Small Business Optimism Grows, but Entrepreneurs Say Worst of Economic Woes Not over Yet, According to the American Express OPEN Small Business Monitor
Thu Sep 17, 2009 12:05pm EDT
Hiring plans hit all-time survey low, dropping below fall 2002 level
NEW YORK--(Business Wire)--
More than half (55%) of entrepreneurs have an optimistic outlook on near-term
business prospects, up from 45% in March 2009, according to the American Express
OPEN Small Business Monitor, a semi-annual survey of business owners. One
quarter (26%) report expanding opportunities for their business, up from 15%
from a year ago, but six in ten (63%) do not think the worst of the U.S.
economic woes are over, and nearly one in six (17%) say they risk going out of
business in the next six months because of the economy.
"There appears to be a dichotomy where many small businesses are seeing signs of
improvement while other firms are still struggling to make payroll," said Susan
Sobbott, president American Express OPEN. "For the first time since 2007, the
majority of small businesses are optimistic about the near-term future, in part
because of less competition, however some of the less healthy firms are dipping
into cash reserves and personal assets to stem the tide of declining sales."
Among those businesses reporting growth opportunities for their firms, 44% say
these opportunities come as a result of less competition. The ability to
renegotiate equipment leases and supply contracts (13%) and lower real estate
costs (12%) also contributed to these firms` growth mindset. Overall, when asked
for the primary way they address cash flow issues, 32% of business owners said
they use personal or private funds, up 9 percentage points from March. More than
a third (35%) say the recession has caused them to tap personal assets, on-par
with the March reading (37%).
Although small business optimism is on the upswing after hitting its all-time
low a year ago, the American Express OPEN Small Business Monitor shows that
business are not shifting to hiring mode. This fall, just under one quarter have
plans to hire (23% vs. 28% this spring), which is the lowest reading in the
history of the Monitor (falling below the fall 2002 recession level of 26%), and
plans for capital investments equal the record setting low from Spring 2009
(42%).
With hiring and capital investment plans on hold for most, business owners are
taking a conservative, back-to-basics approach to managing their firms:
* Concentrating on current customers. Forty-one percent of small business owners
say their top priority over the next six months is maintaining current sources
of revenue. By comparison, only one quarter (26%) say they are focused on
growing their business, which is the lowest number for growth in Monitor
history.
* Avoiding risk. Half (49%) say they are not willing to take on financial risk
to grow their business, an all-time high for the Monitor.
* Keeping employees happy. In general, deteriorating employee morale has
plateaued. Only twelve percent say employee morale has worsened over the last
six months (down from 25% for the preceding six-month period.) Three-quarters
say morale has stayed the same, and nine percent say it has improved. In
addition, approximately one in three (28%) business owners see offering
financial incentives such as bonuses and paid time off as a way to increase
employee morale, and twenty-three percent see more regular communication about
the business as the key to improving morale.
In addition, business owners continue to do everything they can to protect their
employees. For example, thirty-five percent of small business owners have tapped
personal assets as a result of the recession, twenty-seven percent have stopped
taking a salary and seventeen percent are working a second job, comparable to
six months ago. At the same time, fewer business owners are laying people off
(15%, down from 23% in the spring) or cutting benefits (8%, versus 16% this
spring).
Even as hiring plans are not in the cards for most business owners, the nearly
one quarter planning to hire are upbeat. These business owners are more willing
to think the economy creates new opportunities for their business (36% vs. 31%
overall) and seek out alternative tactics to manage their business. In addition,
more than three quarters (78%, compared to 65% overall) of those hiring will use
online marketing techniques to boost business and nearly half (46%, vs. 39%
overall) will negotiate flexible payment methods with their suppliers/vendors.
On average, entrepreneurs with hiring plans work about one-half hour longer per
day than business owners overall (more than 11 hours 45 minutes vs. 11 hours 15
minutes).
Regardless of hiring plans, one in ten business owners (11%) say they have
recently hired someone who was laid off from another company because of the
recession.
Economy takes toll on entrepreneurs
As business owners work to navigate their firms through the current economic
climate, they are plagued by cash flow concerns and the overall stress a
challenging economy creates. Nearly seven in ten entrepreneurs (68%) are
"stressed out" by the economy and three in ten (31%) say that the current
economy has caused them to question their decision to become an entrepreneur.
The number of entrepreneurs experiencing cash flow issues this fall (60%) is up
slightly over both the previous fall (55%) and this spring (57%). The biggest
cash flow worry for business owners is the ability to pay bills on time (26%).
When cash flow concerns arise, business owners are most likely to dip into their
own pockets: 32% of business owners will use personal or private funds, and one
in four (25%) will put off purchases. Others will use credit or charge cards
(13%), obtain and use a line of credit (12%), lease rather than purchase
business equipment (4%), or get a short-term loan in order to improve cash flow
(3%).
Looking beyond the basic issue of cash flow, nearly half of entrepreneurs (45%)
are looking to access capital from external sources in order to run their
businesses. One out of five business owners (19%) say they are experiencing
difficulty accessing capital. To secure the funds they need, business owners are
tapping a variety of sources, including using a bank loan (14%), using business
or personal credit cards (each 13%), tapping personal savings (10%), borrowing
from a friend or family member (3%), and private equity/venture capital or home
equity (each 2%).
Outlook varies by industry, age, gender, and region
Examining business owners by generation, industry sector, region and gender
provides further perspective on the economy. The American Express Small Business
OPEN Monitor studies three key industry sectors: retail, manufacturing and
services as well as the three generational age groups: Generation Y (18-28),
Generation X (29-44) and Baby Boomers (45-63), entrepreneurs by gender and by
geographic region.
