Bank of America Survey Finds Small Business Owners’ Confidence Down While Election-Year Anxiety Rises
Political Uncertainty Gives Small Business Owners Pause on Hiring and Growth Plans
Small business owners’ confidence in the national economy is down, according to the spring 2016 Bank of America Small Business Owner Report, which found that only 29 percent of small business owners feel confident that the national economy will improve over the next year – a sharp drop from a year ago.
The report, based on a semi-annual survey of 1,000 small business owners across the country, suggests that the upcoming presidential and congressional elections are having a sizable influence on the outlook of small business owners. Sixty-seven percent believe that the upcoming presidential election will affect their business “a lot” or “somewhat,” while 53 percent believe congressional elections will have an impact.
Nearly four in five say they are concerned about the “effectiveness” of U.S. government leaders, which was higher than last year, but in line with previous election year results in 2012 and 2014. At the same time, concern for nearly all other economic factors, including commodities prices, interest rates and credit availability, is down, with the exception of U.S. and/or global stock market and health care costs.
“Our survey suggests that uncertainty over the upcoming elections is making small business owners less optimistic about their businesses and the economy than in recent years,” said Robb Hilson, Small Business executive, Bank of America. “As a result, they’re taking a wait-and-see approach before making major investments in the growth of their businesses. We also see this trend when it comes to hiring, as the majority of small business owners we surveyed this spring plan to keep the same number of employees over the next 12 months, perhaps suggesting they are waiting until after the election to reassess hiring plans.”
Modest growth plans compared to previous years
Consistent with the report’s findings about the economy, small business owners’ outlook on revenue growth and hiring plans has also slowed. Fifty-one percent expect their revenue to grow over the next 12 months, down from previous years, while 40 percent project revenue will remain flat. Hiring projections have cooled as well, with only 22 percent of small business owners planning to hire new employees in 2016.
In addition, fewer small business owners plan to apply for a loan, with only 9 percent reporting they intend to seek funding in 2016. The top reasons cited for needing a loan this year include investing in new equipment (34 percent), expanding operations (22 percent), and hiring more employees (22 percent).
Small business owners voting with their wallets in mind
As they prepare to cast their votes, small business owners are taking into account both personal and business considerations. Approximately one-third gave more weight to their personal views, while 15 percent approach voting from more of a business perspective. Fifty-one percent take both into consideration evenly.
For those who vote primarily from their small business owner perspective, the top issues about which they’re concerned are taxes (68 percent), the economy and job growth (67 percent), and health care policy (55 percent). Priorities are similar for those voting from a personal perspective: health care policy (59 percent), taxes (57 percent), and the economy and job growth (50 percent).
Skills and character most important factors when hiring job candidates
The face of the small business workforce is changing: Forty percent of small business owners do not regard a college degree as important when evaluating job applicants. Nearly half (49 percent) report that skill level is now the single most important factor in hiring, followed by fit with company culture (24 percent) and previous work experience (24 percent).
In general, small business owners favor candidates who are trustworthy (75 percent), hardworking (70 percent) and experienced (57 percent). Sales ability (28 percent), tech savviness (27 percent) and knowledge of STEM (science, technology, engineering and mathematics) (12 percent) are less important in evaluating candidates.
While large companies, and in particular technology companies, have been challenged to fill science, technology and engineering positions, 63 percent of small business owners say they do not have trouble finding workers with the technical skills needed to perform jobs at their companies. However, for the 33 percent of small business owners who believe a skills gap exists, they are overcoming the challenge by rolling up their sleeves and taking on more tasks themselves (49 percent) versus offering training programs (32 percent) or relocation benefits (5 percent).
Health care concerns rank high as costs rise
Health care continues to loom prominently as an issue of importance for small business owners. Nearly three-quarters are concerned about the cost of health care, and the topic ranks second as an election-year issue about which they care most. Forty percent of small businesses currently offer health insurance to their employees, including 39 percent of those with fewer than 50 employees who are not required to do so. Sixty-nine percent say their health care costs went up this year, with 41 percent reporting an increase of up to 20 percent. Twenty-nine percent say costs went up by more than 20 percent, and 5 percent report they have doubled.
Most small businesses would need to adjust to a minimum wage increase
In the midst of a national debate over the minimum wage, and as individual states have enacted their own increases, 57 percent of small business owners say they would need to take financial measures to adjust for an increase. Of those, the most commonly cited action would be to increase the price of products and services (23 percent). Only small numbers believe an increase would affect their current business operations, whether it be changes to personnel management - cutting hours (15 percent) or staff (13 percent) - operational spending (15 percent) or technology investments (7 percent).
Generational differences in outlook and hiring
Interestingly, Generation X (Gen X) is more confident in the national economy improving (41 percent) than either millennials (34 percent) or baby boomers (28 percent).
Conversely, millennials see the outlook for their small businesses this year in a much rosier light, with 81 percent expecting revenue growth – 16 percentage points more than Gen X (65 percent) and 35 percentage points more than boomers (46 percent). All are equally concerned about the impact of the 2016 elections.
Millennials’ hiring outlook is also more robust, with 48 percent reporting they plan to hire, compared to just 34 percent of Gen Xers and 19 percent of boomers. The importance of a college degree in hiring is almost equally low across all generations (important for just 39 percent of millennials, 38 percent of Gen X and 29 percent of boomers). Among all small business owners, there is a preference for hiring Gen-X employees (47 percent) over millennials (26 percent) and baby boomers (8 percent). Split generationally, however, millennials choose their age group over any other, with 61 percent preferring to hire 18- to 34-year-olds.
For a complete, in-depth look at the insights of the nation’s small business owners, read the entire spring 2016 Bank of America Small Business Owner Report, and for additional insights, download the Small Business Owner Report national infographic here.
Bank of America Small Business Owner Report
GfK Public Affairs & Corporate Communications conducted the Bank of America Small Business Owner Report Survey for spring of 2016 online between March 17 and April 19, 2016 using pre-recruited online sample of small business owners. GfK contacted a national sample of 1,000 small business owners in the United States with annual revenue between $100,000 and $4,999,999 and employing between 2 and 99 employees. In addition, a total of 300 small business owners were also surveyed in nine target markets: Los Angeles, Dallas, Washington, D.C., New York, Boston, Chicago, San Francisco, Atlanta and Miami. The final results were weighted to national benchmark standards for size, revenue, and region. Previous waves of the Small Business Owners Report survey were conducted by telephone. Best efforts were made to replicate processes in sample, weighting, and method.
Bank of America
Bank of America is one of the world's leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,700 retail financial centers, approximately 16,000 ATMs, and award-winning online banking with approximately 33 million active users and approximately 20 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
Reporters May Contact:
Don Vecchiarello, Bank of America, 1.980.387.4899