Survey: Small Business Economic Confidence Tempered by Slow Recovery

HOUSTON - Uncertainty about the economic recovery has caused 61 percent of small business owners to delay their expectation of an economic rebound until 2011 or later, while over 18 percent feel a turnaround will happen in 2010 and 20 percent are unsure, according to the most recent Business Confidence Survey released today by Administaff, a provider of human resources services for small- and medium-sized businesses.

The economy was listed by 78 percent of business owners as one of their biggest short-term concerns, up from 71 percent in April, followed by 53 percent citing government health care reform, 46 percent specifying rising health care costs and 40 percent listing controlling operating costs. For the longer-term, 70.7 percent of respondents said they were either very concerned or had elevated concerns about potential tax increases, followed closely by 70.3 percent listing government expansion and the effect on business, 67.9 percent designating the economy and 67.7 percent citing the federal deficit and the total national debt.

When asked about their pipelines for new business for the balance of 2010, 48 percent of survey respondents said that they expect a sales increase, down from 55 percent in April and identical to the 48 percent last October; 31 percent predicted it will stay the same, while 12 percent anticipated decreasing sales, up from 7 percent last April; and 8 percent were unsure.

In addition, 65 percent of owners and managers of small and medium-sized businesses said that they are either meeting or exceeding their 2010 performance plans compared to 72 percent in the last survey, while the remaining 35 percent reported that they are doing worse than expected.

Administaff also announced compensation data from its base of more than 5,600 small and medium-sized businesses. Compared to the 2009 second quarter data, average compensation is up 2.1 percent, bonuses are up 11.2 percent, and commissions were up 0.4 percent. Overtime pay is still low, running 8.2 percent of regular pay, under the 10 percent level that generally indicates a need for additional employees, but up slightly from 7.5 percent.

“Many owners of small and medium-sized businesses seem to be hesitant to hire more workers and commit important financial resources in the face of current economic uncertainty,” said Paul J. Sarvadi, Administaff's chairman and chief executive officer. “However, they appear to be ready and willing to make those positive decisions as soon as key fiscal elements are in place.”

In the survey conducted July 20-22, when asked how they are managing the number of company employees, results were identical to April with 60 percent of participants stating that they are maintaining current staffing levels, 31 percent are adding new positions and 9 percent are laying off employees.

The survey also said that 62 percent of participants expected to maintain employee compensation at current levels throughout 2010, 21 percent planned increases, 5 percent expected decreases and 12 percent were unsure.

Concerning their current profit-generating activities, 70 percent of participants listed selling new accounts as the leading strategy, a slight decrease to the 73 percent response rate in April. This was followed by 66 percent naming increased service to clients, 40 percent said they were adding new services or products versus 52 percent in April, while 34 percent of survey respondents listed negotiating with vendors, and 25 percent named investing in new improvements as fifth.