As the holiday shopping season approaches, businesses in the retail sector are
the least optimistic group of business owners across these industries. This
fall, more than half of services businesses (58%, up from 53% last fall)
maintain a positive outlook, versus just half of manufacturers (51%, on par with
52% in fall 2008) and just under half of retailers (47% on par with 48% last
fall). The effect of the economy can be seen to have varying effects across
industries:
* Retailers are more likely to have hiring plans, due to the upcoming holiday
season, (27%, on par with 28% last fall) when compared to other industry sectors
(22% of manufacturers down from 30% last fall and 17% of services businesses
down substantially from 44% last fall)
* Services businesses are more concerned with cash flow issues (63% vs. 52% last
fall) versus other industries (60% of retailers up from 56% last fall, and 61%
of manufacturers up significantly from 47% last fall)
* The services sector is more likely than other industry sectors to have capital
investment plans (39% down from 45% last fall) compared to 36% of manufacturers
down from 59% last fall and 34% of retailers down from 37% last fall
* The manufacturing sector is more likely to say that the worst of US economic
woes are not over compared to other industry sectors (68%, vs. 64% of retailers
and 56% of services
* Manufacturers and retailers are the most likely to be willing to take a
financial risk (each 55%) when compared to services businesses (40%)
Gen Y geared for growth, Gen X most "stressed out" and Boomers are cash strapped
Generally speaking, the experience of older and more seasoned entrepreneurs puts
them in a better position than younger entrepreneurs to manage through
downturns. According to the American Express OPEN Small Business Monitor,
however, the tables have turned, and it`s younger business owners who are geared
for growth.
The survey found that Gen Y is the most optimistic group of entrepreneurs when
compared to other age groups and to the overall sample of business owners. More
than three-quarters (80%) of these entrepreneurs have a significantly more
positive outlook on business prospects versus Gen X and business owners overall
(each 55%), and Baby Boomers (52%).
The optimism of Gen Y entrepreneurs extends across a number of areas:
* They`re most likely to hire (36%, vs. 25% of Gen X and 20% of Boomers )
* They`re most likely to have capital investment plans (58%, vs. 41% of Gen X
and 39% of Boomers)
* They`re most willing to take a financial risk (67%, vs. 52% of Gen X and 47%
of Boomers)
* They`re least likely to have cash flow issues (53% versus 59% for Gen X and
64% of Baby Boomers)
* They`re least stressed out by the economy (57% versus 72% of Gen X`ers and 71%
of Boomers)
* They`re most likely to implement employee-friendly policies to battle the
recession. Gen Y will allow employees to maintain a flexible schedule (44%),
Baby Boomers will institute a hiring freeze (41%) and Gen X entrepreneurs will
institute a salary freeze (39%)
Women more upbeat than their male counterparts
No less revealing than examining the mindset of entrepreneurs by age, gender
also plays a role in shaping the outlook of a business owner.
* Women are more likely to have a positive outlook on business prospects
considering the economic climate (60%, vs. 50% of men)
* Women are more likely to have cash flow concerns (62%, vs. 57% of men)
* Women are also more likely to have difficulty accessing the capital they need
to run their business (26%, vs. 16% of men)
* Men are more willing to take financial risks (47%, vs. 40% of women)
* One third of men say the current economy creates new opportunities for
business (34%, vs. 29% of women)
Businesses in the Northeast struggling to stay afloat; West is most optimistic
Along withage, gender and industry sectors, geography plays a significant role
in business owners` outlook on business prospects and the economy:
* The west is most optimistic (60%, vs. 54% in north central states, 53% in the
northeast and 52% in the south); businesses in the northeast are most at risk of
going out of business (24%, vs. 19% in north central states, 17% in the west and
13% in the south)
* The south is most willing to hire (31%, vs. 22% in the west, 17% in the
northeast and 15% in north central states)
* The south is also most likely to take on a financial risk (55%, vs. 50% in
north central states, 44% in the west and 38% in the northeast)
* The north central states are most likely to make capital investments (48%, vs.
43% in the west, 41% in the south and 36% in the northeast)
* The northeast is most likely to have cash flow issues (69%, vs. 60% in the
south, 58% in the west and 55% in north central states)
* The northeast is also most likely to question their decision to become an
entrepreneur (39%, vs. 31% in the south, 30% in the west and 25% in north
central states)
Additional survey results are available by contacting American Express OPEN.
Fact sheets on regional data, women entrepreneurs, by generation and key
business sectors are available on request.
Survey Methodology
American Express OPEN Small Business Monitor, released each spring and fall, is
based on a nationally representative sample of 763 small business
owners/managers of companies with fewer than 100 employees. The anonymous survey
was conducted via telephone by Echo Research from August 11- August 25, 2009.
The poll has a margin of error of +/- 3.6%.
About American Express OPEN®
American Express OPEN is dedicated exclusively to the success of small business
owners and their companies. OPEN supports business owners with exceptional
service and tailored products and services that deliver purchasing power,
flexibility, control and rewards to help customers run their business.
Specifically, business 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 OPEN.com, or call 1-800-NOW-OPEN to apply for a
card. Terms and conditions apply.
American Express Company www.americanexpress.com is a leading global payments,
network and travel company founded in 1850.
M Booth & Associates
Matt Hantz/Alex Della Rocca
212-481-7000
Matth@mbooth.com
Alexd@mbooth.com
or
American Express OPEN
Rosa Alfonso
212-640-1712
Rosa.M.Alfonso@aexp.com
