2010 mid-year economic report - nsba

2010 Mid-Year Economic Report

2010 Mid-Year Economic Report 2 National Small Business Association

MethodologyThe 2010 Mid-Year Economic Report was conducted on-line June 23 through July 14 among 400 small-business members of NSBA representing every industry in every state in the nation. While the results in this survey can be extrapolated to the at-large small-business community, it is worth mentioning that NSBA members tend to be older, more well-established small businesses.

Since 1937, NSBA has been the nation’s leading small-business advocate. As part of NSBA’s mission to address the needs and represent the concerns of the small-business community, we conduct a series of surveys and quick polls throughout the year. Among those are the two, annual NSBA Economic Reports. The Mid-Year Economic Report, released late-July, and Year-End Economic Report, released late-January, use NSBA survey data to provide a snapshot of how small business is dealing with the current economic situation. The 2010 Mid-Year Economic Report shows a small-business community that is continuing to struggle under a lagging economy and the ongoing credit crunch, and unable to create any signifi cant new jobs.

Unfortunately, despite a temporary increase of optimism reported in the 2009 Year-End Economic Report, small businesses surveyed in early July 2010 reported decreases in optimism, confi dence and business growth. There does, however, appear to be a small, and slightly increasing, group of small businesses that are growing and rebounding from the last two years of a dismal U.S. economy. Nine percent of small businesses report their business is already growing—up from the seven percent who reported existing growth back in December 2009.

These growing businesses are the exception, however. More small-business owners today expect there will be no growth opportunities in the coming year than back in December 2009. Only 47 percent expect such growth opportunities in the coming year while a nearly equal amount—44 percent—do not believe there will be any growth opportunities in the coming year.

Small-business owners are very concerned with the state of the U.S. economy with 45 percent stating they believe the economy is worse off today than it was just one year ago. Access to capital continues to evade small businesses as the highest percentage of small-business owners since NSBA has been conducting this survey report an inability to garner adequate fi nancing to run their business. Holding broad implications for the overall U.S. economic recovery, few small businesses hired new employees in the last 12 month, and, despite projections for the coming year faring better, the majority of respondents project no growth in their number of employees.

“Despite a temporary increase of optimism just six months ago, small businesses today report decreases in optimism, confi dence and business growth.”

Started in 1937, NSBA is the nation’s oldest small-business advocacy group representing employers in every state. As a strictly nonpartisan organization, NSBA reaches more than 150,000 employers in all sectors and industries of the U.S. economy from retail to trade to technology. Our members are as diverse as the economy that they fuel. NSBA’s policy positions and priorities are strictly formulated through robust volunteer leadership and refl ective of our nation’s 29.6 million small businesses.

2010 Mid-Year Economic Report 2 National Small Business Association 2010 Mid-Year Economic Report 3 National Small Business Association

Thinking about the next 12 months, do you anticipate:

Small Business ConfidenceThe majority of small-business owners (59 percent) expect the overall U.S. economy to be flat in the coming year. Contrary to the December 2009 data which showed the number of small businesses expecting a recession was cut in half from the previous survey, the July 2010 data reports an increase, up from 21 percent to 29 percent, of those expecting a recession in the coming year. Correspondingly, there was a decrease in the number of small-business owners expecting economic expansion—from 16 percent down to 13 percent. Still not as low as one year ago when only seven percent expected economic expansion, this reversal underscores the belief of many small businesses that the recession may not go away as quickly as it set in.

Given the ongoing economic difficulties the U.S. has faced over the past two years, small-business owners overwhelmingly cited economic uncertainty as the most significant challenge to the future growth and survival of their business. According to the July 2010 survey, 73 percent—up from 64 percent just six months ago—cited economic uncertainty as the number one challenge facing their business, followed by decline in consumer spending (47 percent), cost of health insurance benefits (37 percent), federal taxes (36 percent), and lack of available capital (29 percent).

