Survey: Fewer Small Businesses Expect to Hire or Grow
Join us in a city near you at Entrepreneur’s Accelerate Your Business event series kicking off Feb 23. View cities and dates »
Uncertainty surrounding the federal deficit, taxes and health care is negatively impacting small businesses' revenue and hiring projections for this year and next, according to the fourth annual U.S. Bank Small Business Survey published today.
The survey was conducted online in January among 3,210 small-business owners with less than $10 million in annual revenue. While two-thirds of small businesses surveyed said they are in good financial health or better, only 16 percent expect to increase staff over the next 12 months. When asked the same question a year ago, 20 percent of small businesses expected to ramp up hiring.
What's more, now only 41 percent of business owners expect their revenue to be higher in 2014. Asked the same question last year, 46 percent expected revenue to increase in the next year.
"The majority of small businesses are in good financial condition," says John Elmore, vice chairman of community banking and branch delivery at U.S. Bank of Minneapolis. "They are optimistic about what the future holds, but there certainly is a level of caution."
According to the survey, small businesses with the highest growth prospects, defined as those expecting to increase staff or grow revenues over the next year, include businesses in financial services, computer technology, sales and marketing industries. Those with the lowest prospects include companies in the agriculture and farming sectors.
Of particular concern to Elmore is the reluctance small businesses are expressing when it comes to hiring. "If we don't get unemployment and underemployment down, the pace of the recovery will continue to be slower than what we would like it to be," he says.
The U.S. unemployment rate fell to 7.6 percent in March from 7.8 percent in February, but it's not necessarily a positive sign. The drop was largely due to people leaving the workforce altogether.
There are also some signs that businesses with about 50 employees may not by filling open positions or adding to their ranks due to the Affordable Care Act. The bill, which overhauled health-care laws in the U.S., levies fines on companies with more than 50 employees who don't offer health-insurance coverage to their workers.
Still, small-business owners surveyed cite economic uncertainty as the most significant challenge to their business growth, consistent with 2011 and 2012 survey results. The federal budget deficit and debt situation is their biggest concern. Other worries include unemployment, health care, and taxes.
Another notable finding from the U.S. Bank survey is that fewer small businesses are borrowing money, with only 13 percent reporting they have borrowed or tried to borrow money for business purposes in the past six months. When asked the same question a year ago, 19 percent of businesses placed themselves in this category.
On a brighter note: Businesses that have secured loans during the past six months seem to be having an easier time of it, with 52 percent describing the process as easy compared with 49 percent in last year's survey.