/a n/a Which one of the following issues do you believe Congress and President Obama s administration should address first? Reduce the national deficit 34% Reducing the tax burden 14% Reducing the regulatory burden on businesses 13% Simplify the tax system 12% Rein-in costs of health care reform 8% Increase small business access to capital 5% Other 4% Tort reform 3% Improving education to provide a qualified domestic workforce 2% Remove barriers to small-business exporting 2% Credit card reform (that includes SB) 1% Enact a comprehensive energy policycomprehensive energy policy 1% Reduce the burden of unfair labor laws 1% 2012 MID-YEAR ECONOMIC REPORT 15 NATIONAL SMALL BUSINESS ASSOCIATION

16 CONCLUSION METHODOLOGY Small employers comprise 99.7 percent of all employer firms in the U.S. One in two workers in the private workforce run or work for a small business, and one in four individuals in the total U.S. population is part of the small-business community (equaling 23 percent of the population.) Firms with fewer than 500 employees accounted for 64 percent of net new jobs between 1993 and the third quarter of 2008 and 32 percent of those gains came from the creation of new, small firms. The Great Recession hit in late 2007 when the unemployment rate began to rise and remains stubbornly high to this day. Small businesses are struggling to create jobs in an economy where economic and political uncertainty is rampant. Small businesses are the key to job growth and giving them the tools they need to create jobs is paramount to economic recovery. More can, and must be done to ensure entrepreneurship remains a viable, attainable option for every American. Government leaders ought to heed advice to act on items that will spur economic growth, but also to show restraint when it comes to any proposal that could further shake small-business owners confidence and exacerbate already lacking small-business job creation capabilities. Please click here for information on NSBA s priority policies. For past Economic Reports and other issue-specific surveys from NSBA, please visit our Surveys & Reports page on the NSBA website. For questions, interviews or to reprint any or all of this report, please contact the NSBA public affairs department at press@nsba.biz or The 2012 Mid- Year Economic Report was conducted online July among 350 small-business members of NSBA representing every industry in every state in the nation. While the results in this survey can be extrapolated to the at-large small-business community, it is worth mentioning that NSBA members tend to be older, more well-established small businesses. That said, the cross-section of business demographics is consistent through the various years these surveys have been conducted, resulting in valid trending data MID-YEAR ECONOMIC REPORT 16 NATIONAL SMALL BUSINESS ASSOCIATION

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