2012 mid-year economic report - home - national small ...these reports use nsba survey data to...

2012 MID-YEAR ECONOMIC REPORT 1 NATIONAL SMALL BUSINESS ASSOCIATION

2012 MID-YEARECONOMIC REPORT


The National Small Business Association (NSBA) is the country’s longest-running small-business advocacy group now celebrating its 75th Anniversary. Focused on federal advocacy, and operating on a staunchly nonpartisan basis, NSBA is a recognized leader of America’s small-business community. In addition to our wide array of advocacy efforts, NSBA provides critical data on the small-business community. Throughout the year, we conduct a series of surveys and quick polls, chief among them are our two Economic Reports: the NSBA Mid-Year Economic Report and the NSBA Year-End Economic Report. These reports use NSBA survey data to provide a snapshot of how small businesses are dealing with the current economic situation.

The 2012 Mid-Year Economic Report shows that small-business owners are feeling less optimistic about the outlook of their own firms and the overall U.S. economy than in the previous six months. This dip in outlook and confidence underscores an ongoing cycle wherein small-business owners express higher economic outlooks and confidence levels in their own business at the start of a new year—when the Year-End Survey is conducted. That confidence and positive economic outlook routinely erodes by the time July and August come around when our Mid-Year Survey is conducted.

Six months ago, the 2011 Year-End Economic Report found small businesses more confident with notable drops in the number of small-business owners who anticipated a recessionary economy from 30 percent in July 2011 down to 14 percent in December 2011. Unfortunately, that number has jumped back up to 34 percent—the highest number of small-business owners predicting a recession since December 2009. Correspondingly, the number of small-business owners who anticipate economic expansion in the coming 12 months was cut nearly in half from 20 percent six months ago to 11 percent today.

On a positive note, small-business owners’ long-term economic outlook is slightly better with 23 percent now saying that today’s economy is better than it was five years ago, the highest it’s been in four years. Unfortunately the near-term outlook is a gloomy one: the number of small-business owners saying the national economy is worse today than six months ago jumped from 31 percent in December 2011 to 44 percent today.

Reflecting the negative outlook of the U.S. economy, there was an increase in the number of small-business owners who are not confident about the future of their own business, up from 25 percent six months ago to 40 percent today. This 15 percentage point increase is the largest six-month jump we’ve seen since we began the survey nearly five years ago.

When asked about growth opportunities, 55 percent—down from 63 percent six months ago—said they expect growth in the coming year or already are growing. While the lowest this indicator has been in three months, there still exists a majority of small businesses that predict some kind of growth this year.

In terms of employment, there was a modest decrease the past six months from 22 percent who increased their employee size six months ago to just 19 percent today. The number of small-business owners who project increases in employee size in the coming 12 months dropped from 30 percent in December 2012 to 25 percent today.

FOREWORD

NSBA Chair Chris Holman

NSBA President Todd McCracken


Past and projected revenues also saw changes for the negative. There was a 10-point jump in the number of small-business owners who reported decreases in revenue over the past 12 months, and those small businesses projecting revenue gains in the coming year dropped from 56 percent six months ago to 45 percent today.

Small-business owners continue to point to economic uncertainty (68 percent) as the most significant challenge to the future growth and survival of their business. Decline in consumer spending (42 percent), regulatory burdens (38 percent), cost of health insurance benefits (33 percent), the growing national debt (27 percent), federal taxes (26 percent), and lack of available capital (23 percent) also weigh heavily on the minds of small-business owners. It is worth noting that there was a jump in the number of small-business owners who picked “federal taxes” as a significant challenge facing their business from 19 percent in December 2011 to 26 percent today.

Access to capital is an ongoing challenge for small businesses—despite modest gains seen in the preceding six months. Today, 75 percent say they have been impacted by the credit crunch and 66 percent—down from 70 percent six months ago—say they are able to obtain adequate financing for their firms.

The growing national debt is the number one thing small businesses thing Congress and the administration should address. Following closely is reducing the tax burden, reducing regulatory burdens, and simplify the tax system. When asked which deficit reducing proposals they support, 72 percent said reform and reduce entitlement spending and 62 percent said significant cuts for certain federal agencies and programs. Added as an option for the first time in this survey, 19 percent said they would support a tax increase for those making more than $1 million annually.

Included in this report, you’ll find a greater emphasis on the data and various charts and less text. We know your time is valuable and we hope you find this format easy and useful.

Please contact NSBA’s media office for inquiries at [email protected].

