Small Business Owners Remain Lukewarm on the Economy, Growth, Hiring
CHARLOTTE, N.C.–(BUSINESS WIRE)–Small business owners are getting by with a little help from their
friends, family and community, with 83 percent reporting they receive
financial, operational and/or emotional assistance from their family,
according the fall
2016 Bank of America Small Business Owner Report.
The report, based on a semi-annual survey of 1,000 small business owners
across the country, found that 38 percent have received financial gifts
or loans from family and/or friends to fund their business, and 53
percent rely on family to serve important roles in their business,
whether as advisers, employees, investors or partners. When asked who
helps them most with running their business, 35 percent responded
“friends and family,” exceeded only by “employees” (44 percent).
Support from family, friends and community has proven to be a bright
spot in an otherwise challenging business environment. Overall optimism
about the national (31 percent) and local economies (37 percent)
improving remain in line with lower levels reported in the spring.
Revenue expectations, as well as plans to grow and hire, also held
steady from spring to fall. Fifty-two percent of entrepreneurs predict
revenue growth in 2017; 55 percent plan to grow their business over the
next five years; and only 25 percent plan to hire in the year ahead –
all among the lowest projections recorded in the survey since 2012.
“We know small business owners are inherent self-starters making
significant personal sacrifices on behalf of their businesses, but
what’s fascinating is this dimension of family, friends and community
that they see as core to their success,” said Sharon Miller, head of
Small Business, Bank of America. “As apprehension about the economy
stalls plans for many to grow and hire, small business owners are
forging ahead with a foundation of support from loved ones and local
networks. It shows why it’s so important for us at Bank of America to
serve and support business owners, their families and local communities.”
The importance of community to small business owners is illustrated by
the fact that 62 percent report that residents in their community
actively support local businesses, with 47 percent saying their local
community plays an important role in the success of their own individual
enterprise. To show appreciation for this patronage, a majority of small
business owners (67 percent) invest in their communities by supporting
local charitable and/or nonprofit organizations.
New small businesses significantly more optimistic about economy;
more reliant on family
One exception to the dampened outlook is the newer subset of small
business owners – those whose businesses are less than five years old,
who are more optimistic about the economy and their business growth.
Fifty-two percent of these entrepreneurs are optimistic their local
economies will improve in the year ahead, compared to 43 percent of
growing businesses (six to 10 years) and 31 percent of well-established
businesses (11+ years). To a lesser degree, the trend also holds for
12-month outlooks on the national economy (39 percent vs. 34 percent vs.
28 percent). New small business owners are also more optimistic about
projected revenue growth in 2017, with 78 percent expecting growth,
compared to 65 percent of growing businesses and only 42 percent of
Owners of newer small businesses not only are more optimistic than their
more established peers, they also are more likely to receive financial
support from family and friends. Thirty-four percent of new small
business owners report that family and/or friends helped fund their
business when they were first starting out, compared to only 18 percent
of both growing and well-established business owners. Taking a broader
look to when the small business is up and running, 54 percent of new
entrepreneurs report that family/friends have gifted or lent them money
for their business at some point, compared to 42 percent of growing
businesses and 32 percent of well-established firms.
Concern over health care costs, consumer spending
The top economic concern cited by small business owners this fall was
health care costs. Three-quarters of respondents reported concern over
the impact of health care costs on their business over the next 12
months. Consumer spending, which was among the lower-rated concerns in
the spring, is now on the minds of 51 percent of small business owners
heading into the holidays.
Life cycle of small business financing
Small business owners report shifting sources of capital over the
lifetime of their business. As their businesses were just getting off
the ground, small business owners were most likely to rely on financing
from personal savings (76 percent), followed by personal credit cards
(36 percent), bank loans (25 percent) and gifts or loans from family
and/or friends (21 percent). Once a business has been established, bank
loans become the top source of capital (43 percent), followed by
personal credit cards (42 percent) and support from family and/or
friends (7 percent).
End-of-year revenues, seasonal sales and holiday perks
Despite a cautious outlook on the year ahead, 68 percent of small
business owners expect to hit their year-end revenue targets, while 40
percent of those in the retail, consumer products and wholesale
industries expect to generate more revenue this year than in 2015. They
don’t, however, expect much of a boost from commercial holidays.
Sixty-eight percent of retail small business owners said that Black
Friday was not important to their business, while 67 percent said the
same about Cyber Monday.
When it comes to holiday perks for employees, small business owners
appear to be tightening their belts. Just 72 percent of small business
owners plan to reward employees with a holiday perk this season, down
from 92 percent in 2015 and 89 percent in 2014. In past years, more than
half of small business owners said they planned to give employee
bonuses; this season only 31 percent said they would.
Holiday parties are also on the decline, with only one-quarter reporting
they’ll host one for employees, compared to close to half of small
business owners in previous years.
For those who are planning to reward employees this holiday season, 37
percent say they will have to make some sort of personal sacrifice,
whether it’s working longer hours themselves (15 percent), sacrificing
at least a portion of their own wage (14 percent), or forgoing vacation
or days off (11 percent).
EMV ambivalence; one-third haven’t implemented
One-third of small business owners acknowledge they have not implemented
Europay, MasterCard, Visa (EMV) chip card reader technology in their
payment systems despite an October 2015 deadline. Forty-five percent of
those who are required to implement it but haven’t done so report they
don’t see the value or importance of the technology, while 17 percent
say they lack the funds. Of small business owners who have adopted EMV
technology, nearly two-thirds say they don’t feel any more secure now
than before the technology was in place.
For a complete, in-depth look at the insights of the nation’s small
business owners, read the fall
2016 Bank of America Small Business Owner Report, and for additional
insights, download the Small Business Owner Report national infographic here.
About the Bank of America Small Business Owner Report
Affairs and Corporate Communications conducted the Bank of America Small
Business Owner Report survey for fall of 2016 online between August 7
and October 4, 2016 using pre-recruited online sample of small business
owners. GfK contacted a national sample of 1,000 small business owners
in the United States with annual revenue between $100,000 and $4,999,999
and employing between 2 and 99 employees. In addition, small business
owners were surveyed in 10 target markets: Atlanta, Boston, Chicago,
Dallas/Fort Worth, Houston, Los Angeles, Miami, New York, San Francisco
and Washington, D.C. A total of 300 small business owners were surveyed
in Atlanta, Boston, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New
York, San Francisco and Washington, D.C., and 100 small business owners
were surveyed in Houston. The final results were weighted to national
benchmark standards for size, revenue and region.
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