We have a heaping helping of small business data to share with you, and it points to a good year ahead.
Several economic surveys and studies out this month show that small businesses are feeling more confident than ever, shunning Grinch-like recession fears.
So let’s get right to it.
In the latest MetLife & U.S. Chamber of Commerce Small Business Index, all 50 states are reporting small businesses saw revenue growth in 2019 and unemployment is at a 50 year low, even while trade battles with China were going on (fortunately, the December announcement from the White House signaled good news on that front) and a growing number of economists are predicting a recession next year. One in five small business owners added staff in 2019, even as low unemployment made hiring tough.
“Through this quarter, small business optimism has continued to grow reaching unprecedented levels. These high levels of confidence have prompted Main Street employers to increase hiring,” said Tom Sullivan, VP of small business policy at the U.S. Chamber of Commerce. “It is remarkable that millennial-owned and minority-owned small businesses have aggressive hiring plans despite the tight labor market.”
Here are some highlights:
- 71% of small business owners feel optimistic about the health of their business, while 62% feel optimistic about the health of their local economy and 57% believe the U.S. economy is in good health. .
- 20% of the owners reported they increased the size of their staff in the past year, the highest percentage in the history of the index.
- 83% of small businesses feel comfortable with their cash flow, another indicator of good health.
- In terms of hiring, both millennials and minority business owners are looking forward to increasing their staff. For millennials, 51% of them say they plan to grow their staff, while only 25% of baby boomers plan to do so.
- 54% of owners worry about cybersecurity threats, while another 50% say data privacy. However, cost is of big concern for 44% of small businesses when it comes to adopting new technologies. Additionally, they say time for IT training (25%) and lack of understanding of new technologies (19%), are also concerns.
- Of those using technology, small businesses prefer standard technologies to help them grow. The vast majority (84%) say they use computer accounting systems. Data privacy software (53%), social media management (84%) and email marketing tools (50%) follow.
- The tech tools that small businesses are least likely to use are smartphone apps for scheduling (46%), cloud computing (46%), customer relationship management (CRM) systems (28%), and big data analysis (15%).
Bank of America’s Small Business Owner Snapshot for Fall of 2019 showed similarly cheery trends. The headline: 82% of small business owners surveyed expect revenue gains in 2019. Over the next 12 months, 69% of small businesses plan to expand, 58% expect revenue to increase, 24% plan to hire and 12% plan to apply for a loan. However, 44% said they were negatively impacted by trade policy, higher than the last two snapshots, and 66% of respondents said that holiday period will be challenging for their small businesses, with work/life balance the top challenge. You are not alone.
Meanwhile, another study has found that entrepreneurs with recently launched companies plan to create jobs within a few years, another strong signal for the small business economy. The 2018/2019 U.S. Global Entrepreneurship Monitor Report by researchers at Babson College found that 87% of entrepreneurs with young companies expect to employ workers during the next five years, and 38% expect to have six or more workers. Seventeen percent said they expected to have 20 or more workers in five years. “They trust that they can recruit, hire, and develop employees to help them successfully grow their business,” the study said.
The jobs these entrepreneurs believe they will be creating are typically in companies that provide finance, real estate and business services, as well as retail and wholesale businesses, according to the study.
Among the more than 31 million entrepreneurs in the U.S., African Americans start businesses at a higher rate than the White/Caucasian and Hispanic/Latino ethnicities, entrepreneurial activity was found to be strong across the entire age spectrum of the 18-74 adult population, and since 2015, there has been a steady rise in the rate of both men’s and women’s entrepreneurship in the United States, the study also found.
- The year 2018 marked an all-time high with early stage entrepreneurial activity rates of 17.7% for men and 13.6% for women, with the gender gap between men and women narrowing to 4.1%.
- In light of GEM’s finding that 63% of Americans believe entrepreneurship is a good career choice and the low unemployment rate during this time, starting a business was viewed as a good choice rather than a necessity. Less than 9% of entrepreneurs surveyed said they started their companies out of necessity.
- Trends over the past years suggest that entrepreneurs in the United States are increasingly exploiting technological advances – away from traditional wholesale/retail toward entrepreneurial opportunities with potentially lower costs and greater upside in the knowledge and service spaces.
- African/African Americans start businesses at a higher rate (26.4% rate) than the White/Caucasian (13,5%) and Hispanic/Latino ethnicities (17.5%, and entrepreneurial activity was found to be strong across the entire age spectrum of the 18-74 adult population.
“Entrepreneurship can fill employment gaps in the economy and enable people to pursue the career they desire,” said GEM U.S. Team Leader and Babson College Professor Julian Lange. “It is therefore imperative to equip people with the ability to pursue entrepreneurial opportunities and start businesses when they need or choose to do so.”
Still, plenty of entrepreneurs wish more access to capital was under the tree this year. Kauffman Foundation’s Access to Capital for Entrepreneurs Report, pointed out that access to capital continues to be a barrier for small businesses and startups. Even though bank lending and venture capital are most often cited as a means to fund one’s business, 83% do not access either capital source at the startup phase. The survey found. Almost 65% rely on personal and family savings, while 10% carry balances on personal credit cards.
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