Chris Holman NSBA Chair Michigan Business Network

Todd McCrackenNSBA President and CEO

FOREWORD


DEMOGRAPHICS

How many total full-time personnel are currently employed by your business?

Which of the following best describes the industry or sector in which your business operates?

What were your gross sales or revenues for your most recent fiscal year? In what region is your business located?

Which of the following best describes the structure of your business?

4%

33%

30%

26%

6%

0

1 to 5

6 to 19

20 to 99

100 to 499

PARTNERSHIPSOLE PROPRIETORSHIPLLC

CORPORATION S-CORP

18%13%

10%9%

8%7%7%

6%4%4%

3%3%

2%2%2%2%

1%1%1%

ManufacturingConstruction

Professional ServicesRetail

DistributionIT (Software/Hardware)

ProfessionalDefense

InsuranceAgricultureHealth Care

TransportationFabricated Products

FinancePrinting & Publishing

Real EstateBiotech

ChemicalsHospitality/Tourism

Less than $100,000$100,000 - $250,000$250,000 - $500,000

$500,000 - $1 Million$1 - $5 Million

$5 - $25 Million$25 - $75 Million

$75 - $150 MillionMore than $150 Million

11%8%9%

12%30%

21%4%

1%2%

30%

45%

10%

2%

13%

New England 6%

Mid-Atlantic 25%

Great Lakes 15%

Farm Belt 6%

South 22%

Mountain 10%

Pacific 16%


When compared with six months ago, would you say today’s national economy is:

What are the three most significant challenges to the future growth and survival of your business? (Please check the three most important challenges)

From a financial perspective, how do you feel right now about the future for your business?

When compared with one year ago, would you say today’s national economy is:

Compared to five years ago ... Would you say the national economy is:

Thinking about the next 12 months, do you anticipate:

CONFIDENCESMALL BUSINESS

As has been the case in past reports, there exists a cyclical

depression in confidence and economic outlook during

summer months. Today, small-business owners are feeling less optimistic about the outlook of their own firms and the overall U.S. economy

than in the previous six months. The number of small-business

owners who anticipate a recessionary economy in

the coming 12 months is 34 percent—the highest it’s been

since December 2009.

The number of small-business owners who anticipate economic

expansion in the coming 12 months was cut nearly in half from 20 percent six months

ago to 11 percent today.

BETTER OFF

BETTER OFF

WORSE OFF

WORSE OFF

ABOUT THE SAME

ABOUT THE SAME

Economic uncertainty 68%

Decline in customer spending

42%

Regulatory burdens 38%

Cost of health insurance benefits

33%

Growing national debt 27%

Federal taxes 26%

Lack of available capital 23%

Lack of qualified workers 10%

State and local taxes 10%

Cost of employee salaries 8%

Foreign competition 6%

Cost of employee benefits, not including health insurance

5%

Cost of technology 4%

Cost of training workers 3%

No major challenges 1%

27%

28%

29%

44%

43%

28%

20%

24%

47%

52%

33%

25%

24%

24%

31%

44%

46%

31%

16%

21%

44%

48%

40%

31%

JULY 11

JULY 11

DEC. 10

DEC. 10

DEC. 11

DEC. 11

JULY 12

JULY 12

BETTER OFF

EXPANSION

WORSE OFF

FLAT ECONOMY

ABOUT THE SAME

A RECESSION

18%

22%

77%

65%

6%

13%

21%

12%

72%

58%

7%

30%

21%

20%

71%

66%

7%

14%

23%

11%

68%

55%

9%

34%

JULY 11

JULY 11

DEC. 10

DEC. 10

DEC. 11

DEC. 11

JULY 12

JULY 12

CONFIDENT NOT CONFIDENT

JULY 2012

60% 40%

DEC. 2011

75% 25%

JULY 2011

64% 36%

DEC. 2010

66% 34%


Do you believe there will be growth opportunities for your business in the coming year?

Which of the following growth strategies will you use in the next 12 months?

GROWTHBUSINESS

Today, 55 percent of small-business owners either expect growth in the coming year or already are growing. While the lowest this indicator has been in three years, and down from 63 percent just six months ago, it is worth noting that the majority of small businesses have a positive growth outlook.

Unfortunately, there was a 10-point jump in the number of small-business owners who reported decreases in revenue over the past 12 months, and those small businesses projecting revenue gains in the coming year dropped from 56 percent six months ago to 45 percent today.

Furthermore, profits also experienced decreases: 40 percent of small-business owners cited decreases in profit, up from 31 percent in December 2012. Projections did not fare much better, with just 37 percent anticipating profit growth, down from 50 percent six months ago.