As is to be expected from any entrepreneur—individuals who are typically very upbeat and optimistic about the future of their business and their ability to make changes for the positive—the majority still feel confident about the future of their own business. However, as with many indicators in this report, there was a decrease in the number of small-business owners citing such confidence, down from 61 percent in December 2009 to just 59 percent in July 2010. Although the majority of small-business owners are confident about their own small business, the fact that well over one-third—41 percent—have concerns about the ongoing viability of their business is very concerning.

Dec. 09

Dec. 09

July 10

July 10

July 09

July 09

Dec. 08

Dec. 08

Aug. 08

Aug. 08

From a financial perspective, how do you feel right now about the future for your business?

CONFIDENT NOT CONFIDENT

75%62%

58%61% 59%

25%38%

42% 39% 41%

80%

70%

60%

50%

40%

30%

20%

10%

0%6 Months Ago 1 Year Ago 5 Years Ago

Better Off

Worse Off

About the Same

When comparing today’s economy, would you say the national economy is:

ECONOMIC EXPANSION

21%

3%7%

16% 13%

A RECESSION

64%

26%

42%

21%29%

A FLAT ECONOMY

53%

33%

63%59%

51%


The 2010 Mid-Year Economic survey took a close look at

how business has fared over the past 12 months as well

as projections for the coming year. Small-business owners

were asked how much change their businesses had

experienced in gross sales/revenues and net profi ts, and

the results remain largely unchanged from the previous

survey. Both indicators continue to show a net decrease.

One of the few positives in the survey was that there was

an increase in the number of small businesses reporting

an increase in both revenues and profi ts. Small businesses

reporting revenue increases rose from 22 percent in

December 2009 to 26 percent in July 2010, and those

reporting increases in profi ts rose from 19 percent in

December 2009 to 24 percent in July 2010.

Comparatively, in August 2008—just two years ago—48

percent cited revenue increases and

30 percent cited decreases. That

was the last time small businesses

reported net gains in revenues. This

trend of net revenue losses began

in December 2008, which was

the fi rst time a majority of

small-business respondents

cited revenue decreases

since NSBA began

asking the question

in 1993.

Past Business Growth

No change

Total Decrease

Total Increase

22%

62%

16%

48%

53%

30%

21%

22%26%

64%

14%21%

38%

45%

17%

Changes in gross sales/revenues over the last 12 months:

Do you believe there will be growth opportunities for your business…

“The trend of net revenue losses began in December 2008, which was the

fi rst time a majority of small-business respondents cited revenue decreases since NSBA began asking the question

in 1993. ”

In the next 3 months 03% 04%In the next 3 to 6 months 09% 11%In the next 6 to 12 months 35% 37%None in the coming year 44% 41%My business is already growing 09% 07%

JULY 10 DEC. 09

Dec. 09 July 10July 09Dec. 08Aug. 08


Small-business owners also were asked to rate their level of expected business growth for the coming 12 months. Despite the large gain in December 2009 (up to 43 percent from 30 percent in July 2009) there was only a minor one-point gain to 44 percent in July 2010. There also was a notable decrease in the number of small-business owners projecting decreases in revenues (down from 31 percent to 25 percent) from the 2009 survey, however it was not as large a decrease as was seen between July 2009 and December 2009. The result is projected net gains in revenue for 19 percent of small businesses in the coming 12 months.

With regards to profits, there were similar increases in the number of small businesses projecting profit gains, and decreases to those projecting profit decreases. Thirty-seven percent project profit gains in the coming year up from 34 percent back in December 2009, and 29 percent project profit losses down from 41 percent in December 2009. This represents a minor net gain in profit projections among eight percent of small-business owners.

Since 1993 when NSBA began asking these questions, small businesses have reported net increases in both revenues and profits. However, beginning in December 2008, both projection indicators showed net decreases among small businesses. In December 2009, revenue projections actually resulted in net gains, but profit remained a net decrease. Today, though only a small net gain of eight percent, profit projections appear to be back on the side of net positives for small businesses.

