The Booming Economy Index: December 2018

The American economy has been booming of late, with hundreds of thousands new jobs added every month, annualized growth numbers from the past two quarters at the tune of 3.5% and 4.2%, and the stock market currently experiencing its longest running bull market since March 2009.

As small businesses across the country make up 99.7% of all U.S. employers and 64% of net new private-sector jobs, they truly are the backbone of the country’s economy and an aggregate indicator of its health and status. To understand the recent momentum of the U.S. economy and determine how much impact that momentum has had on small business, Fundera, through independent accredited research firm YouGov, conducted research to see how small business has fared throughout the country, and what its prospects are going into 2019.  

All indicators suggest that the U.S. economy is growing at explosive rates, yet there are early warning signs suggesting a slowdown in growth is around the corner—such as the November jobs report showing a less-than-expected gain of 155,00 jobs and deep declines on the S&P 500 and Dow Jones in early December. Although market conditions are strong, it’s important for small business owners to use this time wisely to set themselves up for growth and success—while simultaneously preparing to weather possible shifts in the U.S. economy many are foreseeing following the rampant economic growth.

The U.S. Economy and the Stock Market: Growth and Impact

Since January 2018, the economy has grown rapidly every month, with more than half (55%) of U.S. small business owners and senior decision makers within those businesses reporting that, as it relates to profit and revenue, their business is better off today than it was a year ago. A third (33%) reported that their business remained steady—about the same as it was a year ago. More granularly:

• 32% of small business owners and senior decision makers with 51-100 employees claim their business is much better off than it was a year ago, compared to 21% with two-10 employees and 26% with 11-50 employees.
• 28% of small business owners and senior decision makers with two-10 employees say their business is about the same as it was a year ago, while 29% with 11-50 and 51-100 employees say the same.
• 47% of small business owners and senior decision makers with businesses earning less than $1 million in annual revenue claim to be better off than a year ago compared to 62% of businesses with revenue between $1 million to $500 million.
• 62% of small business owners and senior decision makers in the South reported being better off than they were a year ago, compared to 51% in the Northeast, 52% in the Midwest, and 51% in the West.

Data suggests that the bigger the small business (i.e. more employees, more revenue), the more likely it benefitted from the momentum and growth of the economy over the past year, with those in the South reporting more growth in profit and revenue than other regions of the country—suggesting better market conditions there than elsewhere.

But not everyone rode the same wave of growth, or maintained a steady business environment over the past year. Slightly more than one in 10 (12%) small business owners and senior decision makers reported their business being worse off than it was a year ago—and the smaller the business, the harder the hits:

• 17% of small business owners and senior decision makers with two-10 employees claim their business is worse off than a year ago; compared to 10% with 11-50 employees and 9% of owners with 51-100 employees saying the same.

When looking at the performance of the U.S. stock market solely and how the longest running bull market since March 2009 might have impacted small business, only 39% of U.S. small business owners and senior decision makers believe it’s had a positive impact since January 2018. More than half (56%) believe the market had no impact over the course of a year, with only 6% citing a negative impact.

In light of this reported growth and impact of small business under the context of wider expansion of the U.S economy and stock market, are these small businesses on track to hit their end-of-year financial goals?

When asked that question, 55% small business owners and senior decision makers said they were on track, 23% said they were not on track, and 16% said they do not track their fulfillment toward end-of-year fiscal goals. Another 5% reported that they don’t know what their end-of-year financial goals are.

Looking to the Future: 2019 Goals and Predictions

It’s clear the economy has grown—and it’s clear that growth has trickled down to (or possibly been created from) a majority of small businesses over the past year. But that growth hasn’t hit everyone. As the economy remains strong now and market conditions are conducive to capital investment, it’s important that small businesses use this time wisely to review their financial plans for 2019.

Although 45% of U.S. small business owners and senior decision makers believe the economy will remain strong and continue to grow, making for a positive business environment for small business growth with more opportunity in 2019, it’s important to strategize now for the future and everything that may come with it.

Twenty-eight percent of U.S. small business owners and senior decision makers believe the economy will stagnate with slowed growth, making for a negative business environment for small business growth with less opportunity in 2019. Although market conditions are good, now is the time small businesses should explore financial solutions to safeguard their interests, such as securing extensions to a line of credit or seeking business financing for an upcoming project.

In light of this outlook, small business owners and senior decision makers in the U.S. want to accomplish the following going into 2019, all of which require a smart allocation of resources:

• 10% will seek financing options to invest into the business for growth.
• 10% want to open a new office or location to expand their business.
• 25% want to hire more permanent W-2 employees.
• 18% want to create and release a new product or service for their customers.

Small Business Saturday: Boon or Bust?

According to Adobe Analytics, consumers have already spent $80.3 billion in online shopping from November 1 to December 6. And the National Retail Federation forecasts a holiday sales increase in 2018 between 4.3% and 4.8%—for a total of $717.45 billion to $720.89 billion. That’s a lot of money, and traditionally has always funneled toward giant e-retailers and brick-and-mortar stores, typically leaving small business trailing behind in holiday spending.

Small Business Saturday, a massive initiative concocted and spearheaded by American Express every year to encourage holiday shoppers to patronize small and medium-sized businesses on the Saturday after Thanksgiving, was created to correct that. The holiday is now massively popular and well recognized by consumers

However, it’s clear that small business can do more to capitalize on this holiday and maximize their opportunity to capture holiday dollars. According to data from Fundera, only 6% of small business owners and senior decision makers admitted to actively creating and promoting Small Business Saturday deals for their customers this year.

Other findings reveal that small business owners and senior decision makers reported:

• 9% of small businesses said they sell services or products to consumers and saw a notable bump in sales from Small Business Saturday; one in five (20%) who said they sell services or products to consumers did not.
• 7% of small businesses said they sell services or products to other businesses and saw a notable bump in sales from Small Business Saturday; again, one in five (20%) who said they sell to other businesses did not.

More than half (57%) of small business owners and senior decision makers claim they didn’t even participate in creating a Small Business Saturday deal for their customers. The data paints a picture of indifference—and with such little participation from small businesses across the country, it’s clear that there is opportunity to seize with marketing promotions and activations to encourage more foot traffic during the busiest shopping weekend of the year.

Methodology

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 510 adults who are owners or senior decision makers at small businesses (fewer than 100 employees). Fieldwork was undertaken between November 28-December 4, 2018. The survey was carried out online. The figures have been weighted.

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from Fundera Ledger https://www.fundera.com/blog/booming-economy-index/