FEWER SMALL BUSINESS OWNERS WILL GIVE CLIENT GIFTS THIS HOLIDAY SEASON, BUT THOSE WHO ARE GIVING WILL SPEND SUBSTANTIALLY MORE, ACCORDING TO AMERICAN EXPRESS SMALL BUSINESS SURVEY

Spending on Staff Also Down with Gift Giving, Merrymaking and Time Off Taking the Hardest Hit; Small Business Owners in North Central States Fare Best, Dramatic Shifts in North East

NEW YORK, November 01, 2007 -- Fewer small business owners will thank their clients and customers with a gift this holiday season, according to the OPEN from American Express Small Business Monitor, a semi-annual survey of business owners. Interestingly, those who do plan to give will be spending significantly more than last year and are also more likely to recognize their staff and be growth-minded.

"Guilty!" is what two-thirds of those surveyed (65%) say they would feel if they didn't show their appreciation to clients/customers and employees come the holidays -- still, only 59% plan to buy client gifts this year, compared to 70% in 2006. Likewise, those small business owners who intend to thank their staff dropped to 70%, down from 77% last year, with merrymaking, gifts and time off taking the hardest hit.

Ironically, while the number of small business owners spending on clients and customers fell this year, those who do plan to buy will be spending 28% more than in the previous two years ($1,483). And those who "don't know" how much they'll spend on clients also rose -- from 15% last year to 26%.

"According to the survey, while 64% of small business owners are positive about the future economy and growth, many agree that rising interest rates (43%) and the downturn in the housing market (35%) have had a negative effect on their business," said Alice Bredin, OPEN from American Express small business advisor. "Given this dichotomy, small business owners are spending carefully -- and with growth in mind, which may help explain why those who intend to thank their clients with holiday gifts this year are allotting larger budgets."

The number of small business owners spending less than $500 on holiday gifts for clients and customers dropped from last year (27% vs. 41%) while those spending $500 or more increased (46% from 36% in 2006). Strikingly, those in the highest spending category of $5,000+ doubled from last year to 8%.

Small Business Owners Who Plan To Give Gifts To Clients Are Growth-Minded, Customer-Focused and Generous With Staff
Of the 59% of small business owners who plan to give gifts to clients, an overwhelming majority agree that their business is an important part of their legacy (82% versus 50% of those not giving client gifts).

Among this group, 70% plan to make capital investments and 81% say they will grow their business over the next six months. This compares to 43% and 66% of their non gift-giving counterparts, respectively.

Also noteworthy is that small business owners who say they will give to clients and customers are much more likely to do something to reward their staff -- 86% vs. 48% of those with no plans to acknowledge their clients. Their generosity toward staff extends to other facets of giving -- 79% of gift-giving owners offer health coverage to employees versus 60% of non gift-givers, and 32% of gift-givers are more likely to hand out bonuses during other times of the year versus 21% of non gift-givers.

"Small business owners who are giving holiday gifts to clients seem to have mastered an important life lesson - you get back what you give," says Bredin. "Keeping a legacy alive means running a growth-centric business and investing wisely, not only in customers but in staff as well. With 19% of gift-givers surveyed saying the single greatest deterrent in growing their business is their staff's abilities (vs. just 5% of those not planning to give), I'm not surprised that this savvy group is making every effort to retain their most capable employees."

Notably, one-third (32%) of the small business owners surveyed who plan to give gifts to clients and customers say the area of their business they would most like to improve is customer service versus 22% of those not giving gifts.

"Many small business owners are smartly focused on clients and customers as a means to growth. Client gift-giving during the holiday season can be an effective marketing tool -- but it is most effective when it is the culmination of a year's worth of exceptional customer service and relationship development," said Bredin.

Gift-giving Is A High Stakes Effort
The most popular choice among small business owners this year is to send cards and calendars to clients and customers though this number is down considerably from last year (34% vs. 48% in 2006). The second most popular gift choice is gift cards (26%) followed by fruit/food baskets (20%), unique company branded/monogrammed gift items and donations to charity made in a client's name (each 18%), flowers/plants (9%) and wine/liquor (8%).

Interestingly, the number of owners who answered "none of the above" to this laundry list of typical gift items increased since last year (41% vs. 30%). "Not surprising," said Bredin, who noted that it makes sense for owners to think creatively when it comes to ways to impress their clients and customers. "The stakes are high for making a lasting impression with your gift, especially when competing against larger companies with substantial marketing budgets," she said.

Through an American Express service, small business owners who are Business Platinum or Business Centurion Card members can give uncommon gifts and experiences to their clients, including a hot air balloon trip, a custom-made hand-stitched sport coat, a five-course gourmet dinner prepared by a personal chef, and a day of wellness at the client's office with massage, aromatherapy, meditation, and individual employee time with a wellness guru.

Do small business owners expect a thank you call or card from clients or customers for the gift? Seventy-two percent of those surveyed say they are "very likely" or "somewhat likely" to be thanked. In terms of gender, 78% of women business owners say they are "very likely" or "somewhat likely" to be thanked, versus 68% of their male counterparts.