When asked about which future growth strategies they plan to implement in the coming 12 months, the top three responses were new advertising and marketing strategies (37 percent), expanded Internet presence and e-commerce (34 percent), and strategic alliances (30 percent). Unfortunately, the next highest-rated response for this survey question was “no growth strategies planned.” Although there was a slight decrease in the number of small businesses selecting this option in the December 2009 report, it has increased back up to 22 percent—its highest point in more than 2 years. Another troubling change in responses between December 2009 and July 2010 is a two-point decrease (from 16 percent to 14 percent, respectively) in the number of small businesses who selected “hire new employees” as a planned growth strategy in the coming year.

The timing of growth is another important component of the survey. The good news: small-business owners were asked if they believe there will be growth opportunities for their business, and nine percent—up from seven percent just six months ago—cited their business is already growing. The bad news: there was a drop in the number of small businesses expecting growth opportunities in the coming year. In December 2009 a majority of small businesses (52 percent) expected such opportunities, however today, only 47 percent expect growth opportunities. Accordingly, there was an increase from 41 percent to 44 percent among those businesses that expect no growth opportunities at all in the coming year. This makes for a very slim difference—three-points—between those expecting growth and those not.

Projected Business Growth

Total increase

Changes expected in gross sales/revenues over the next 12 months:

“Another troubling change in responses between December 2009 and July 2010 is a two-

point decrease (from 16 percent to 14 percent) in the number of small businesses that selected

“hire new employees” as a planned growth strategy in the

coming year.”

No change

Total Decrease

Total Increase

30%

20%

57%

21%

43%

44%

26%31%

31%

22%

50%

23%

31%25%

47%



Changes in number of employees over the last 12 months:

As the leading contributor of net new jobs to the U.S.

economy, small-business job growth has been a critical

piece of NSBA’s surveys and polls. In the NSBA Economic

Surveys, small-business owners are asked how their business

has fared over the past 12 months regarding number of

employees. Unfortunately, small-business owners continue

to be financially stymied and unable to grow their business,

thereby restricting their ability to create jobs.

Similar to revenues and profits, employment growth

resulted in a net decrease. Despite a noteworthy gain (from

nine percent to 12 percent) between the July 2009 and

December 2009 surveys, there was a slight decrease (down

to 11 percent) in July 2010 among small businesses who

hired new employees over the last 12 months. Fortunately

there also was a decrease in the number of small businesses

cutting jobs. Though still far too high to support the kind

of job creation small business has historically achieved

following a recession, the drop from 64 percent to 59

percent among small businesses reducing their workforce

is at least a small step in the right direction.

Past Job Growth

“Small-business owners continue to be financially stymied and

unable to grow their business, thereby restricting their ability to

create jobs. ”

Aug 08 Dec 08 July 09 Dec 09 July 10

55%

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

TOTAL INCREASE

TOTAL DECREASE

NO CHANGE


Although job growth projections between July 2009 and

December 2009 increased substantially, it appears that

upward trend has come to a halt. Just six months ago,

24 percent of small-business owners projected increases

in their number of employees. Today, only 22 percent

are making such projections. Fortunately, there also was

a small decrease in the number projecting job cuts.

The overwhelming majority (61 percent) expect no

changes whatsoever in their employment numbers.

These projections underscore the general sentiment of

unease and lack of confidence found throughout this

survey. Contrary to the apparent turn-around seen in the

December 2009 survey that indicated small-business job

growth is back on an up-swing, the July 2010 numbers

merely show stagnation in job growth.

Given the historic role small business has played in job

creation, this trend in net job cuts should be alarming.

Furthermore, the decreases—small as they may be—in

job growth projections indicate a strong need to support

small-business growth and ensure impediments, such as

an inability to finance growth, are removed. Creating an

environment where small businesses can start, thrive and

grow surely will enable the U.S. to move more promptly

toward lasting economic recovery.

Projected Job GrowthChanges expected to the number of employees over the next 12 months:

“ Contrary to the apparent turn-around

seen in the December 2009 survey that

indicated small-business job growth

is back on an up-swing, the July 2010

numbers merely show stagnation in job

growth.”

