In particular, a bigger chunk of business owners expect higher earnings in 2015. ”This could be a breakout year for small business,” says Bill Dunkelberg, NFIB Chief Economist. “There’s no question that small business owners are feeling better about the economy. We’ve been waiting a long time for this kind of activity”
While business owner optimism has been trending up for a while, the signs of a significant and sustainable upswing were thin – until now. The NFIB’s latest survey from December 2014 reported positive small business momentum in eight of the 10 categories tracked by the survey, including increases in hiring, spending and expected earnings. One category was unchanged and the single category that dropped had experienced a big jump earlier, so a decline was not surprising.
Areas where businesses expect to see or make the biggest changes this year include capital investments, hiring, sales and expansion. For the past 6-7 years, only a few business owners considered expansion a good idea. But that’s now changed dramatically.
Hiring is Strong, But...
About 54 percent of business owners surveyed say they are either hiring or trying to hire – but 43 percent say they are having trouble finding enough qualified candidates. About one in every four businesses reported having at least one job opening they could not fill in the most recent quarter. And about 14 percent say they are using temp workers to fill some of the gaps.
To attract and keep employees, business owners are paying more, with about 25 percent reporting higher compensation in the latest quarter.
Meanwhile, sales prospects are looking up. More businesses are reporting higher sales and fewer are reporting that weak sales are a problem. In fact, the number complaining of weak sales has dropped to its lowest level since 2007. In short, customers really have started to show up again – the best thing that can happen to a small business owner.
Small firms are also in a spending mood themselves, with about 60 percent reporting capital investments in the latest quarter – the highest level since December 2007 at the pre-recession peak of the expansion. Of those making capital outlays, 42 percent bought new equipment, 23 percent bought vehicles and 16 percent improved or expanded facilities. Another six percent acquired buildings or land for expansion, and 12 percent spent money on new fixtures and furniture.
Long Time Coming
It took 4½ years from the start of the “recovery” for small business optimism to reach its pre-recession average. Over all those years it slogged along, never once posting an above average reading.
In other words, less than half of the nation’s small business economy was not participating in a recovery that was felt quite differently in other sectors. For example, big business profited first, sending profits and the stock market to record levels. But that success was not being shared among Main Street’s roughly 5.5 million firms with fewer than 20 employees.
Other Surveys Confirm
Other surveys are showing small business optimism at multi-year highs as well. For example, new research from Kabbage, Inc., an online loan source for small business, reports that 95 percent of business owners surveyed expect revenue growth in 2015, and half expect that growth to exceed 20 percent.
Importantly, greater optimism exists across nearly all industry sectors and geographies. The most bullish owners in 2015 are in these types of businesses (in order):
- Consulting/marketing services
- Beauty, fitness and spas
- Home services
More Spending on Marketing
Business owners aim to accelerate growth in part by boosting their spending on marketing and advertising. About 52 percent plan to invest more in marketing and some 70 percent plan to expand their product offering.
Small business owners plan to increase marketing spending in social media, search and content marketing, with more than half saying they will start using social media marketing this year.
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