Political Uncertainty Gives Small Business
Owners Pause on Hiring and Growth Plans
Small business owners’ confidence in the national economy is
down, according to the spring 2016 Bank of America Small Business
Owner Report, which found that only 29 percent of small business
owners feel confident that the national economy will improve over
the next year – a sharp drop from a year ago.
The report, based on a semi-annual survey of 1,000 small
business owners across the country, suggests that the upcoming
presidential and congressional elections are having a sizable
influence on the outlook of small business owners. Sixty-seven
percent believe that the upcoming presidential election will affect
their business “a lot” or “somewhat,” while 53 percent believe
congressional elections will have an impact.
Nearly four in five say they are concerned about the
“effectiveness” of U.S. government leaders, which was higher than
last year, but in line with previous election year results in 2012
and 2014. At the same time, concern for nearly all other economic
factors, including commodities prices, interest rates and credit
availability, is down, with the exception of U.S. and/or global
stock market and health care costs.
“Our survey suggests that uncertainty over the upcoming
elections is making small business owners less optimistic about
their businesses and the economy than in recent years,” said Robb
Hilson, Small Business executive, Bank of America. “As a result,
they’re taking a wait-and-see approach before making major
investments in the growth of their businesses. We also see this
trend when it comes to hiring, as the majority of small business
owners we surveyed this spring plan to keep the same number of
employees over the next 12 months, perhaps suggesting they are
waiting until after the election to reassess hiring plans.”
Modest growth plans compared to previous years
Consistent with the report’s findings about the economy, small
business owners’ outlook on revenue growth and hiring plans has
also slowed. Fifty-one percent expect their revenue to grow over
the next 12 months, down from previous years, while 40 percent
project revenue will remain flat. Hiring projections have cooled as
well, with only 22 percent of small business owners planning to
hire new employees in 2016.
In addition, fewer small business owners plan to apply for a
loan, with only 9 percent reporting they intend to seek funding in
2016. The top reasons cited for needing a loan this year include
investing in new equipment (34 percent), expanding operations (22
percent), and hiring more employees (22 percent).
Small business owners voting with their wallets in
mind
As they prepare to cast their votes, small business owners are
taking into account both personal and business considerations.
Approximately one-third gave more weight to their personal views,
while 15 percent approach voting from more of a business
perspective. Fifty-one percent take both into consideration
evenly.
For those who vote primarily from their small business owner
perspective, the top issues about which they’re concerned are taxes
(68 percent), the economy and job growth (67 percent), and health
care policy (55 percent). Priorities are similar for those voting
from a personal perspective: health care policy (59 percent), taxes
(57 percent), and the economy and job growth (50 percent).
Skills and character most important factors when hiring job
candidates
The face of the small business workforce is changing: Forty
percent of small business owners do not regard a college degree as
important when evaluating job applicants. Nearly half (49 percent)
report that skill level is now the single most important factor in
hiring, followed by fit with company culture (24 percent) and
previous work experience (24 percent).
In general, small business owners favor candidates who are
trustworthy (75 percent), hardworking (70 percent) and experienced
(57 percent). Sales ability (28 percent), tech savviness (27
percent) and knowledge of STEM (science, technology, engineering
and mathematics) (12 percent) are less important in evaluating
candidates.
While large companies, and in particular technology companies,
have been challenged to fill science, technology and engineering
positions, 63 percent of small business owners say they do not have
trouble finding workers with the technical skills needed to perform
jobs at their companies. However, for the 33 percent of small
business owners who believe a skills gap exists, they
are overcoming the challenge by rolling up their sleeves and
taking on more tasks themselves (49 percent) versus offering
training programs (32 percent) or relocation benefits (5
percent).
Health care concerns rank high as costs rise
Health care continues to loom prominently as an issue of
importance for small business owners. Nearly three-quarters
are concerned about the cost of health care, and the topic ranks
second as an election-year issue about which they care most. Forty
percent of small businesses currently offer health insurance to
their employees, including 39 percent of those with fewer than 50
employees who are not required to do so. Sixty-nine percent say
their health care costs went up this year, with 41 percent
reporting an increase of up to 20 percent. Twenty-nine percent say
costs went up by more than 20 percent, and 5 percent report they
have doubled.
Most small businesses would need to adjust to a minimum wage
increase
In the midst of a national debate over the minimum wage, and as
individual states have enacted their own increases, 57 percent of
small business owners say they would need to take financial
measures to adjust for an increase. Of those, the most commonly
cited action would be to increase the price of products and
services (23 percent). Only small numbers believe an increase would
affect their current business operations, whether it be changes to
personnel management - cutting hours (15 percent) or staff (13
percent) - operational spending (15 percent) or technology
investments (7 percent).
Generational differences in outlook and hiring
Interestingly, Generation X (Gen X) is more confident in the
national economy improving (41 percent) than either millennials (34
percent) or baby boomers (28 percent).
Conversely, millennials see the outlook for their small
businesses this year in a much rosier light, with 81 percent
expecting revenue growth – 16 percentage points more than Gen X (65
percent) and 35 percentage points more than boomers (46 percent).
All are equally concerned about the impact of the 2016
elections.
Millennials’ hiring outlook is also more robust, with 48 percent
reporting they plan to hire, compared to just 34 percent of Gen
Xers and 19 percent of boomers. The importance of a college degree
in hiring is almost equally low across all generations (important
for just 39 percent of millennials, 38 percent of Gen X and 29
percent of boomers). Among all small business owners, there is a
preference for hiring Gen-X employees (47 percent) over millennials
(26 percent) and baby boomers (8 percent). Split generationally,
however, millennials choose their age group over any other, with 61
percent preferring to hire 18- to 34-year-olds.
For a complete, in-depth look at the insights of the nation’s
small business owners, read the entire spring 2016 Bank of America
Small Business Owner Report, and for additional insights, download
the Small Business Owner Report national infographic here.
Bank of America Small Business Owner ReportGfK Public Affairs
& Corporate Communications conducted the Bank of America Small
Business Owner Report Survey for spring of 2016 online between
March 17 and April 19, 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, a total of 300 small business owners were
also surveyed in nine target markets: Los Angeles, Dallas,
Washington, D.C., New York, Boston, Chicago, San Francisco, Atlanta
and Miami. The final results were weighted to national benchmark
standards for size, revenue, and region. Previous waves of the
Small Business Owners Report survey were conducted by telephone.
Best efforts were made to replicate processes in sample, weighting,
and method.
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