No change

Total Decrease

Total Increase

13%

58%

30%

56%

24%22%

58%61%

18%

56%

29%

14%

18%17%

26%



Small-Business FinancingAs NSBA repeatedly has said over the last two years, small-business access to capital is a growing problem. When asked what are the most significant challenges facing their business, nearly one-third (29 percent) said lack of available capital—that’s up from 24 percent just six months ago.

The prospect of getting financed for a small business—even in a growing economy—is very difficult simply due to the fact that many small businesses lack the assets necessary for a traditional bank loan, making them a riskier lending option for banks. Unfortunately, the number of small businesses able to obtain adequate financing for their business has steadily decreased in the last few years. Today, only 59 percent of small businesses are able to obtain adequate financing for their business. That number has dropped from 78 percent in August 2008, 67 percent in December 2008, 62 percent in July 2009, and 61 percent in December 2009. Although a majority are able to secure financing, it cannot be glossed over that 41 percent—which translates into more than 12 million—of the nation’s small businesses are not able to get adequate financing.

NSBA has been asking small-business owners if their business had been impacted by the credit crunch since early 2008. In

What types of financing has your company used within the past 12 months to meet your capital needs?

Small-business owners reporting being impacted by the credit-crunch.

February 2008, 55 percent responded that it had. In August 2008 that number jumped to 67 percent, and continued to rise to 69 percent in December 2008 and hit a high of 80 percent in July 2009. Despite a slight easing in December 2009 down to 78 percent, the number today is back up at its highest point. Eighty percent—four out of five—of small-business owners report that their company has been impacted by the credit crunch.

The availability of capital is a critical component to business growth and job creation for small businesses. Since 1993, when NSBA began asking these questions, there has been a direct correlation between access to capital and job growth—when capital flows more freely, small businesses add new jobs.

Among small-business owners for whom capital availability has been a problem, 44 percent state that they have been unable to grow or expand the business, and 20 percent state that they have been forced to reduce their number of employees. Perhaps even more worrisome is the growth in small businesses that report they are unable to increase inventory to meet demand—up from seven percent in December 2009 to 12 percent today. This means that, although growth opportunities exist for these businesses, they are being held back by a lack of capital.

In the last six months, there has been a decrease in small-business use of nearly every financing mechanism, from traditional bank loans to credit cards to vendor credit. The number of small businesses using no financing options remained steady at 21 percent—virtually no change from the December 2009 results.

Prior to the December 2009 survey, credit cards had been the number one source of financing for small-business owners, Today, however, they have dropped to the number three slot, just behind traditional bank loans at number one and earnings of the business at number two. Although reports have shown a higher rate of approvals among credit card applicants, many small businesses are hesitant to take on credit-card debt given the volatility associated with them.

LoansWhile the number of small businesses relying on traditional bank loans jumped to 53 percent in July 2009—up from 44 percent in December 2008—only 43 percent small-business owners today are using bank loans. That number was higher just six months ago with 46 percent of small-business owners using bank loans. In addition to banks’ unwillingness to loan to small businesses, the fact that terms continue to worsen for small businesses is likely part of the reason small-business owners have been seeking fewer bank loans. Twenty-four percent of small-business owners reported less favorable terms on their loans in the last year, and only two percent report that

Aug. 08

Dec. 08

July09

Dec. 09

July 10

Bank loan 50% 44% 53% 46% 43%

Earnings of the business

49% 51% 43% 43% 42%

Credit cards 41% 49% 43% 41% 39%

Used no financing 17% 22% 16% 21% 21%

Vendor credit 22% 27% 29% 24% 20%

Private loan (friends or family)

12% 16% 20% 18% 19%

Leasing 9% 8% 9% 8% 10%

Other (please specify)

8% 8% 6% 7% 7%

Small Business Administration loan

5% 3% 4% 4% 4%

Private placement of debt

2% 4% 3% 2% 4%

Selling/pledging accounts receivable

2% 3% 3% 3% 3%

78%80% 80%

69%68%



the terms of their loans have become more favorable.

