Small-business owners’ hopes for the future are getting bigger and stronger. That much is clear from recent surveys of business owner attitudes that showed, among other signs of confidence, a willingness to support a federal minimum wage and an increase in capital spending.
The details, however, reveal a less crystalline image, as feelings about key issues like hiring seem to depend on just who's doing the asking and how questions are phrased. For instance, The Hartford's 2014 Small Business Success Study found that only 8 percent of surveyed business owners would use an investment of $100,000 to hire full-time workers. It also found that 67 percent of small-business owners hadn't hired anyone in the past year.
The National Federation of Independent Business’s (NFIB) Small Business Optimism Index for October reported that 10 percent of small-business owners planned to hire, up a percentage point from September. But the number of employers who wanted to hire but couldn’t find qualified candidates rose sharply to an all-time high.
Are Things Really Rosy?
A review of many of the key measures in both surveys reveals a generally positive picture. For instance, according to The Hartford’s August survey of more than 2,000 employers with fewer than 100 workers, more than three-quarters (77 percent) of small-business owners feel successful about their operations, up from 70 percent in 2013. The Hartford poll also found that 35 percent feel extremely or very successful, compared to just 23 percent who felt this way in 2011.
And The Hartford respondents were much less worried about negative influences than in the past. Those influences include low economic growth (56 percent now versus 67 percent in 2012), taxes (40 percent compared to 59 percent) and health-care costs (39 percent versus 53 percent).
Stephanie Bush, senior vice president of small commercial insurance at The Hartford, says a big factor in the reluctance to hire is a lingering hangover of post-recession risk aversion. According to Bush, “More than half [55 percent] of small-business owners said they're more financially conservative in how they're operating their businesses today due to the most recent recession.”
Three-quarters of business owners surveyed by The Hartford rated their overall approach to business risk as conservative, she adds, and a similar number have kept their risk level unchanged over the past six months. “A large risk when running a business is hiring new employees," Bush says, "so it’s easy to see why 67 percent of small-business owners haven't hired anyone in the past year.” However, a similar number (66 percent) said they supported a federal minimum wage, perhaps because 81 percent already pay their employees an hourly rate that's above the minimum wage.
Along with an increase in the number of small-business owners planning to increase capital spending, the NFIB Small Business Optimism Index found that more owners expect higher sales in the next three months. The net result in the index, which combines readings on several variables, was a gain of 0.8 points to 96.1, last reached in August.
In contrast to The Hartford findings, the NFIB’s results showed small-business owners are slightly less optimistic about business conditions as well as the outlook for expansion over the next six months. Jack Mozloom, media director for the NFIB, says mixed signals from Congress and the White House are a big cause of that.
“An overwhelming majority of small-business owners regard Washington and its policies as their major economic problem,” Mozloom says. “They don’t know where things are going to go in terms of taxes, health care and regulations. All of that has them unwilling to hire new people.”
The two studies concurred in one important area: namely, that business owners were having less trouble getting financing. In fact, the NFIB says a record low percentage of small-business owners reported any problems getting access to capital. The NFIB also found that small-business owners simply weren’t interested in getting loans.
The Hartford survey likewise found that a large number (46 percent) of owners believe it's slightly or not difficult at all to get a business loan or other financing—that's a 39 percent increase from 2012. And when they do seek funding, The Hartford reported, small-business owners today are more likely to choose personal sources, such as 401(k) accounts or family loans, over commercial loans. By comparison, in 2012, commercial loans were the top source of funding for entrepreneurs.
Mozloom says the measurement of employers who are having trouble finding qualified workers has been bouncing around for several months, but the number shot up in the latest report. Many of the NFIB members who contributed opinions say they're looking for specific skill sets, such as auto mechanics and welders, and it’s these skilled workers who are in short supply, Mozloom notes.
The upshot of both surveys is that small businesses have easier access to financing now than in the past few years, and many anticipate putting additional funds to work in their businesses. When it comes to expanding their workforces, however, they seem to think it’s neither necessary nor desirable. “More of them are planning to make capital investments,” Mozloom notes, “but they're still unwilling to hire employees.”
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