Small Business Survival Plan: Cut Capital Spending,Squeeze Expenses and Conserve Cash
April 09 2009 - 7:00AM
PR Newswire (US)
- Owners Divided on Benefits of Federal Stimulus Program, PNC
Survey Finds - PITTSBURGH, April 9 /PRNewswire/ -- U.S. small and
mid-sized business owners intend to manage through the recession
through reductions in capital spending and expenses amid divided
opinions about the benefits of the federal stimulus program,
according to the PNC Economic Outlook survey's newest findings.
(Photo: http://www.newscom.com/cgi-bin/prnh/20090409/NE96563 ) The
spring findings in the PNC survey, which began in 2003, provide
insights into how the nation's business owners are coping with the
economic slump and the implications for the financial recovery. A
record-high 71 percent are pessimistic about the prospects of the
U.S. economy during the next six months compared to 55 percent last
fall. One-third (36 percent) are pessimistic about their own
company's prospects -- versus 29 percent last fall. "These findings
support PNC's forecast that the U.S. economy will continue to
suffer into the second half of the year," said Stuart Hoffman,
chief economist for The PNC Financial Services Group, Inc.
(NYSE:PNC). "We forecast only a small positive for real GDP growth
in the fourth quarter of 2009 as the economy waits for 2010 to feel
real traction from the various federal policy stimulus
initiatives." Coping Strategies The small business survey, which
gauges the mood and sentiment of the bedrock of the American
economy, revealed the following insights into owners' outlook and
coping strategies: -- Weaker sales, profits and hiring: A
record-low one out of four (26 percent) expect an increase in their
sales during the next six months while 21 percent anticipate
profits to rise. Only 12 percent expect to hire full-time employees
compared to 23 percent one year ago. -- Bunker mentality: Only 29
percent plan to take out a new loan or line of credit over the next
six months; 79 percent plan to reduce capital spending; and 77
percent intend to conserve cash and keep more bank deposits on
hand. -- Squeezing expenses: 90 percent plan to reduce or eliminate
business expenses over the next six months; one in four (23
percent) plan to lay off employees; 67 percent will look to get
their receivables faster. -- Pricing power short-circuited: Only 19
percent plan to raise prices to preserve profit margins since few
think market conditions will allow a hike. Views on Stimulus Plan,
Housing, Energy Business owners are clearly divided on the benefits
of the federal economic stimulus program. While 54 percent see a
"slight" to "significant" benefit for businesses, 46 percent
foresee no benefit at all. Asked to rank the effect of the elements
on the economic recovery, respondents are most likely to expect
positive outcomes from: Tax cuts or credits for businesses (81
percent); grants to state and local governments for infrastructure
projects (67 percent); and tax cuts for individuals except the
highest income families (62 percent). Sixty percent expect
investments in energy to have a positive effect and 55 percent are
positive about investments in new technology for health care and
education. Other findings include: -- Impact of Energy Prices: A
majority (57 percent) say falling energy prices have had a positive
impact on their business. Hoffman said a surprising 14 percent say
falling energy prices have had a major or minor negative impact.
Generally, the larger the company, the more positive the reported
benefit from falling prices, he noted. -- House Price Woes:
Declining house prices are still on the minds of business owners.
An increasing proportion (88 percent vs. 78 percent a year ago)
believes house prices in their area will remain the same or
decrease over the next 6-12 months. Hoffman said this result is
consistent with major measures of aggregate house prices that show
no end yet to the price slide. "House price expectations are an
important factor in consumer spending, so the findings imply an
overall expectation for weak consumer spending for the rest of
2009," he added. An online media kit containing national and
regional survey results is available on PNC's website at
http://www.pnc.com/go/presskits. The PNC Financial Services Group,
Inc. (http://www.pnc.com/) is one of the nation's largest
diversified financial services organizations providing consumer and
business banking; specialized services for corporations and
government entities, including corporate banking, real estate
finance and asset-based lending; wealth management; asset
management and global fund services. Methodology The PNC Economic
Outlook survey was conducted between Jan. 26 and March 4 by
telephone within the United States among 1,261 owners or senior
decision-makers of small and mid-sized businesses with annual
revenues of $100,000 to $250 million. The results given in this
release are based on interviews with 504 businesses nationally,
while the remaining 757 interviews were conducted among businesses
within the states of Florida, Maryland, New Jersey, Ohio and
Pennsylvania. Sampling error for the national results is +/- 4.0
percentage points at the 95 percent confidence level. The survey
was conducted by Artemis Strategy Group
(http://www.artemissg.com/), a communications strategy research
firm specializing in brand positioning and policy issues. The firm,
headquartered in Washington D.C., provides communications research
and consulting to a range of public and private sector clients.
This report has been prepared for general informational purposes
only and is not intended as specific advice or recommendations.
Information has been gathered from third party sources and has not
been independently verified or accepted by The PNC Financial
Services Group, Inc. PNC makes no representations or warranties as
to the accuracy or completeness of the information, assumptions,
analyses or conclusions presented in the report. PNC cannot be held
responsible for any errors or misrepresentations contained in the
report or in the information gathered from third party sources. Any
reliance upon the information provided in the report is solely and
exclusively at your own risk. CONTACT: Gina Madison (412) 762-0539
http://www.newscom.com/cgi-bin/prnh/20090409/NE96563
http://photoarchive.ap.org/ DATASOURCE: The PNC Financial Services
Group, Inc. CONTACT: Gina Madison of The PNC Financial Services
Group, Inc., +1-412-762-0539, Web Site: http://www.pnc.com/
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