Forbes recently ran a report1, based on data from financial information company Sageworks, finding that small businesses in the United States ended 2016 with improved sales and profitability compared to 2015. Businesses with less than $10 million in annual revenues saw as much as a 7.3 percent annual sales increase throughout 2016. If that wasn't impressive enough, consider that this is the fifth consecutive year of growth over the 7 percent mark. Profit margins were also up over the previous year by a percentage point, reaching 8.1 percent.
On top of these increases, small businesses have been hiring more and spending more on growth while sales have been climbing. In many cases, these hiring businesses have also managed to steadily increase profits even while spending money growing their employee base.
Small business optimism in general has improved significantly, a December 2016 Gallup poll found.2 This optimism came right after the presidential election, indicating that most business owners believe the new administration will have a positive impact on the U.S. business climate, especially because of the emphasis in the presidential campaign on reducing regulations.
The National Small Business Association (NSBA) surveyed3 1,000 small business owners about the impact of government regulations, finding the two "most burdensome" regulations for small business to be the federal tax code and the Affordable Care Act. It also found that 14 percent of small business owners claim to spend over 20 hours per month just dealing with federal regulations. The average first year's regulatory costs, according to the survey, was $83,019.
“The average small-business owner is spending at least $12,000 every year dealing with regulations," said NSBA President and CEO Todd McCracken. "This has real-world implications: more than half of small businesses have held off on hiring a new employee due to regulatory burdens.”3
According to the Gallup poll, the percentage of small business owners who expect revenues to increase over the coming year was 58 percent, up from 48 percent in the previous quarter. At the same time, cash flow expectations rose from 65 percent to 70 percent. More than 35 percent of small business owners expect to increase spending (up from 25 percent in the prior quarter), the poll found, while those who expect to add jobs went up to 36 percent (compared to 21 percent the prior quarter).
Further supporting claims of major optimism is the National Federation of Independent Business (NFIB) Index of Small Business Optimism for the end of 2016.4 This index found that small business optimism hit its highest level since 2004, up 38 points. “We haven’t seen numbers like this in a long time," said NFIB President and CEO Juanita Duggan. "Small business is ready for a breakout, and that can only mean very good things for the U.S. economy.”
Duggan said business owners are feeling better about taking risks and making investments, and that optimism is the "main ingredient" for economic expansion.
The Index has an "Expect Better Business Conditions" segment, and numbers there are telling. The segment jumped from 12 percent in November 2016 to 50 percent in December. At the same time, the "Sales Expectations" segment went up 20 points.
It seems clear that the U.S. business climate has been steadily improving, and that most small businesses are optimistic about what lies ahead.
Is your business planning to expand in 2017? If so, you may need some financial backing to help with growth and cash flow. Contact a Nevada State Bank business banker for information about how we can provide the funding you need to succeed.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.