41% 45% 14%

YES NO ALREADY GROWING

JULY 2012

DEC. 2011

JULY 2011

New advertising and marketing strategies 49% 47% 43%

Internet / Expand E-commerce 32% 31% 36%

Strategic alliance 29% 33% 26%

No growth strategies will be used in the next 12 months 23% 22% 24%

Hire new employees 15% 17% 21%

Joint Venture 12% 17% 15%

Investments in R&D 13% 13% 14%

Other (please specify) 9% 11% 11%

Expand operations to new facilities/add additional stores 7% 10% 10%

Acquisition 6% 8% 7%

Outsourcing 6% 6% 9%

Merger 4% 4% 5%

DEC. 2011

47% 37% 17%

JULY 2011

40% 45% 15%

DEC. 2010

45% 40% 15%

JULY 2012


GROWTHBUSINESS

How much did your gross sales/revenues change over the last 12 months?

How much did net profits change over the last 12 months?

How much do you expect gross sales/revenues to change over the next 12 months?

How much do you expect net profits to change over the next 12 months?

39%

31%

45%

37%

40%

48%

24%

31%

22%

21%

31%

31%

INCREASE

INCREASE

INCREASE

INCREASE

DECREASE

DECREASE

DECREASE

DECREASE

NO CHANGE

NO CHANGE

NO CHANGE

NO CHANGE

DEC. 2011

46% 31% 24%

JULY 2011

39% 37% 24%

DEC. 2010

39% 43% 18%

DEC. 2011

36% 38% 25%

JULY 2011

32% 46% 23%

DEC. 2010

36% 46% 18%

DEC. 2011

56% 14% 29%

JULY 2011

49% 19% 32%

DEC. 2010

54% 19% 27%

DEC. 2011

50% 18% 32%

JULY 2011

43% 26% 31%

DEC. 2010

44% 24% 32%

JULY 2012

JULY 2012

JULY 2012

JULY 2012


How much did the number of employees change over the last 12 months?

How much do you expect number of employees to change over the next 12 months?

GROWTHJOB

There were modest decreases in the past six months among businesses who reported hiring. Today, just 19 percent report increasing their employee size,

down from 22 percent in December 2011, while 25 percent report decreases in employee size, resulting in negative net employee growth.

Looking ahead, the number of small-business owners who project increases in employee size in the coming 12 months dropped from 30 percent in December 2012 to 25 percent today. There was a commensurate increase in those who

anticipate decreasing their workforce, however the net projected employee growth still remains at a positive.

INCREASE INCREASEDECREASE DECREASENO CHANGE NO CHANGE

JULY 2012

19% 25% 55%

DEC. 2011

22% 23% 55%

JULY 2011

22% 26% 52%

DEC. 2010

15% 31% 54%

JULY 2012

25% 12% 63%

DEC. 2011

30% 8% 62%

JULY 2011

29% 12% 60%

DEC. 2010

25% 11% 64%


NSBA repeatedly has warned that limitations on small businesses ability to garner capital will continue to hinder broad U.S. economic

growth. Using NSBA data from as far back as 1993, there is a clear correlation to a small-business owner’s ability to hire and his/her ability to get financing. While the last four

years have seen a small-business community struggling to stay afloat, we also have seen their ability to get capital diminish. (place by

chart 34)

The number of small businesses relying on bank loans continues to drop, to 46 percent today from a July 2009 high of 53 percent.

There also were drops in the number of small businesses that use earnings of the business

and vendor credit as sources of financing. There was a notable increase in small-

business owners who report using private loans (friends and family) from 14 percent in

December 2011 to 19 percent today.

Credit cards continue to be a key source of financing, even as a majority of small-

business owners continue to report worsening terms on their credit cards. However it is worth noting that, when asked to evaluate their terms over six months and five years,

there is a lower incidence of worsening rates in the last six months.

NSBA in June released its Small-Business Access to Capital Survey, which provides a

detailed look at small-business credit markets. Please click here to view that survey.

FINANCINGSMALL BUSINESS

Has your business been impacted by the credit-crunch?

25%

28%

32%

25%

75%

73%

68%

75%

Have you experienced any of the following changes on any of your lines of credit or on your credit cards in the last six months?

11% 16% 73%

INCREASE DECREASE NO CHANGE

DEC. 2011

12% 17% 71%

JULY 2011

11% 24% 65%

DEC. 2010

14% 24% 62%

JULY 2012

YES NO

JULY2012

JULY2011

DEC.2011

DEC.2010

http://www.nsba.biz/wp-content/uploads/2012/07/Access-to-Capital-Survey.pdf


Is your business able to obtain adequate financing?

