Small Business Owners Show Decreased Confidence

The new IPA Small Business Confidence Index (IPA SBCI) indicates that small business owners are showing severely decreased expectations for revenue as energy costs are making more of an impact on their businesses, according to International Profit Associates (IPA). The poll measures expectations concerning the general economy, hiring and revenue growth, looking forward 12 months.


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“The IPA SBCI’s measurements of confidence in the general economy, revenue growth and hiring are all pointed downward. This means that small and medium-size businesses must do all they can to succeed in trying times,” IPA President Gregg Steinberg said in a prepared statement, adding “When small business owners are impacted by cost increases over which they have no control such as rising energy prices, it is even more important that they control the costs they can control in their businesses.”

An important poll result is revenue expectations. In January of this year, this number was 67 percent and in April it declined about 11 percent. Now, the April figure of 59 percent has fallen to 46 percent, according to IPA. This is about a 22 percent drop.

Hiring expectations have declined as well. The IPA reports that the poll results in January were 40 percent and 39 percent in April. In the current poll, it is 30 percent, about a 23 percent drop from April.

The general economy received flatter numbers in the current poll, with 42 percent of respondents indicating they were confident of a better economy in the current poll. This number was 44 percent in April and 49 percent in January. The current number has dropped about only 14 percent in 2006.

Respondents were asked to rate a list of factors that impact all businesses. In the current survey, these factors, including their resulting percentages, were:

  • 15 percent Energy/fuel costs
  • 13 percent Cost of material
  • 12 percent Taxes
  • 12 percent Economic conditions
  • 11 percent Finding quality employees
  • 10 percent Healthcare costs
  • 8 percent Interest rates
  • 5 percent Government regulation
  • 3 percent Foreign competition
  • 3 percent Ability to obtain capital
  • 6 percent Other

“The continuing spike in the price of gasoline has pushed it to the top of the list of concern of small businesses in America," Steinberg said in a prepared statement. "With the cost of materials second, these two cost-driven factors should remind business owners to have strong real-time controls in place that take into account changing market conditions and provide for immediate operational adjustments.”

IPA conducted the structured poll that was supervised through an independent resource. The firm is the largest privately held provider of management consulting and professional services to small and medium-size businesses in North America.

A total of 358 small business owners and senior managers voluntarily participated in this poll. The results of the 2006 IPA SBCI were gathered using phone and e-mail responses, according to the International Profit Associates Small Business Research Board (IPA SBRB).

Previous IPA SBCI surveys ask questions pertinent to the times. The November 2004 survey showed that 67 percent of small business respondents indicated that the re-election of George W. Bush would have a positive impact on the economy in 2005. The survey also found that 91 percent voted on Election Day 2004, according to Biznus.net.

Those responding to the August 2005 poll indicated growing concerns about increasing interest rates, finding quality employees and taxes, according to LookSmart. A significant increase in revenue was seen by about 33 percent of respondents. 52 percent anticipated 2005 revenues to exceed 2004 financial results.

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