IPA SBRB Study: Small Business Optimism Tempered by Concern About Healthcare, Fuel and Employment Costs

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More than four months into 2005, small business remains optimistic about business prospects for the remainder of the year, according to a new IPA SBRB study. However, that optimism is somewhat guarded in the face of rising costs for healthcare, fuel and employee compensation.

More than four months into 2005, small business remains optimistic about business prospects for the remainder of the year, according to a new IPA SBRB study. However, that optimism is somewhat guarded in the face of rising costs for healthcare, fuel and employee compensation.

This study looked into common economic indicators for small business and how owners and senior managers are viewing these issues for the rest of 2005. Highlights from the survey include:

• A jump in those expecting a significant increase in revenue this year,

• A 15 percent decrease of small businesses who say they will be growing the size of their staff

• One-third of small businesses are not providing increased compensation to their employees.

Revenue Results

Small business remains upbeat on revenue for 2005. When asked about year-over-year improvement, 44% of the small businesses surveyed said they expected revenue improvement of ten percent or more. This is significantly more than the 25% who said they expected significant improvement in a February 2005 IPA SBRB study.

Almost two-thirds (63%) expect some revenue improvement. Fully 85% of the small businesses said they would have revenue equal to or greater than last year.

Staffing levels

Only 9% of the small businesses indicated they were decreasing staffing levels for the remainder of the year while 86% said that they would maintain or increase staff levels.

More than one-third (36%) said they would be increasing the size of their staff.

This represents a 15 percent decrease from the 42% of owners who said they would be hiring in an IPA SBRB survey at the beginning of the year.

Compensation

Nearly two-thirds (62%) of small business owners said they would be providing increased compensation to their employees this year. 24% were giving raises of five percent or more; 38% were giving increases of less than five percent. Only 4% of small businesses were decreasing compensation and 34% were providing no raises.

Single most important issue

Business owners and managers were asked to select the “single issue you feel will have the greatest impact on your business in 2005.” The results compared to the previous IPA SBRB study are below.

                                         02/05     05/05

Economic factors     32%             33%

Healthcare costs     18%             15%

Finding quality employees 16%             10%

Ability to obtain capital 10%             8%

Taxes                        8%             8%

Interest rates                6%             4%

Foreign competition        4%             5%

Government regulation        4%             5%

Other/No answer                3%             9%

In the current survey, businesses could identify a specific issue that wasn’t included on the list. There were a few mentions of fuel costs in addition to industry-specific cost issues and those who chose not to answer the question. The general weighting of these issues remains consistent.

“This survey, which covers a variety of important issues to small business, shows that entrepreneurial optimism remains strong,” said Gregg Steinberg, President of International Profit Associates, the largest privately-held provider of management consulting and professional services to small and medium-size businesses in North America. “However, with increasing healthcare costs and the addition of high fuel costs creating increased compensation stagnation, caution should be taken in tempering top line optimism with bottom line profitability.”

The International Profit Associates Small Business Research Board ascertains the opinions of small business owners and managers on a wide variety of topics related to their own businesses as well as national and international issues that may impact their operations.

Participants in the poll provide feedback on significant issues and allow for real-time insight into the state of small businesses nationwide. The universe of participants is developed from among small businesses across the United States. More than 220 small businesses owners and senior managers participated in this IPA SBRB poll. The IPA SBRB study is a voluntary survey conducted via phone and email. The poll was structured and supervised through an independent resource.

The latest information about the IPA Small Business Research Board can be found at http://www.ipasbrb.com.

International Profit Associates, Inc. (IPA) is the largest privately-held provider of management consulting services to small and medium-size businesses in North America. IPA and its more than 1,800 professionals offer a wide range of proven and innovative methodologies to help businesses grow and prosper regardless of the economic cycle. IPA either provides directly or through its affiliated companies a comprehensive array of business advisory services, tax and estate planning services or merger, acquisition and other financial advisory services in the United States and Canada. More information about IPA can be found at http://www.ipa-iba.com.

Contact:

Raymond D. Minkus    

(847) 509-5777             

rdm@minkuspr.com        

or

Jeffrey D. Bierig

(847) 509-5777

jbierig@minkuspr.com

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