Press Release

Small Businesses are Anticipating a Slower 2016 Holiday Season

Study finds business owners are concerned about year-end sales, but have a more positive outlook on 2017


McLean, Va. (December 13, 2016) – Small business owners are preparing for weaker sales this holiday season, with only 23 percent expecting an increase in sales – down from 29 percent a year ago. Capital One's latest Spark Business Barometer, a national study of small businesses tracking financial conditions, economic perceptions, hiring plans and other indicators of small business growth, revealed smaller businesses (with under $1 million in annual revenues) are driving the negative outlook, feeling less optimistic about holiday sales compared to their larger counterparts and competitors.

 

Despite the dip in holiday sales expectations, small business sentiment overall seems to be improving. Forty-nine percent of business owners reported "good" or "excellent" business conditions in their area heading into 2017 – an increase of eight points compared to the first half of 2016 (41 percent) and slightly above average (48 percent) since the Barometer began tracking business conditions in 2013. Twelve percent of small business owners believe their financial position will be "much better" in the next six months - up three points from earlier this year.

 

"It is encouraging to see many businesses improving their outlook about the future, after a brief dip in confidence earlier this year. While concerns related to costs and regulations still exist, we are glad to see that optimism is on the rise," said Buck Stinson, Head of Small Business Card at Capital One. "At Capital One, we're committed to understanding the trends and challenges impacting businesses, so we can deliver solutions that fuel small business growth."

 

The latest survey also found one-third of small business owners reported better financial positions compared to 12 months ago, slightly up from Q3 2015 (31 percent). The latest findings are six points below the historical average of 39 percent since the Barometer began tracking sentiment in 2011 and remains steady compared to Q4 2012 during the last election cycle.

 

Capital One's Small Business Confidence Score

In Q4 2016, business owners reported feeling more optimistic compared to the first half of 2016, and are on track to reaching the highest levels measured 2014 and 2015.  Capital One's Small Business Confidence Score is an analysis of small business sentiment data collected by the Spark Business Barometer, looking at economic sentiment, hiring plans, recent sales and future financial positions.

 

 

 

 

*The Capital One Small Business Confidence Score evaluates responses to a series of questions from the Spark Business Barometer and ranges from -100 (very low confidence) to +100 (Very High Confidence).

 

The following are additional highlights uncovered in the fall 2016 Spark Business Barometer survey:

 

Small business optimism is back on track.

  •  Nearly half (49 percent) of small business owners surveyed believe business conditions in their area are "good" or "excellent" (up from 41 percent in spring 2016); and slightly above the historical average since 2013 (48 percent).

  • Thirty-eight percent of businesses reported increased sales over the last six months – an increase of 6 points since earlier this year.

  • Female business owners are more encouraged by local conditions than their male counterparts, with 55 percent saying business conditions are "excellent/good," compared to 46 percent of men.

 

Businesses overall are expecting weaker holiday sales, but larger businesses tend to be more optimistic.

  • Though expectations for the holidays are down overall in 2016, 31 percent of larger businesses – with more than $1 million in annual revenue – believe sales this holiday season will increase, compared to 20 percent of smaller businesses.

  • Forty-nine percent of businesses with over $1 million in annual revenue reported better financial positions compared to last year versus only 30 percent of business owners with less than $1M in annual revenue.

  • Fifty-nine percent of larger businesses reported "excellent" or "good" business conditions in their area, compared to 48 percent of smaller businesses.

 

Business owners cite taxes as their top concern for 2017.

  • The top three concerns of small business owners in the coming year include taxes (47 percent), managing cash flow (31 percent) and keeping up with technology (25 percent).

  • When surveyed on issues including taxation, technology and managing cash flow, male business owners were more concerned than their female counterparts overall. Seventy-two percent of men estimate they will be impacted by these issues in 2017, compared with 67 percent of females.

  • When thinking about the recent presidential election, top concerns reported by small businesses were tax policies (31 percent), growing healthcare costs (18 percent) and the importance of economic growth (15 percent).

 

Businesses are hesitant to grow.

  • Only 23 percent of small business owners plan to hire new employees in the next six months – slightly down from earlier this year (26 percent) but up from 20 percent a year ago.

  • Less businesses are hiring contractors, with 41 percent reporting plans to hire a contractor (compared to 51 percent in Q4 2015).

  • Industries with the highest growth expectations in 2017 include construction (45 percent), transportation (30 percent), and finance (29 percent).

  • Women business owners are more likely to add to the workforce in the next 12 months, with 26 percent planning to add to their workforce (versus 21 percent of men).

 

Most small business owners still do not offer retirement plans.

  • The number of SBOs offering retirement plans has increased slightly since the first half of this year, from 13 to 16 percent.

  • More than half of SBOs that don't currently offer a retirement plan said they don't have enough employees to offer a plan (60 percent) – a popular misperception related to 401(k) requirements.

  • Despite this, most small business owners who don't currently offer a retirement plan feel retirement plans do fall within their realm of responsibility, with only three percent responding that they don't believe they should be responsible for offering this benefit to employees.

     

Business owners are not fully capitalizing on marketing and e-commerce opportunities.

  • While thirty-two percent of business owners say increasing advertising and marketing efforts would best improve their business in 2017, only 14 percent say creating a website would best improve their business in 2017.

  • Only 56 percent of respondents cited having a company website, and only 53 percent of those with a website have optimized it for mobile.

  • Seventy-five percent are not currently offering a mobile payment solution to customers, and only four percent of those business owners plan to in the next 6-12 months.

  • Thirty-seven percent are still not utilizing social media to market their business. However, those businesses that do have a social presence utilize more traditional platforms like Facebook (54 percent) and LinkedIn (22 percent), over Twitter (11 percent), YouTube (9 percent) and Instagram (8 percent).

 

Survey Methodology

The following presents a summary of the methodology used to execute Capital One's Fall 2016 Small Business Barometer Survey, conducted by the market research and business intelligence firm ORC International.  For this telephone study, ORC interviewed a national sample of 400 for-profit small businesses in the US.  Small businesses are defined as those with total annual revenues less than $10 million. Interviews were conducted from September 29-October 13, 2016. One respondent per business was interviewed.  The margin of error is +/- 4.9 percent at a 95 percent confidence level. 

 

The initial sample for this study was constructed using a random selection from the extensive business database maintained by Infogroup, Inc., and drawn to be representative of qualifying small businesses throughout the U.S. by industry, region and employee size.  To compensate for variation in response rate among different types of businesses, final data was weighted by region and industry to help ensure the final results were proportionally representative of the small business population.  In developing the weighting frame, ORC International considered the impact on comparability with prior waves of the study.

 

About Spark Business

Capital One® offers a broad spectrum of financial products and services to consumers, small businesses, and commercial clients. Spark Business from Capital One comprises a suite of innovative products and services specifically designed for small business, including credit cards with unlimited rewards, no-fee checking and savings, and secure and flexible merchant service offerings. Spark Business provides tips, resources, and inspiration to help your business thrive at www.SparkBusinessIQ.com. For more information, visit www.CapitalOne.com/smallbusiness.

 

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Contact: Alison Cahill
917-653-7592
alison.cahill@capitalone.com


 





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