BUSINESS OWNERS REMAIN POSITIVE ABOUT GROWTH, BUT PLAN TO HOLD THE LINE ON HIRING, ACCORDING TO THE 2004 SMALL BUSINESS MONITOR BY OPEN FROM AMERICAN EXPRESS(SM)
Investing Wins Out over Cost Cutting as a Business Strategy, Two out of Three Business Owners Willing to Take a Financial Risk to Grow their Companies
NEW YORK, October 13, 2004 -- Small business owners are keeping hiring plans in check, although most see near-term growth opportunities for their companies, according to the 2004 Small Business Monitor by OPEN from American Express.
The survey found that 35% of businesses report plans to hire more staff over the next six months, down from 46% in April and steady from a year ago. Overall, hiring plans have increased since 2002 when 26% reported plans to bring on new employees. Among those with current hiring plans, a third (34%) say they are recruiting for an open position; the top reason for adding new jobs was to handle growing business.
Small business hiring plans vary by region and by a company's age. Businesses in the Southern states (39%), the North Central states (38%) and the West (35%) are almost equally likely to hire additional staff compared to the North East (27%). Companies in business for three or fewer years are also more likely to have hiring plans than older companies (53% vs. 34%).
Small businesses reporting hiring plans also appear to be offering more comprehensive benefits packages compared to companies that do not plan to add staff, including flexible work hours (76% vs. 60%), paid vacation (62% vs. 54%), and profit sharing (19% vs. 10%). In all, 65% of businesses that are hiring offer healthcare benefits compared to 54% for those not planning to hire.
According to the survey, nearly three quarters (74%) of business owners foresee growth opportunities for their companies in the next six months, similar to last year, and up from 64% in October 2002. In addition, fewer have a negative outlook about their near-term business prospects. Fourteen-percent say they expect the economic climate to negatively affect their businesses (vs.17% last year and 21% in 2002).
“Business owners are confident in their abilities to successfully grow their companies,” said Susan Sobbott, president, OPEN from American Express. With fewer facing cash flow issues, an increasing focus on investing in their companies and a broad willingness to take a financial risk to fuel expansion, business owners are well positioned to grow their companies.
Positioned for Growth
Overall, 51% of business owners report having cash flow challenges, down from 55% in 2003 and 63% in 2002. For these business owners, the ability to pay bills on time is their greatest cash flow concern, similar to last year. Two-thirds of business owners (63%) also report that they are willing to take a financial risk in the next six months to grow their businesses. Among these risk takers, nearly one in three (29%) say they're willing to take an above-average financial risk.
The survey also found that more business owners are focused on investing in their businesses in areas including marketing, advertising or equipment purchases. Investing is the second most commonly cited management tactic behind a heightened focus on better customer service. This marks the first time since the survey by OPEN from American Express was launched in 2002 that business owners were more focused on making business investments compared to slashing expenses and cutting back on personal spending to create additional cash flow flexibility.
The number of small businesses planning to make capital investments remains steady compared to last year (61% vs. 62% in Fall 2003) and up from October 2002 (56%). Topping the list of capital expenditures is new technology, including computer hardware (34%), followed by computer software and software licenses (29%), office equipment (21%) and real estate investments and office furnishings (tied at 14%).
Capital Investments Remain Steady
Among those planning to make technology purchases in the next six months, most will purchase PCs (54%), followed by software (36%), printers (28%), servers (15%), peripherals (12%) and PDAs (9%). Of these business owners, one-quarter say they plan to spend more on technology over the next six months compared to the recent past. Nearly two-thirds (62%) report plan to keep their technology budgets steady.
To make some these technology purchases, many businesses will use credit and charge cards. Overall, more than three-quarters (78%) say they use charge or credit cards to pay for business expenses up from 73% in October 2003 and 74% in 2002. Among them, 31% will purchase computer equipment. The most common purchase using business credit or charge cards is travel (56%), followed by office supplies and entertainment (tied at 47%), wholesale purchases (42%),, and business professional services (22%).
“Credit and charge cards are increasingly important tools that can help manage cash flow. Business owners using them for their company purchases can help streamline expense management reporting and benefit from the flexibility of paying at once or over time. They can also earn valuable savings and rewards points, frequent flyer miles or even cash back,” Sobbott added.
Professional Development
In addition to running their companies, many business owners are also making time to network. In all, 40% of business owners report belonging to industry-related organizations or coops. Among these business owners, the main reason for taking part is to stay plugged into business trends and industry standards (28%), to cultivate sales leads (25%), to develop professional skills (23%) and to take advantage of cost savings for wholesale purchases and employee benefits, including health care (14%).
In terms of professional development, nine in ten business owners (92%) say they want to further develop specific business skills including customer service (67%), marketing and sales (64%), financial management/planning (53%), decision-making (45%) and negotiation (39%).
Survey Methodology
The OPEN Small Business Network Semi-Annual Monitor, released each April and October, is based on a nationally representative sample of 773 small business owners/managers of companies with fewer than 100 employees. The survey was conducted via telephone by International Communications Research (ICR) from September 13- September 27, 2004. The poll has a margin of error of +3.5%.
About OPEN: The Small Business Network from American Express
OPEN: The Small Business Network is a division of American Express that offers small business owners a wide range of tools, services and savings designed to meet their evolving needs, including charge and credit cards, convenient access to working capital and credit information, enhanced online account management capabilities and savings on business services from an enhanced lineup of partners. To obtain more information about the OPEN Network, visit OPEN.americanexpress.com or call 1-800-NOW-OPEN to apply for a card or loan.
American Express Company is a diversified worldwide travel, financial and network services company founded in 1850. It is a world leader in charge and credit cards, Travelers Cheques, travel, financial planning, business services, insurance and international banking.
Contacts:
Tom Sclafani
212.640.0541
Thomas.M.Sclafani@aexp.com