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Capital One Bank Quarterly Small Business Barometer Survey Reveals Small Businesses Are Looking Up

May 24, 2012 at 8:11 AM EDT

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 ( 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