Although the U.S. economy grew by 2.2 percent in 2012, the nation’s small-business owners remain mixed on America’s financial health.
According to the fourth annual U.S. Bank Small Business Survey released in April, 53 percent of Missouri small-business owners surveyed believe the nation is still in a recession. Nationwide, that number is 10 percent lower, at 43 percent, and in states such as California, 58 percent of small-business owners polled believe the nation remains in recovery mode.
Conducted by Market Probe Inc. via an online sampling in January among 3,210 small-business owners with less than $10 million in annual revenue, the two-phase study across U.S. Bank’s 25-state footprint also conducted market interviews in 10 states, including Missouri.
“An uncertain federal economy is the No. 1 concern of those polled,” said U.S. Bank Regional President Steve Fox, noting 30 percent of those surveyed nationally cited the economy as the single-most significant challenge to small-business owners today. “The Missouri number is higher than average because many people still continue to struggle. Some clients are seeing record growth, but others are going under. It’s all a matter of perception.”
U.S. Bank client and Everything Kitchens LLC founder and CEO Emily Church said her business is still feeling the effects of the recession.
“We feel the effects very strong and everyday,” Church said of her Springfield-based specialty kitchen store. “The government has done a lot to mask it, but the ripple effects are still present.
“I believe inflation is a lot higher than reported, due to a lot of the quantitative easing from the Federal Reserve being put into areas that are not immediately released into circulation, which is when the full inflation effect is felt. Before the recession, we would see a price increase from vendors once every three years or so. Now, we are seeing constant price increases, two or three times a year in some cases.”
BKD LLC Chief Investment Officer Jeff Layman said the U.S. economy hasn’t been in a recession for several years, posting its largest outputs ever, even surpassing 2007’s prerecession marks.
The U.S. Department of Commerce Bureau of Economic Analysis defines a recession as a marked slippage in economic activity, often cited as two consecutive quarters of negative gross domestic product growth, but not always. The Bureau estimates the U.S. was in a recession from fourth-quarter 2007 through second-quarter 2009 when real GDP decreased at an average annual rate of 3.5 percent. For the period of expansion from second quarter 2009 through first quarter 2011, real GDP increased at an average annual rate of 2.6 percent.
“It seems peculiar to me that so many small-business owner believe we are still in a recession, because the economic data just doesn’t support that,” Layman said. “This sentiment is in direct contrast with the current consumer sentiment. On the back of lower unemployment rates, improved home prices and record stocks, consumers are spending more and business owners should be seeing that.
“The real question is, what is the confidence level of these business owners?”
According to the survey, only 29 percent of those surveyed report higher revenue compared to the previous year; however, 41 percent expect revenue to be higher in the coming year.
Church said Everything Kitchen’s revenues were up about 20 percent in 2012 and have already surpassed the 20 percent mark for 2013 revenue. Profits remain only slightly up despite large revenue growth, due to rising health care costs, shipping costs and other areas of increase in recent years.
Although two-thirds of small businesses are in good financial health or better, only 16 percent expect to increase staff during the next year.
“I think a lot of uncertainly and some unwillingness to hire comes from questions surrounding the implementation of the Affordable Care Act,” Fox said, noting those surveyed rank health care concerns in the top three national issues facing small-business owners.
U.S. Bank is the nation’s second largest U.S. Small Business Administration lender based on loan volumes for fiscal 2012, and No. 8 in the Springfield metropolitan statistical area based on Springfield Business Journal list research. However, Fox said small-business owners are still hesitant to borrow. About 74 percent of small-business owners are currently delaying capital expenditures and 53 percent are not comfortable with their business’ financial situation, according to the survey.
Layman said some uncertainty due to the fiscal cliff was resolved, easing short-term pain, but renewed concerns over the sequester in March didn’t help the perception of America’s long-range fiscal situation.
“I always say if you give an investor stable rules, they can make anything work, but add in the element of uncertainty and they are hesitant to do anything at all,” he said.
