Capital One's Small Business Growth Index Finds Business Owners Are Optimistic about Current and Future Conditions, but Hiring and Investments Remain Flat
McLean, VA — April 4, 2017 – Small business owners are feeling good about sales, the economy and future conditions, with women- and millennial-owned businesses reporting significant increases in sentiment and expectations for the future. Capital One's latest Small Business Growth Index found 50 percent of small business owners (SBOs) overall feel current business conditions are good or excellent (up from 41 percent a year ago), and the same percentage expect to see conditions improve in the next six months – the highest level reported since spring 2012.
"It's encouraging to see more small businesses feeling optimistic about their performance and future prospects, particularly women and younger business owners who represent increasingly significant segments impacting our local and national economies," said Buck Stinson, head of small business card at Capital One. "At Spark Business, we're committed to understanding the opportunities and challenges impacting small businesses across the board, so we can build solutions that enable growth and success."
Meanwhile, despite the increased optimism, the survey showed many businesses appear hesitant to invest in people, technology and marketing that may fuel business growth, with a majority of SBOs reporting they have no plans to hire (67 percent), increase marketing (66 percent), or invest in new technologies such as mobile payments (62 percent) in the coming six to twelve months.
The following are key themes revealed by the Spring 2017 Small Business Growth Index:
Business owners are feeling good and expect conditions to continue improving in 2017.
Fifty-percent of all SBOs report their financial position is about the same as a year ago and 50 percent also expect to be in a better position six months from now; meanwhile only four percent expect to be in a worse position in six months – the lowest reported percentage since fall 2012.
Women and millennials continue to drive optimism, with 47 percent of women saying they'll be in a better financial position six months from now (up 13 points from late 2016); and 73 percent of millennials expect to be in a better position, compared to Gen X (53 percent) and Baby Boomers (49 percent). Unsurprisingly, women and millennials SBOs also have more optimistic views of current business conditions, with 56 percent of women and 67 percent of millennial saying business conditions are good or excellent.
SBOs in the Northeast and South are considerably more optimistic, with 57 percent of SBOs in those regions expecting improved conditions, compared to the Midwest (45 percent) and West (42 percent).
The Capital One Small Business Confidence Score, which tracks small business sentiment, including economic sentiment, hiring plans, future financial positions and recent sales, is the highest it has been since Q1 2015. The score for Q1 2017 (29.2) is nearly 10 points higher compared to this time last year (19.6), demonstrating small business owners' overall optimistic outlook.
*The Capital One Small Business Confidence Score evaluates responses to a series of questions from the Small Business Growth Index and ranges from -100 (very low confidence) to +100 (Very High Confidence).
Despite the optimism, most SBOs are still hesitant to invest in the near-term.
Only 27 percent of small business owners plan to hire additional employees in the next six months, significantly lower than the 32 percent of small businesses who planned to take on additional staff in 2015. Two-thirds (63 percent) of those who plan to hire saying these will be full-time associates vs. part-time (49 percent) or contractors (23 percent).
Additionally, less than a third (30 percent) of SBOs plan to increase marketing spend this year, with most businesses saying they have no need for marketing, or word of mouth is sufficient.
Just one percent of SBOs plan to invest in mobile payment technologies that can streamline the purchasing process, eliminate invoicing delays, and help boost cash flow.
The top factors SBOs believe may impact business (including the ability to invest in the business) include: taxes (50 percent), managing cash flow (32 percent), keeping up with technology (30 percent), minimum wage increases (22 percent), access to capital (16 percent) and immigration reform (9 percent).
Businesses that use data analytics and mobile payments are more likely to have increased sales.
While less than a quarter (23 percent) of SBOs currently offer a mobile payment option for customers, 46 percent of SBOs who currently offer mobile payments options say sales have increased over the past six months, compared to 35 percent who do not use the technology.
Similarly, 44 percent of SBOs who use data analytics tools report increased sales, compared to 33 percent who do not. Despite this, only 39 percent of SBOs use data analytics tools today.
Thirty percent of small business owners are concerned with "keeping up with technology," which shows that SBOs correlate technological advancements with increased sales. This outpaces SBO's level of concern for other key issues, including minimum wage increases (22 percent) and access to capital (16 percent).
The Internet of Things (IoT) will have the most impact on small businesses this year, with 22 percent of SBOs saying it will have the most or second most impact on their business, followed by EMV/chip cards (17 percent) and mobile or digital payments (17 percent).
Benefits are not as commonly offered as some may think.
Sixty-eight percent of small business owners offer some type of benefits, such as health insurance or retirement benefits, to their employees.
Paid vacation or personal time off is the most common benefit provided; however, only 51 percent of SBOs offer it to employees. As expected, businesses with more employees are more likely to offer paid time off; 71 percent of small businesses with five or more employees do so, but only 36 percent of those with less than five employees do the same.
Only 20 percent of small businesses offer maternity leave, and, perhaps surprisingly, women SBOs are not any more likely to offer this benefit to employees. Paternity leave is only offered by 15 percent of SBOs; though millennials are more likely to offer this benefit (29 percent).
Small businesses are more likely to offer paid vacation or personal time off (51 percent), health insurance (26 percent) or maternity leave (20 percent) than retirement benefits, like a 401(k); just 19 percent of small business owners offer retirement benefits to employees.
"Small businesses are integral parts of our communities and economy, and the survey findings demonstrate both small business successes as well as areas where they can continue to grow," said Stinson. "Learning about their tendencies and outlooks helps us to better serve small business owners, helping them thrive as a result."
Capital One's Spring 2017 Small Business Growth Index Survey (previously the Capital One Spark Business Barometer) was conducted by the market research and business intelligence firm ORC International. For this telephone study, ORC interviewed a national sample of 500 for-profit small businesses in the U.S. Small businesses are defined as those with a total annual revenue less than $10 million. Interviews were conducted from February 9 – March 1, 2017. One respondent per business was interviewed. The margin of error is +/- 4.38 percentage points at a 95% 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 were weighted by region and industry to help ensure the final results are 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.
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