What types of financing has your company used within the past 12 months to meet your capital needs?

JULY 2012

DEC. 2011

JULY 2011

DEC. 2010

Bank loan 46% 47% 49% 45%

Earnings of the business 43% 46% 43% 45%

Credit cards 34% 33% 37% 36%

Used no financing 23% 21% 23% 21%

Private loan (friends or family) 19% 14% 21% 15%

Vendor credit 18% 23% 25% 23%

Leasing 6% 11% 10% 9%

Small Business Administration (SBA) loan 6% 4% 4% 4%

Other (please specify) 3% 6% 5% 7%

Private placement of debt 3% 2% 2% 2%

Selling/pledging accounts receivable 2% 3% 4% 4%

For bank loans that are currently outstanding, which of the following has occurred in the last 12 Months?

JULY 2012

DEC. 2011

JULY 2011

DEC. 2010

Terms have become less favorable to your business. 13% 17% 21% 22%

Terms have stayed the same. 41% 40% 39% 38%

Terms have become more favorable to your business. 9% 6% 7% 6%

Do not have outstanding loans. 37% 36% 33% 34%


YES NO

JULY 2012

DEC. 2011

JULY 2011

DEC. 2010

66%

34%

70%

64%

64%

30%

36%

36%


`


Percentage of Small Businesses Carrying Any Debt

80%

78%

73%

$1,099,615$1,342,279$1,604,934

5 YEARS AGO

TODAY2 YEARS AGO5 YEARS AGO

2 YEARS AGO

TODAY

`Please estimate your small businesses total debt, including loans, credit cards, property mortgage, invoices owed, etc…

Average debt among those that do have debt

5 YEARS AGO

2 YEARS AGO

TODAY

Debt 1 to 50k 28% 27% 25%

Debt 51k to 100k 9% 14% 15%

101k to 500k 29% 26% 29%

501K to 1mil 12% 14% 12%

More than 1mil 22% 19% 19%

If capital availability is a problem for your business, what is the effect on your operations?

JULY 2012

DEC. 2011

JULY 2011

Unable to grow business or expand operations 33% 34% 36%

Reduced the number of employees 16% 20% 18%

Unable to finance increased sales 18% 16% 18%

Reduced benefits to employees 9% 11% 12%

Unable to increase inventory to meet demand 11% 10% 10%

Closed stores or branches 2% 3% 2%

Other 6% 2% 3%


Do you believe that the terms of the credit cards you use for business have improved or gotten worse over the last five years?

Do you believe that the terms of the credit cards you use for business have improved or gotten worse over the last SIX MONTHS?

7%

6%

56%

37%

37%

57%

IMPROVED

IMPROVED

GOTTEN WORSE

GOTTEN WORSE

NOT SURE

NOT SURE


DEC. 20117% 54% 39%

JULY 20117% 60% 33%

DEC. 20107% 58% 35%

DEC. 20116% 40% 54%

JULY 20115% 49% 45%

DEC. 20107% 48% 45%

JULY 2012

JULY 2012


“ “`


CORRELATION BETWEEN AVAILABILITY OF CAPITAL AND EMPLOYMENT GROWTH

100%

90%

80%

70%

60%

50%

40%

30%

20%

10% 0%

Increased EmploymentAble to get financing

19931994

19951996

19972000

2007Feb. 0

8

Aug. 08

Dec. 08

July 09

Dec. 09

July 10

Dec. 10

July 11

Dec. 11

July 12

Since 1993, when NSBA began asking these questions, there has been a direct correlation between access to capital and job growth—when capital flows more freely, small businesses add new jobs.


How well would you say you understand how the new health care reform law is going to impact your business?

If you qualify for the small-business health care tax credits, how much will they help your business?

In what ways have you coped with rising health care costs?

PUBLIC POLICY

When asked to rank to top items that Congress and the administration should address, the number one issue is reducing the national deficit, followed by reducing the tax burden, reducing regulatory burdens, and simplifying the tax system.

Health care reform continues to weigh heavily on the minds of America’s small businesses, however there is growing understanding of how the law will impact their business. Unfortunately the small-business tax credits continue to pose confusion and or exempt large numbers of small businesses.

NSBA believes firmly that the ongoing debate and lack of a clear, long-term solution to the growing deficit has added dramatically to small-business owners’ concerns and has contributed to the overall negative outlook for the U.S. economy. The growing partisan rancor surrounding the elections and rapidly diminishing days before the so-called “fiscal cliff” is only exacerbating the problem.

