Small Business Conditions Improving, Yet Concerns Remain, According to Capital One's Quarterly Spark Small Business Barometer
Plans to Hire Remain Stagnant Despite Increased Sales and Optimism
about the Economy during the
Following are the key trends derived from this quarter’s survey:
- Financial optimism is on the rise: 45 percent of small businesses across the country are reporting that they believe their financial position will be better in six months, a seven-point increase from Q4 2012 (38 percent) and a two-point increase from Q2 2012 (43 percent).
- Small business owners are financially better off than a year ago: 35 percent of small businesses say their firm’s financial position is better than a year ago, compared with 18 percent who report that their financial position is worse – a significant improvement over Q4 2012, when a two-year high of 27 percent said their finances were worse.
- Positive sentiment on local markets: 64 percent of small businesses are optimistic about the economies where they do business, but slightly less than half (48 percent) are optimistic about the state of the national economy.
- Even in light of optimism, lack of plans to hire persists: 67 percent of small businesses do not have plans to hire in the next six months, a 1 point decrease from Q4 2012 (68 percent), but seven points higher than Q2 2012 (60 percent).
“Our survey results for the second quarter indicate that while optimism
and confidence are on the rise and more small businesses are on sound
financial footing, concerns and uncertainty continue to hold back plans
for staffing increases and growth,” said
More than half (52 percent) of small businesses across the country report that current business conditions are fair or poor, while 46 percent report that business conditions are excellent or good. While the majority of those surveyed report that they are less than optimistic about current business conditions, 35 percent of small businesses say their firm’s financial position is better than a year ago, compared with 18 percent who report that their financial position is worse. This is a significant nine point decrease from the two-year high of small businesses that said their financial position was worse in Q4 2012 (27 percent). This quarter’s results are on par with the slow, but steady trend of business owners feeling better about their firm’s financial shape and positive outlook about future prospects that has developed since Capital One issued its first quarterly survey in Q1 2009.
Nearly half of small businesses across the country are reporting that they believe their financial position will be better in six months (45 percent), which could be attributed to the increase in sales that 35 percent of small businesses saw during the past six months. This is a 7 point increase from Q4 2012 (38 percent) and a 2 percent increase from Q2 2012 (43 percent). This quarter, only 10 percent of small businesses report that they think their financial position will be worse in six months, a significant 10 point decrease from Q4 2012 (20 percent), but a 2 percent increase from Q2 2012 (8 percent). Forty-one percent of small businesses report they believe their financial positions will be about the same in six months.
The growing optimism small businesses are reporting this quarter was also reflected in their responses about the state of the national economy and the local economies where they do business. Slightly more small businesses across the country are optimistic about the national economy (48 percent) compared to 46 percent who are pessimistic. Additionally, the majority of small businesses (64 percent) are optimistic about the economies where they do businesses, which bodes well for local businesses across the country.
However, the boost in confidence small businesses reported about the
economy and their future financial situations was not carried over when
they were asked about hiring plans. Most small businesses do not have
plans to hire in the next six months (67 percent), a 1 point decrease
from Q4 2012 (68 percent), but a 7 point increase from Q2 2012 (60
percent). This continues the conservative hiring trend the Spark
Small Business Barometer has tracked since 2009. Over the course of
the four years, 30-38 percent of respondents say their firms have plans
to hire additional employees in the coming six months, while 55-70
percent say their firms do not. As shown this quarter, business owners
continue to be cautious about adding employees, likely still waiting to
see continued positive economic indicators and more regulatory and tax
Of the 30 percent of small businesses that did report plans to hire this quarter, nearly three fourths (72 percent) anticipate hiring between 1-5 new employees. Nearly 30 percent of small businesses report plans to hire military veterans (28 percent) in the next six months, but only 18 percent have plans to hire recent college graduates. Nearly 30 percent of small businesses report that increased revenue/sales (29 percent) and replacing an employee who left (29 percent) are the primary factors driving their decisions to hire.
The findings reported in this release are from a telephone survey
conducted by the opinion research firm,
About Capital One
Source: Capital One
Alison Cahill, 917-653-7592