Small Business Owners' Staff May Be Singing The Blues This Holiday Season
Seventy percent of small business owners said they will do something for their staff this holiday season. However, the percentages are down across the board, with plans for monetary rewards and volunteer activity taking less of a hit than holiday parties, gifts and time off.

Only 43% of owners intend to hand out employee gifts, compared to 52% in 2006. The number of small business owners throwing a holiday party for their staff has dropped 10 percentage points from last year to 44%. Other expressions of thanks include year-end bonuses (43% vs. 47% last year) and raises (28% vs. 30%), with another 22% intending to ask their staff to take part in a volunteer activity as a group (vs. 26% last year).

Bredin was somewhat perplexed by the decline of those planning to give time off to their employees (44% compared to 55% last year). "Even when spending is down, the gift of time is an easy way to thank staff without breaking the bank. And with improving customer service top of mind, it becomes that much more important to take steps to retain valued employees."

Younger Generations of Small Business Owners Giving More Than Boomers
When asked if they had plans to acknowledge their staff, 70% of those small business owners who are Baby Boomers (ages 42-64) said yes, compared to 78% of younger small business owners (ages 18-41). Compared to the younger owners, boomers are less likely to reward their staff come the holidays:

Hand out bonuses - Boomers (41%); Ages 18-41 (54%)
Give time off - Boomers (43%); Ages 18-41 (56%)
Throw a holiday party - Boomers (41%); Ages 18-41 (57%)
Volunteer as a group - Boomers (22%); Ages 18-41 (27%)

When it comes to recognizing clients and customers, Boomers again fall short compared to younger small business owners. In fact, only 58% of Boomers say they will do something to thank their clients/customers this year, compared to 69% of younger small business owners (18-41).

Holiday Budgets Tighten Across Country With Dramatic Shifts in North East; North Central States Fare Best
More small business owners in the North Central states are likely to do something to thank their staff (82%) -- up 8 percentage points from last year. However, the number of owners in other regions planning to reward employees this year dropped especially in the North East (64% vs. 80% last year), but also in the South (73% vs. 83%) and West (61% vs. 67%).

On the gift-giving front, more owners from the North Central states (54%) plan to give gifts to their employees than their counterparts in other regions of the country -- 41% in the West and South and 34% in the North East. These percentages are in sharp contrast to 2006 findings both in terms of percentage and ranking: South (58%) and North East (56%) followed by the North Central states (48%) and West (44%).

In terms of giving raises, the most dramatic change is in the North East -- only 19% plan to give raises compared to 28% last year. In other regions the numbers remained fairly steady: North Central (27%), West (26%), South (37%).

And though last year owners from the North East were most likely to give bonuses to staff, this year they are least likely (36% vs. 60% last year). Notable also is that 44% of small business owners from the North Central region intend to give bonuses -- up from 36% in 2006. In other regions, 49% of Southern small business owners say they will hand out bonuses to staff (on par with last year's findings) as well as 41% from the West, down from 45% in 2006.

Throughout the country, percentages of owners giving the gift of time dropped everywhere but in the North Central region: South (52% vs. 68% last year), North Central (46% - same as 2006), West (39% vs. 50%), and North East (31% vs. 47%).

Though numbers of small business owners throwing holiday parties for staff are down across the board, fewer holiday parties for employees will take place in the North East (41% vs. 52% last year) and West (34% vs. 47%). In the North Central and Southern states, 49% of owners will throw a holiday party compared to 54% and 58% last year respectively.

This year, more small business owners in the North Central and Southern (63% each) states will thank their clients/customers with a holiday gift compared to their North Eastern (59%) and Western (51%) neighbors. Still, these numbers are appreciably down from last year -- South (73%), North East and West (71% each) and North Central (64%).

But, among small business owners who do plan to send gifts to clients and customers, fewer are spending under the $500 mark compared to last year, with the biggest change in the North East (21% vs. 49% last year), followed by the West (20% vs. 33%), South (25% vs. 37%), and North Central (42% vs. 49%).

Survey Methodology
The OPEN from American Express Small Business Monitor, released each spring and fall, is based on a nationally representative sample of 625 small business owners/managers of companies with fewer than 100 employees. The survey was conducted via telephone by International Communications Research from August 20 to August 31, 2007. The poll has a margin of error of +3.9%.

About OPEN from American Express®
OPEN from American Express is dedicated exclusively to the success of small business owners and their companies. OPEN supports business owners with unparalleled service. With tailored products and services, the team delivers purchasing power, flexibility, control and rewards to help customers run their business. Specifically, business owner customers can leverage an enhanced set of products, tools, services and savings, including charge and credit cards, convenient access to working capital, robust online account management capabilities and savings on business services from an expanded lineup of partners. To obtain more information about OPEN®, visit OPEN.com, or call 1-800-NOW-OPEN to apply for a card or loan. Terms and conditions apply.

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Contacts:
Rosa Alfonso
212.640.1712
Rosa.M.Alfonso@aexp.com

Shaunn D'Alessandro
212.640.1627
shaunn.m.d'alessandro@aexp.com