Although lower demand for loans from small-business owners who are typically hesitant to take on additional debt in a distressed economy may be a part of the equation, the decrease in loans is more likely related to the terms and availability of such loans. Many banks appear unable or unwilling to lend affordable capital to any small businesses that doesn’t meet their extremely high definition of a “creditworthy” small business.

Underscoring this fact, the April 2010 Federal Reserve Board (the Fed) Senior Loan Officer Survey reported that, although banks have begun slightly easing standards on large firm loans, little has changed for small firms. Among large banks, 19.4 percent eased their standards on loans to large firms while only 3.4 percent did the same for small business. Compounding matters, there was even a net tightening on loan terms to small businesses from smaller banks—the very banks that small businesses typically turn to as they are the last remaining institutions still willing to make character-based loans. The reason cited for this tightening was completely unrelated to the businesses themselves, and rather was due to a less favorable economic outlook and the banks’ decreased tolerance for risk.

The implications of the collapsed housing market continue to haunt the small-business community. In August 2008, 12 percent of small-business owners leveraged their business loans with a second home mortgage. That number has been steadily decreasing since that time and is now at an all-time low of six percent.

Credit CardsGiven the events of the last year, in which interest rates on credit cards remained high, credit-card limits were arbitrarily cut, and credit-card accounts were eliminated entirely by the credit-card companies, it is not surprising that the gradual decrease in credit-card usage has continued. Although the number of small-businesses relying on credit cards has dropped slightly, they still account for one of the largest sources of financing for NSBA’s members.

In the last year, a major piece of legislation was passed, the Credit CARD Act, which went into effect in early-2010 and put a stop to some of the most egregious practices of the credit-card industry. Unfortunately that legislation didn’t expressly include the cards used exclusively or primarily for small-business use despite the best efforts of NSBA and some key advocates on Capitol Hill. Credit-card companies and large banks railed against the legislation and an amendment to extend the protections to small businesses, warning that the legislation and the small-business inclusion amendment would make credit cards wildly more expensive and difficult to qualify for across the board.

Now four months after the implementation date, that simply

has not happened. Granted, a significant number of small businesses (48 percent) report that the terms on their credit cards have in fact gotten worse in the last several months, however that number actually decreased since the December 2009 report when 64 percent reported worsening terms in recent months. Given that many banks have voluntarily adjusted their standard operating procedures to extend the legislative protections to both personal and business credit cards, this is a clear indication that the legislation did NOT cause wholesale cost increases in credit cards as opponents to the bill projected. Furthermore, the survey indicates that the law is working, as fewer small-business owners reported that the terms of their credit card had worsened.

The interest rates small-business owners are subject to continue to be high, though not as a direct result of the legislation. The average interest rate small businesses pay is 16 percent. Half of small businesses (50 percent) pay more than 15 percent in interest rates on their credit cards. Nearly one-quarter (23 percent) of all small-business owners are currently paying 20 percent or more in interest rates. This has not been a notable change since the December 2009 report.

One particularly problematic trend that began in late-2008 was credit-card companies arbitrarily reducing the credit limit on a card—or shutting down the card entirely. For a small-business owner carrying a balance, this unexpected reduction results in a diminished credit score, as the owner suddenly is utilizing more of his/her available credit. With banks increasingly reliant on personal credit scores in their underwriting practices, this credit score hit can be quite problematic. Compounding matters, these reductions are typically due simply to the fact that, as a small business, they are viewed as a more risky credit option.

When asked in December 2008, 28 percent of small-business owners responded that they had experienced a decrease in their line(s) of credit or a credit-card limit in the past six months. Today, 36 percent—up slightly from 35 percent in December 2009—of small-business owners were subject to such a decrease in the last six months.

Is your business able to obtain adequate financing?

Yes No

61% 59%

39% 41%

62%

38%

67%

33%

78%

22%



Public PolicyJust months away from the mid-term elections with some key pieces of legislation having been passed—health care reform and fi nancial regulatory reform to name a few—lawmakers fi nd themselves still facing high unemployment and a struggling small-business community. Despite all the rhetoric about the importance of small business to the U.S. economy, too little has been done address the many issues bogging down America’s small-business owners. Small business has played a critical role in past economic recoveries; however they continue to be hit with increasing diffi culty accessing capital, putting the brakes on any growth opportunities.

