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.
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