A new NSBA study shows that the problems and perceptions of small-business owners have shifted a good deal in the past seven years
Small-business owners are optimistic about the future of their own businesses, even though they think the economy on the whole is getting worse. And perhaps not surprisingly, they're very concerned about health-care costs, and access to capital. That's according to a survey of 500 small and mid-sized businesses sponsored by the National Small Business Assn., a Washington, D.C.-based small business advocacy group. The results were released on Apr. 24, in conjunction with the Small Business Administration's Small Business Week 2007, which kicked off Apr. 22.
The NSBA last sponsored a similar survey in 2000, and the 2007 results show some major changes. For instance, small-business owners are more pessimistic about the national economy than they were in 2000. In that year, 62% of small-business owners expected continued economic expansion. Just 29% of those surveyed in 2007 held that expectation.
"The survey in 2000 was a month before the tech bubble [burst]," says Glen Bolger, the main pollster and co-founder of Public Opinion Strategies, the national public affairs and politics research firm that conducted the poll, "so it shows that just because small business owners expected more growth, that didn't mean they were right."
The Bootstrap Brigade
Despite their pessimism about the larger economy, small-business owners remain confident about their own chances of growth and success. Regardless of size, 81% of all the businesses surveyed expressed confidence about the future of their business from a financial perspective. "I think that says something about entrepreneurs—they wouldn't be running their own business if they didn't believe they would be successful," says Todd McCracken, president of the NSBA.
Women and minority small-business owners are especially concerned about what they perceive as a worsening economic climate, according to the survey, which showed 53% of women and 48% of minorities believe the economy has gotten worse in the last five years, vs. 33% of men. McCracken says women and minorities tend to be more pessimistic about the economy, because their businesses are often smaller and less established, and also because they face more challenges in getting started.
"They face unique challenges. Minorities often don't enter the business world with a built-in connection. They're pulling themselves up by the bootstraps. That makes it harder for them to grow, and it has an impact on their outlook as well," says McCracken.
Whereas the top challenge identified in 2000 was finding and retaining qualified workers, one of the top challenges today is the cost of health-insurance benefits, with only 41% of companies surveyed offering any health-insurance benefits at all, compared to 61% in 1993. Among the business owners surveyed, 71% support some sort of a health care reform proposal that would require universal coverage, but the same percentage rejects a government mandate on business owners to provide it.
Access to capital is another major concern for today's small-business owners, according to the study. Sixty-seven percent of companies say they're able to secure adequate financing, representing a 9% drop from the 76% who said they could get adequate financing for their business in the 2000 NSBA survey. Among companies with four or fewer employees, 39% said they couldn't get adequate financing. Among companies with five to 19 employees, 26% aren't able to get adequate financing.
Since the smallest businesses struggle the most to get adequate financing, they're more apt to rely on credit cards, according to the survey. Around 50% of small companies used credit cards to finance their business in that last 12 months, and 71% of all companies using a credit card carry a balance from month to month, often of $10,000 or more.
"Companies are using credit cards to take on longer-term debt instead of a cash-management tool, and that's troubling. They're paying a lot more with worse terms, because they can't get access to bank loans," says McCracken.