Small-business owners continue to rank “reducing the tax burden” as the top issue Congress and the administration should address. However in the last six months, there was a notable drop from 43 percent to 36 percent among those that ranked taxes their top issue. In that same time, the number of small businesses that ranked “access to capital” as the top issue Congress and the administration should address rose 5 points to 23 percent. Reducing the regulatory burden on small businesses and health care reform came in third and fourth, respectively.

HeaLtH Care reForMDespite the passage of broad health care reform—legislation which NSBA ultimately opposed due to its inability to truly address rising costs—small business owners continue to report dire consequences of rising health insurance costs. When asked how they have coped with rising health care costs, 24 percent, up from 20 percent in December 2009, were forced to reduce their workforce. That means one in four small businesses, in this terrible economy with high unemployment, is having to lay-off workers due to health insurance costs.

There exists a signifi cant amount of confusion among small-business owners about how the new health care law will impact their business. When asked if their business will qualify for the small-business health care tax credit, only 10 percent said yes. The majority—52 percent—said they weren’t sure whether or not they were eligible for the tax credit. In more broad terms, small businesses were asked to rate their understanding of the new law, and only 21 percent said they have a clear understanding while 79 percent said they have a limited or no understanding at all of how their business will be impacted. Given that this survey is among

How well would you say you understand how the new health care reform law is going to impact your business?

Yes - 67%

No - 33%

Which one of the following issues do you believe Congress and President Obama’s administration should address first?

“There is a direct correlation between access to capital and job growth. Unless

small-business owners are able to secure fi nancing,

we will continue to see high unemployment.”

July 10 Dec. 09Reducing the tax burden 36% 43%Increase small business access to capital

23% 18%

Reducing the regulatory burden on businesses

14% 15%

Health care reform 10% 7%Rising fuel prices and addressing the nations’ dependence on oil

3% 4%

Credit card reform 3% 3%Improving education to provide a qualifi ed domestic workforce

1% 1%

1

2

3

I have a limited understanding

I do not understand at all

I have a very clear understanding

17% 21%

62%


NSBA members who are active in the association and have been offered a good deal of education on the new law, this level of understanding is likely lower among all U.S. small businesses.

sWiPe Fees Credit cards also are costly from the vendor perspective of a small-business owner due to the so-called “swipe fees.” These are the fees charged to any business which accepts credit or debit payments by banks for processing the payment. According the July 2010 survey, 12 percent of small businesses pay more than 3 percent of the total purchase in swipe fees, and the majority, 63 percent pay more than 1.5 percent of the overall purchase. Though a seemingly small percentage, swipe fees add up quickly. The average monthly total spent on swipe fees by small businesses is $2,320 - money that could be put to better use or returned to the customer via reduced prices.

Swipe fees have been a sweet spot for major fi nancial institutions, even during the recession, as just 10 credit and debit card issuers raked in more than 80 percent of the $48 billion earned by the industry in swipe fees for 2008 alone. Fortunately, the recently-passed fi nancial regulatory reform bill included provisions reforming the swipe fee system. The reform directs the Fed to ensure that swipe fees are “reasonable and proportional” to the actual costs incurred to process the transaction, enables small businesses to offer discounts for a particular form of payment, i.e. cash or check, and allows businesses to set a minimum transaction amount of $10 or less.

inCreased 1099 rePortinGAn ugly by-product of the health care reform legislation is a pay-for requiring business that purchase more than $600 of goods or services from another business to submit two 1099 forms—one to the Internal Revenue Service (IRS) and one to the service or goods provider. Under past law, service recipients were only required to fi le 1099 forms for non-corporation service providers. What this means is that if a small-business owner spends more than $600 with a company such as Staples or United Airlines, they must fi le a 1099 report on them.

