The FINANCIAL -- U.S. small business owners’ confidence in the economy has increased significantly from just six months ago, according to the spring 2017 Bank of America Small Business Owner Report, which found that economic confidence ranks among the highest levels recorded in the last five years.
The report, based on a semi-annual survey of 1,000 small business owners across the country, reveals that a majority of entrepreneurs (52 percent) are confident the national economy will improve over the next 12 months – up a staggering 21 percentage points from just six months ago. Similarly, small business owners’ confidence in their local economy improving jumped to 50 percent from 37 percent in fall 2016.
This increase in optimism, however, has yet to translate into positive movement on revenue expectations or five-year growth plans, which remain flat since the fall. This spring:
48 percent expect their revenue to increase over the next 12 months (compared to 52 percent in fall 2016).
56 percent plan to grow their business over the next five years (compared to 55 percent in fall 2016).
In addition, plans to hire have dipped to their lowest point in five years with 18 percent of small business owners surveyed planning to hire in the year ahead, down 7 percentage points from fall 2016. Instead, those surveyed this spring say they are focused on retaining existing employees. Additionally, plans to apply for a loan in 2017 are tracking similarly to fall 2016, with 9 percent of small business owners surveyed planning to apply in the year ahead. The top reported plans for using loan funds include marketing the business (42 percent), investing in new equipment (34 percent) and expanding operations (28 percent).
“What our survey shows is a significant shift in the mindset of small business owners from just six months ago,” said Sharon Miller, head of small business, Bank of America. “Although some uncertainty remains with respect to hiring and revenue, the increase in general optimism is certainly a promising indicator of potential growth for small businesses in 2017.”
Economic concerns drop, though health care continues to weigh heavy
The survey also found that concerns over most economic factors have decreased significantly from six months earlier, with the most significant declines from fall 2016 showing in:
Strength of the U.S. dollar (36 percent, down 16 percentage points).
Stock market (34 percent, down 16 percentage points).
Health care costs (64 percent, down 11 percentage points).
However, while concerns have declined, health care costs continue to be a chief worry for small business owners, driven by both the business cost and individual cost for employees. Forty-two percent report concern over the health care costs their employees must bear.
Of small business owners surveyed who provide health insurance for employees, half felt cost increases have worsened in the last five years, compared to just 21 percent who believe this has improved, and 29 percent reporting no change. On the issues of health care quality and availability, small business owners were split, with the greatest number believing there’s been no change (46 percent and 48 percent, respectively).
More than one-quarter of small businesses surveyed with fewer than 50 employees provide an employee health benefit, even though the law doesn’t require it.
Despite nightmares and long hours, small business owners happy with work-life balance
When asked to describe an average work week, 47 percent said “demanding,” and 30 percent said “stressful.” One-quarter have even had a nightmare about their business failing. Despite this, many still characterize running their business as “fulfilling” (52 percent), “interesting” (52 percent) and “enjoyable” (51 percent).
Millennial small business owners, in particular, noted that they are stressed about the business environment. Despite more ambitious revenue expectations as well as long-term growth and hiring plans, 42 percent of millennials report having had a nightmare about their business failing (vs. 28 percent of Gen-Xers and 23 percent of baby boomers).
Though many small business owners tend to work overtime — with more than three in five reporting they work more than 40 hours a week — 81 percent are satisfied with the number of hours they work. Nearly all value the flexibility of their work location and schedules, as well as the amount of time they can spend with family and close friends. While more than three-quarters admit work interferes with their home life, small business owners are more likely to report they have achieved a work-life balance (82 percent).
For those who have not achieved balance, entrepreneurs report that key roadblocks include too many administrative tasks (46 percent), customers or clients requiring individual attention (44 percent), not having the financial resources to hire additional staff (38 percent) and not having enough employees to run the business without their support (34 percent).
Entrepreneurs envision a virtual, more automated future
When asked for their top predictions about small business 20 years from now, most entrepreneurs envision a virtual and automated future. Top predictions include:
More offices will be virtual rather than physical locations (49 percent).
Operations will be conducted by automation (42 percent).
Businesses will go paperless (42 percent).
Seventy-five percent of entrepreneurs surveyed say encouraging innovation in the workplace is a priority, and 77 percent say it is a key contributor to business success (compared to 95 percent and 99 percent of entrepreneurs in the tech industry, respectively). Thirty-seven percent say they are “industry-leading” or “ahead of the curve,” while 52 percent say they “keep the same pace” with other businesses in their sector. For those in the tech industry, 59 percent consider themselves “industry-leading” or “ahead of the curve,” and one-third are keeping pace.
Technology sector small business owners surveyed are more likely to predict that most businesses will employ a robot in 20 years, compared to their national counterparts (18 percent in the tech industry vs. 10 percent nationwide). They are also more likely to consider themselves innovative leaders (73 percent vs. 53 percent nationwide) and to say that technology is the biggest contributor to the innovative steps they have taken (43 percent vs. 36 percent nationwide).