Small Business Conditions Improving, Yet Concerns Remain, According to Capital One's Quarterly SparkSmall Business Barometer
Plans to Hire Remain Stagnant Despite Increased Sales and Optimism about the Economy during the Second Quarter of 2013
MCLEAN, Va.--(BUSINESS WIRE)-- Small businesses across the country are seeing improved financial conditions and feeling optimistic about the months ahead, yet concerns about hiring and growth remain, according to Capital One’s second quarter 2013 SparkSmall Business Barometer. This quarterly survey of small businesses across the nation examines small business perceptions of the economic environment, and gauges current financial conditions and business projections for the next six months.
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 Jon Witter, President of Direct, Consumer and Small Business Banking at Capital One. “While many small businesses have seen an uptick in sales over the past six months, this is not necessarily translating into significant new hires or investments in the business.”
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 certainty from Washington before fully committing to expansion.
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, Braun Research of Princeton, N.J. Braun Research interviewed a nationally-representative sample of 1,906 for-profit small businesses in the U.S., weighted to Dunn and Bradstreet counts of all businesses nationwide by employee size and geography. Samples were also taken in New York, New Jersey, Louisiana, Texas and the Washington, D.C. metropolitan area. Small businesses are defined as those with less than $10 million in annual revenue. The interviews were conducted from April 24th – May 8th, 2013. All interviews were conducted by telephone at their places of business. One respondent per business was contacted. The margin of error is ± 2.4 percentage points at the 95% confidence level. Interviews were monitored at random. Sampling for this study was conducted using a national sample of businesses drawn from InfoUSA. All interviews were conducted using a computer-assisted telephone interviewing system. Statistical weights were designed from the United States Department of Commerce to ensure proper inclusion of all SIC codes.
About Capital One
Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A., and Capital One Bank (USA), N. A., had $212.4 billion in deposits and $300.2 billion in total assets as of March 31, 2013. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has more than 900 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.
Alison Cahill, 917-653-7592
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