One third of small business owners report the uncertain economy as the biggest challenge they face growing their businesses, the largest number in the seven-year history of the American Express OPEN(R) Small Business Monitor, a semi-annual survey of business owners. One-quarter of business owners are challenged by the rising costs of doing business.Economic challenges coupled with rising energy costs appear to have caused a shift in entrepreneurs' outlook on near-term business prospects and priorities. Compared to last fall optimism is down significantly (48% vs. 64%), but has remained steady compared to six months ago (45%). Cash flow concerns have risen year over year, capital investment plans are at their lowest in the history of the Monitor and the number of business owners offering healthcare benefits to employees is also lower.'The economic news of the last several weeks is shaking every business owners' view of the economy,' said Susan Sobbott, president American Express OPEN. 'Entrepreneurs are nimble and have strategies in place to manage business challenges. They are decreasing investments, adjusting expansion plans to capital on-hand, cutting expenses and focusing on adapting to customer demand. Three quarters of business owners plan to grow their businesses over the next six months, but keeping and maintaining current business and sources of revenue has surpassed growth as the top priority for entrepreneurs. To help retain their current sources of business, entrepreneurs will place a heightened focus on better servicing customers to set their business apart from competitors.In the survey conducted by Echo Research August 12-25, the economy is cited by four in ten small business owners (38%) as the issue that will most sway their decision on the next president of the United States, followed at a distance by tax policy (cited by 18%).
Manufacturing, Retail and Services Businesses
To gain deeper insight into the effects of the current economy on business owners, the survey also examined three key small business sectors that serve as an indicator for the economy: manufacturing, retail and services.
Among these industries, optimism and growth are not always linked. Business owners in the services sector are among the most optimistic (53%) and most likely to have hiring plans (44%), but least likely to have plans for growth. The biggest business challenge they face is the uncertain economy.
Given their reliance on consumer spending, it is no surprise that retailers are least optimistic (48%) among these business sectors.
• The biggest business challenge they face is the rising costs of doing business and the uncertain economy (both 29%).
• However retail entrepreneurs are also among the most likely to have plans for growth (81%), tied with their counterparts in the manufacturing sector.
• Compared to the services and manufacturing sectors, retailers are the most likely to feel a significant impact as a result of higher gas and energy costs (69%), which includes having lost sales as a result of higher costs (56% vs. 40% of business owners overall and 37% of manufacturers and 33% of services companies).
• They are also among the most likely to have experienced cash flow issues and least likely to have capital investment plans.
Business owners in the manufacturing sector are among the most likely to have plans for growth, (81%) tied with counterparts in the retail sector and compared to businesses overall (74%).
• Half of manufacturers (52%) have an optimistic outlook.
• The biggest business challenge they face is rising costs and the uncertain economy (33% and 31%, respectively).
• The manufacturing sector is the most likely, when compared to both businesses overall and key business sectors, to make capital investments over the next six months (59%) and offer healthcare benefits to employees (58%).
• They are more willing to take a financial risk to grow their business and the least likely to experience cash flow concerns.
Navigating through the Challenging Economy Business owners will employ a variety of tactics as they manage their businesses through the current economy. Nearly six in ten entrepreneurs (56%) find themselves reducing or accepting lower profit margins, which is also the top tactic for business owners in the services sector (48%). Half of business owners (51%) find themselves working longer hours in an effort to manage with retail business owners most likely to work longer hours (64%). Just under half will cut business or capital expenses (49%), will raise prices (48%) or will cut back or delay marketing expenses (46%). Business owners in the manufacturing sector are among the most likely to raise prices (63% vs. 60% of retailers and 40% of services companies).