Some have suggested that one way to ease the burden of this new reporting requirement is to add an exemption on any payments above $600 which are made with a credit card. Unfortunately, this proposal stands to harm small businesses in four key ways. First, this will force small-business owners into using credit cards more frequently for larger purchases, which, given the failure of Congress to protect these cards, could constitute signifi cant new costs for small businesses. Second, it will cause increased credit-card transactions from customers, which means increased costs in swipe fees for the small-business owner, and in many cases and inability to compete with large on-line retailers. Third, the provision will hamper business-to-business transactions as 47 percent of small businesses do not accept credit cards for the purchase of their goods and/or services. Fourth, small-business customers will look to ease this reporting requirement by consolidating purchases, which gives an inherent advantage to big-box stores over small businesses.

In 2009, according to the July 2010 Economic Survey, small businesses were required to fi le 1099 reports on an average of 10 independent contractors. This could change drastically under the new law, however. The average number of companies with which small business spent in excess of $600 annually was 86: in short, small businesses would have to fi le 172 1099 forms up from the 20 they currently fi le. Furthermore, small businesses reported that, among those 86 companies with which they spend more than $600 annually, only 30 percent of those purchases are made with a credit card.

Do you accept credit or debit card payments for your goods and/or services?

Approximately what percentage of your total customer purchases are made with credit cards?

Yes

No 53% 47%

Yes No

Percentage of total dollar volume

Percentage of total purchases

Percentage of total dollar volume

Percentage of total purchases

20%21%

Average number of companies for which small businesses fi led a 1099 report in 2009

Average number of companies for which small businesses will have to fi le a 1099 report under the new rules

10vs.

86


CONCLUSIONSmall employers comprise 99.7 percent of all employer fi rms in the U.S.

One in two workers in the private workforce run or work for a small

business, and one in four individuals in the total U.S. population is part

of the small business community (equaling 23 percent of the population.)

Firms with fewer than 500 employees accounted for 64 percent of net

new jobs between 1993 and the third quarter of 2008. Thirty-two percent

of those gains came from the creation of new, small fi rms.

According to the Pew Research Center, small businesses are widely

seen as having a positive impact on the country. Small business ranked

number one with 71 percent of respondents having positive views. Large

corporations, on the other hand, earned a 64 percent negative rating.

Just 25 percent say the federal government has a positive effect on

the way things are going in the country and banks and other fi nancial

institutions only earned a 22 percent positive rating.

According to SBA’s Small Business Economic Indicators for 2003,

when the economy gained momentum after the previous downturn in

the early 1990s, fi rms with fewer than 500 employees increased their

net employment in the fi rst year after the recession, while large fi rms

continued to shrink. From March 2000 to March 2001, small fi rms added

1.15 million net new jobs while large fi rms lost 0.15 million net new

jobs.

NSBA believes more can, and must be done to ensure entrepreneurship

remains a viable, attainable option for every American.

What are the three most significant challenges to the future growth and survival of your business?

FEDERAL TAXES

REGULATORY BURDENS

LACK OF AVAILABLE CAPITAL

STATE AND LOCAL TAXES

COST OF EMPLOYEE SALARIES

COST OF EMPLOYEE BENEFITS, NOT INCLUDING HEALTH INSURANCE

LACK OF QUALIFIED WORKERS

FOREIGN COMPETITION

COST OF TECHNOLOGY

NO MAJOR CHALLENGES

COST OF HEALTH INSURANCE

?

36%

28%

29%

22%

8%

7%

8%

10%

5%

1%

37%

73%

47%

ECONOMIC UNCERTAINTY

DECLINE IN CUSTOMER SPENDING

$

$ $$

Able to get fi nancing Increased employment

0%

20%

40%

60%

80%

1993

1994

1995

1996

1997

2000

2007

Feb-‐08

Aug-‐08

Dec. 08

Jul. 09

Dec. 09

10-‐Jul

Able to Get Financing

Increased Employment

Amid all the fi nancial concerns small-business

owners face, the fact that Congress would approve

this new, massively burdensome 1099

reporting requirement is unfathomable.

80%

60%

40%

20%

0%


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2010 mid-year economic report - nsba

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