JULY 2012

DEC. 2011

JULY 2011

DEC. 2010

Increased deductible 45% 59% 50% 55%

Held off on salary increases for employees 47% 45% 50% 45%

Increased employee share of premium 41% 50% 46% 42%

Reduced employee benefits 36% 48% 42% 37%

Held off on hiring a new employee 27% 27% 32% 24%

Switched insurance carriers 20% 25% 28% 25%

Delayed purchase of new equipment 21% 20% 26% 17%

Held off on implementing growth strategy 23% 25% 24% 18%

Laid off an employee 9% 7% 13% 8%

Dropped insurance 8% 9% 9% 5%

JULY 2012

DEC. 2011

JULY 2011

DEC. 2010

Significantly 3% 5% 4% 3%

Moderately 6% 6% 7% 6%

Just a little 10% 13% 13% 11%

Not at all 19% 18% 19% 17%

I do not qualify 26% 20% 22% 20%

I’m not sure if I qualify 36% 38% 35% 43%

23% 14%63%

CLEAR UNDERSTANDING

NO UNDERSTANDING

LIMITEDUNDERSTANDING

DEC. 201119% 60% 21%

JULY 201119% 63% 18%

DEC. 201015% 53% 32%

JULY 2012


Which of the following deficit-reducing proposals would you support?

Which one of the following issues do you believe Congress and President Obama’s administration should address first?

PUBLIC POLICY

Reduce the national deficit 34%

Reducing the tax burden 14%

Reducing the regulatory burden on businesses 13%

Simplify the tax system 12%

Rein-in costs of health care reform 8%

Increase small business access to capital 5%

Other 4%

Tort reform 3%

Improving education to provide a qualified domestic workforce 2%

Remove barriers to small-business exporting 2%

Credit card reform (that includes SB) 1%

Enact a comprehensive energy policycomprehensive energy policy 1%

Reduce the burden of unfair labor laws 1%

JULY 2012

DEC. 2011

JULY 2011

DEC. 2010

Reform and reduce entitlement spending 72% 73% 72% 70%

Significant cuts for certain federal agencies and programs 62% 61% 62% n/a

An across-the-board budget cut for federal agencies 48% 53% 56% 70%

Eliminate all tax credits and deductions in conjunction with dramatically lower income tax rates

40% 40% 36% 40%

Eliminate certain tax credits and deductions—even those which may benefit my business

31% 37% 26% 24%

Greater authority of the administration to reduce Congressionally-approved spending

33% 26% 24% 29%

A tax increase for those making more than $1 million annually 19% n/a n/a n/a


CONCLUSION

Small employers comprise 99.7 percent of all employer firms in the U.S. One in two workers in the private workforce run or work for a small business, and one in four individuals in the total U.S. population is part of the small-business community (equaling 23 percent of the population.) Firms with fewer than 500 employees accounted for 64 percent of net new jobs between 1993 and the third quarter of 2008 and 32 percent of those gains came from the creation of new, small firms.

The Great Recession hit in late 2007 when the unemployment rate began to rise and remains stubbornly high to this day. Small businesses are struggling to create jobs in an economy where economic and political uncertainty is rampant. Small businesses are the key to job growth and giving them the tools they need to create jobs is paramount to economic recovery.

More can, and must be done to ensure entrepreneurship remains a viable, attainable option for every American. Government leaders ought to heed advice to act on items that will spur economic growth, but also to show restraint when it comes to any proposal that could further shake small-business owners’ confidence and exacerbate already lacking small-business job creation capabilities.

Please click here for information on NSBA’s priority policies.

For past Economic Reports and other issue-specific surveys from NSBA, please visit our Surveys & Reports page on the NSBA website.

For questions, interviews or to reprint any or all of this report, please contact the NSBA public affairs department at [email protected] or 202-552-2904.

The 2012 Mid-Year Economic

Report was conducted on-line July 11-28

among 350 small-business

members of NSBA

representing every industry

in every state in the nation. While

the results in this survey can be extrapolated to the at-large small-business community, it is

worth mentioning that NSBA

members tend to be older, more well-established

small businesses. That said, the cross-section of business

demographics is consistent through

the various years these

surveys have been conducted, resulting in valid trending data.

METHODOLOGY

http://www.nsba.biz/?page_id=41

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1156 15th Street, N.W.Suite 1100 Washington, DC 20005www.nsba.biz

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