State Of The Small Business Market
According to SmallBusinessTrends.com, researchers are evaluating how small businesses are faring in the current economy.
Different surveys from the National Federation of Independent Business (NFIB), ADP and SurePayroll offer differing snapshots of how small businesses seemed to be faring in February (there is usually a one-month lag on these sorts of surveys). And, with the exception of the NFIB, it has been looking like things are getting a tad better.
The NFIB’s Index of Small Business Optimism remains below 90 points for February, having lost the minor gains of last month’s reading. Small business owner survey respondents say they might start hiring again with the right tax breaks but, for them, the real story is customers who simply aren’t buying. Government action on taxes or access to credit won’t help with that.
The ADP National Employment Report for February found that, while medium sized businesses (50-499 employees) were in the black as far as net job growth goes (up by 8,000 jobs), those small gains were wiped out by firms in the smallest (1-49 employees) and largest (> 500 employees) size classes more than made up for that by losing 18,000 jobs and 10,000 jobs, respectively.
But things look a lot less dire according to the other payroll services company. The SurePayroll Small Business Scorecard for February found that year-to-date small business hiring was up by 1.9%, “with continued and increasing reliance on independent contractors.” (Is anybody listening? Did we want to rethink “jobs, jobs, jobs”?) Salaries paid by small businesses were up a little, too (0.2%).
By far, the most optimistic of the bunch was the American Express OPEN Economic Pulse for February. It found that, while small business owners remain concerned about a double-dip recession and high unemployment, they are still more optimistic about the economy than they were a year ago. Like the NFIB survey, the OPEN Pulse found that the largest obstacle to small business growth is broke or otherwise tightfisted customers.
And, also like the NFIB survey, American Express found that small business owner demand for loans is down because they do not believe they have the cash flow right now to handle additional debt.
Overall, the picture is of a small business economy that might be poised to reverse and turn positive, but only very slowly. It is possible that, during the late-second or early-third quarter, it will feel as if there is no movement at all.
Another say-how-are-you-small-business-owners-doing? survey worthy of note is the Small Business Success Index, which I promised you last month that I’d get back to you about and which comes to us from Network Solutions and the University of Maryland Robert Smith School of business.
The Small Business Success Report Card, which is produced from the data in the report, gives us a 75 or a “solid C.” Many would call that a passing grade but, like most parents, we’d like to see better grades from our small businesses. Weak points are “marketing and innovation” and “capital access”, while strength include “customer service” and “compliance.”
The survey also showed that building their online presence is a major concern for small businesses, possibly because it is a relatively inexpensive marketing method. Launching or upgrading company web sites, improving product visuals and/or copyrighting, and developing a social media presence are the top tech priorities. Social media in particular has been very valuable as a means of attracting new customers, tapping into their particular strength: customer service.
And finally, the SBA Office of Advocacy released a particularly timely report early this month, aptly entitled An Analysis of Small Business and Jobs. The paper, authored by Advocacy economist Brian Headd, bills itself as a primer to help policy makers (and anyone else who happens to be interested) “understand some basic facts and trends in small business employment … .”
This report looks at 15 years’ worth of both static and dynamic data from sources in both the Census Bureau (Statistics of U.S. Businesses) and the Bureau of Labor Statistics (Business Employment Dynamics). By using both data sets, Headd is able to examine the impact of small employers on the labor market in both static and dynamic contexts, which yields a solid set of facts. The static data shows the small business share of employment: roughly half the private sector workforce. Meanwhile, the dynamic data lives up to its name.
For example, when performing an analysis of job creation by firm age, the data shows that a cohort of firms, tracked from birth, create more jobs at startup than they do at any other time during the following 20 years. On the other hand, a review of quarterly dynamic employment data finds that continuing firms account for more than two-thirds (69%) of net new job creation, while firm births and deaths only net the remaining 31%. And, during the period from 1992 through the middle of last year, gains or losses of 20 or more employees in a relatively small number of firms accounts for 57% of net employment change.
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