Small business owners are planning for the long term, with more plans
to hire and more revenue toward business development and investments,
according to first quarter 2012 survey data
MCLEAN, Va.--(BUSINESS WIRE)--May. 24, 2012--
Small businesses are showing signs of recovery after a difficult year in
2011, according to the Capital One Small Business Barometer for the
first quarter of 2012, released by Capital One Small Business today in
conjunction with National Small Business Week. This quarterly survey of
small businesses across the nation examines general economic indicators
and small business perceptions of the economic environment, gauging
current financial conditions and business projections for the following
six months. Survey results for the fourth quarter of 2011 showed that
small companies planned to take a deliberate and cautious approach to
investments and hiring for 2012. First quarter 2012 results suggest this
strategy has led to a strong start for small businesses this year, with
many reporting increased liquidity and plans to increase spending on
investments and growing their business.
Small business perceptions toward local economic conditions have
improved significantly. Four out of five small businesses surveyed said
their companies’ financial performance met expectations for the quarter.
For the first time since the second quarter of 2011, the number of small
businesses reporting better financial performance compared to a year ago
is higher than those reporting that their financial performance is at
the same level. The national business outlook indicates small businesses
are upbeat about their current financial situation and improvement over
2011, but concerns over cash flow and the ability to acquire new
customers are tempering their confidence about prospects for the
remainder of 2012. Additionally, 15 percent of small businesses across
the country currently have job openings that they are unable to fill.
“The latest survey results show some positive signs that more small
businesses are beginning to focus on hiring, with the increase in the
number of small businesses making plans to hire compared to the previous
quarter at the highest level in over two years,” said Jon Witter,
President of Direct, Consumer and Small Business at Capital One. “It is
an encouraging sign that many businesses are looking to make long-term
investments, and we are optimistic this trend will continue in quarters
to come.”
Financial Performance and Spending
The first quarter survey results suggest small business owners are
slowly recovering from a steady decline in economic conditions since the
second quarter of 2011. Unlike last quarter, when economic conditions
weakened relative to other quarters, first quarter survey results
revealed economic conditions are improving. The number of small
businesses reporting improving conditions for their firm is up 11 points
to 39 percent, with the majority of this improvement stemming from fewer
small business owners saying conditions are holding steady. Small
businesses reporting economic conditions as getting worse held steady at
18 percent. In the last quarter of 2011, the majority of national small
businesses (52 percent) believed economic conditions would stay the
same. This quarter, the number of small firms reporting economic
conditions are staying the same has dropped nine points to 43 percent.
Findings suggest small business owners are optimistic about the
potential for strong growth this year. For the first time since the
second quarter of 2011, the number of small businesses reporting
improved financial performance is higher than those reporting financial
performance to be about the same compared to one year ago.
While more small business owners are reporting improved financial
positions relative to last quarter, the number of small firms reporting
that financial performance has worsened has remained steady over the
last two years. The majority of small businesses are in a good place to
continue investment at the same pace or even further expand their
business. When asked about spending on business development and
investments, the number of small businesses planning to increase
spending has increased from 20 to 25 percent, and the percentage of
owners planning to cut spending on business development has dropped
three points from 15 percent to 12 percent. The last period of perceived
economic prosperity, the second quarter of 2011, showed a much more
aggressive spending climate, when the gap between firms planning to
increase spending and decrease spending was a wide 20 point margin.
Economic Outlook and Business Pressures
Small business perceptions of the economic outlook for business
prospects show owners are mildly optimistic. The national business
outlook is a measure of business prospects over the next six months on a
scale of significantly worse (1) to significantly better (10). While
most small businesses are reporting better financial performance and
improving economic conditions, they are not ready to project the same
optimism on business prospects. Across sectors, those with a heavy focus
on industrial production had higher than average scores (6.4 points) for
the business outlook:
-
Mining (7.2)
-
Utilities (6.9)
-
Construction (6.9)
-
Government (6.8)
-
Manufacturing (6.7)
Similarly, small business owners were asked to rate six business
indicators on how much each may impact their business over the next six
months. With the highest average score, cash flow (5.6) is perceived to
have the greatest impact on business prospects among small businesses.
