Despite Some Pull Back, Area Entrepreneurs’ Confidence in the National Economy Jumps, Loan Applications Hold Steady From Fall 2016
Los Angeles small business owners’ revenue expectations and hiring plans for the year ahead experienced a steep decline from just six months ago, according to the spring 2017 Bank of America Small Business Owner Report. This spring, one-quarter of L.A. entrepreneurs plan to hire (vs. 39 percent in fall 2016). And, just under half expect their revenue to increase over the next 12 months (vs. 61 percent in fall 2016)—the lowest percentage of 10 major cities surveyed. Long-term growth plans are also trending downward, with 62 percent of area entrepreneurs planning to grow their businesses over the next five years (vs. 67 percent in fall 2016).
The report, based on a semi-annual study of small business owners in the greater L.A. area and across the country, also found fewer L.A. entrepreneurs are confident that their local economy will improve over the next 12 months compared to six months ago (42 percent in spring 2017 vs. 47 percent in fall 2016). Meanwhile, L.A. small business owners’ confidence in the national economy improving (46 percent) is up 7 percentage points from the fall. In addition, 16 percent plan to apply for a loan in 2017—holding steady from fall 2016.
“This spring, more L.A. small business owners are proceeding with caution and hitting pause on their growth and hiring plans,” said Troy Bosch, Los Angeles small business banker manager at Bank of America. “While L.A. entrepreneurs appear to be taking a wait-and-see approach to hiring and expansion, we did see a small but promising boost in confidence toward the national economy. We look forward to seeing their confidence translate into action.”
Despite a mixed economic outlook, the survey also found that L.A. small business owners’ concerns over most economic factors have declined significantly since fall 2016, including:
Health care costs (58 percent, down 14 percentage points since fall 2016).
Strength of the U.S. dollar (48 percent, down 14 percentage points since fall 2016).
Interest rates (47 percent, down 11 percentage points since fall 2016).
Consumer spending (46 percent, down 19 percentage points since fall 2016).
Stock market (37 percent, down 19 percentage points since fall 2016).
While health care costs continue to be a chief concern for L.A. small business owners, they are much more likely to believe that their business’ health care pricing, quality and availability have improved over the past five years, compared to their national counterparts. Of the 36 percent of L.A. entrepreneurs who contribute to employee benefits:
Fifty-four percent believe the pace of annual health care cost increases have improved (21 percent nationwide).
Fifty percent believe the quality of health care has improved (25 percent nationwide).
Fifty-three percent believe the availability of health care has improved (27 percent nationwide).
While 78 percent of L.A. entrepreneurs say work interferes with their home life, three-quarters say they have achieved a work-life balance. Still, it appears L.A. business owners are getting less sleep than their peers across the country. Seventy percent say work regularly interferes with their ability to get enough sleep, versus just over half of small business owners nationwide. In addition, two out of five report having had a nightmare about their business failing.
When asked to describe an average work week, L.A. entrepreneurs report it’s “interesting” (54 percent), “fulfilling” (46 percent) and “enjoyable” (44 percent). However, it does not mean that they are not stressed—45 percent say their job is “demanding,” 33 percent report it is “stressful” and 16 percent find it “exhausting.”
Though many L.A. small business owners tend to work overtime—with nearly three in five reporting that they work more than 40 hours a week—a strong majority (79 percent) still say they are satisfied with the number of hours they work. The vast majority of L.A. entrepreneurs value the flexibility of their work location (89 percent) and schedule (87 percent), as well as the amount of time they can spend with family and close friends (79 percent).
When asked for their top predictions about the future of small business 20 years from now, most L.A. small business owners envision a paperless and virtual one. Top predictions include:
Businesses will go paperless (53 percent).
More offices will be virtual than physical locations (44 percent).
Operations will be conducted by automation (36 percent).
Cash will disappear with transactions becoming digital (36 percent).
Hours of operation will be obsolete (20 percent).
Most businesses will employ a robot (10 percent).
Eighty-six percent of L.A. entrepreneurs say encouraging innovation in the workplace is a priority and key contributor to business success (84 percent). Eighty-one percent have taken some sort of innovative action in the past two years, from upgrading business technology (52 percent) to creating a process to increase efficiency (30 percent). Ten percent say they are “industry-leading,” and 21 percent say they are “ahead of the curve,” while 56 percent say they “keep the same pace” with other business owners in their sector.
GfK Public Communications & Social Science conducted the Bank of America Business Advantage Small Business Owner Report for spring 2017 online between February 21 and March 19, 2017 using a pre-recruited online sample of small business owners. GfK contacted a national sample of 1,001 small business owners in the United States with annual revenue between $100,000 and $4,999,999 and employing between 2 and 99 employees. Additionally, a total of 300 small business owners were surveyed in 10 target markets: Atlanta, Boston, Chicago, Dallas/Fort Worth, Houston, Los Angeles, New York, Miami, San Francisco and Washington, D.C. An oversample of 150 interviews was also completed among respondents in the technology and medical/health care fields. The final results were weighted to national benchmark standards for size, revenue and region.
Waves of the Small Business Owner Report before 2016 were conducted by telephone, and while best efforts were made to replicate processes, differences in sample, weighting and method suggest caution when making direct statistical comparisons to results from previous years.
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 4,600 retail financial centers, approximately 15,900 ATMs, and award-winning digital banking with approximately 35 million active users and more than 22 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:
Colleen Haggerty, Bank of America