Fuel prices (5.3), competitive activity (5.2), the timing of customer
payments (5.2), and price margins (5.2) all sit in a mid-tier of
indicators likely to impact small businesses. Interest rates (4.6) are
perceived as less likely to impact businesses over the next six months.
Almost half (45 percent) of small businesses continue to claim the
ability to acquire new customers is their single biggest challenge in
the next six months. This has been the top challenge among small
businesses across the country for the last two years according to the
Barometer’s past results.
In the first quarter of 2012, small businesses indicated they are less
constrained by key business challenges because financial performance and
economic conditions have been more favorable. One third of small
businesses are intently focused on maintaining existing customers, while
one-quarter (24 percent) of owners are looking to identify new revenue
streams. Still, nearly two-thirds of small firms do not plan to change
their prices, further demonstrating that owners are acting prudently in
a favorable economic environment.
Hiring Outlook
Throughout the country, 15 percent of small businesses currently have
job openings that they are unable to fill, and more companies in the
government (32 percent), utilities (55 percent), and mining (36 percent)
sectors are unable to fill their open positions. There are fewer
openings in firms in the construction (12 percent), wholesale (12
percent), and finance (10 percent) sectors as these industries have
higher turnover compared to others. In line with the economic and
spending trends showing an economic climate in favor of long-term
investment, small businesses are beginning to focus on hiring. More
small businesses are making plans to hire new employees relative to last
quarter and are at the highest level reported in more than two years,
according to the quarterly survey results. One in three (34 percent)
U.S. small businesses plan to hire additional employees over the next
six months, up significantly from 27 percent last quarter (Q4 2011) and
30 percent from last year (Q1 2011).
Availability of Financing
In the first quarter survey, nearly 25 percent of U.S. small businesses
reported they obtained financing in the last twelve months. These
results are consistent with results over the last two years, with a
slight increase from 19 percent last quarter (Q4 2011) to 23 percent in
the first quarter of 2012. In fact, more small firms reported having
obtained financing in the last twelve months than in the last two years.
Of these firms, small businesses in the services and retail sectors were
the highest percentage of those seeking the extra support. Additionally,
one in three small businesses claimed financing is harder to obtain than
it was six months ago, while only seven percent reported that obtaining
financing is easier than it was six months ago.
Survey Methodology
The findings reported in this release are from a telephone survey
conducted by the opinion research firm, Braun Research of Princeton, NJ.
Braun Research interviewed a nationally-representative sample of 1,913
for-profit small businesses in the U.S., weighted to Dunn and Bradstreet
counts of all businesses nationwide by employee size and geography.
Samples were also taken in New York, New Jersey, Louisiana, Texas and
the Washington, D.C. metropolitan area. Small businesses are defined as
those with less than $10 million in annual revenue. The interviews were
conducted from March 26- April 6, 2012. All interviews were conducted by
telephone at their places of business. One respondent per business was
contacted. The margin of error is ± 2.2 percentage points at the 95%
confidence level. Interviews were monitored at random. Sampling for this
study was conducted using a national sample of businesses drawn from
InfoUSA. All interviews were conducted using a computer assisted
telephone interviewing system. Statistical weights were designed from
the United States Department of Commerce to ensure proper inclusion of
all SIC codes.
About Capital One
Capital One Financial Corporation (www.capitalone.com)
is a financial holding company whose subsidiaries, which include Capital
One, N.A., Capital One Bank (USA), N. A., and ING Bank, fsb, had $216.5
billion in deposits and $294.5 billion in total assets outstanding as of
March 31, 2012. Headquartered in McLean, Virginia, Capital One and ING
Direct offer a broad spectrum of financial products and services to
consumers, small businesses and commercial clients through a variety of
channels. Capital One, N.A. has approximately 1,000 branch locations
primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia
and the District of Columbia. A Fortune 500 company, Capital One trades
on the New York Stock Exchange under the symbol "COF" and is included in
the S&P 100 index.
Source: Capital One Financial Corporation
Capital One Financial Corporation
Steve Schooff, 212-216-8984
steve.schooff@capitalone.com
