2013 economic forecast: insights from small and mid-sized ... · 2013 economic forecast: insights...
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2013 Economic Forecast: Insights from
Small and Mid-Sized Business Owners
John K. Paglia, Ph.D., CFA, CPA
Associate Professor of Finance
Director, Pepperdine Private Capital Markets Project
Craig Everett, Ph.D., MBA
Assistant Professor of Finance
Associate Director, Pepperdine Private Capital Markets Project
2 2
This research was made possible with the support of Dun &
Bradstreet Credibility Corp., the leading provider of credit
building and credibility solutions for businesses.
DUN & BRADSTREET CREDIBILITY CORP.
Jeffrey Stibel, Chair and Chief Executive Officer
Judy Hackett, Chief Marketing Officer
Aaron Stibel, Senior Vice President, Technology
Brenda Gary, Senior Marketing Director
Bernice Brennan, Manager, Creative Services & Marketing Communications
Trenice Taylor, Marketing Manager
Noel Fundan, E-mail Marketing Manager
3 3
ACKNOWLEDGEMENTS
I’d also like to thank the following people at The Graziadio School
of Business and Management for their contributions:
Dean Linda Livingstone
Associate Dean David M. Smith
Mike Sims, Executive Officer, CER
Douglass Gore, Director of Public Relations
Mark Chun, Director, Center for Applied Research
Irina Shaykhutdinova, Research Analyst
4 4
• 25 questions
• Invite to participate distributed to sample from Dun
& Bradstreet Credibility Corp.’s business database
• 2,713 completed responses
• Where relevant, responses are segmented by
revenues sizes (<$5 million; $5 million to $100
million)
• Responses collected from January 14 – January 28
About the 2013 Economic Forecast Survey
5 5
Changes in Economic Forecast Over The Years
January
2013 January
2012 January
2011
This year US GDP (Q4/Q4) 0.4% 0.7% 2.0%
Next year US GDP (Q4/Q4) 0.9% 1.9% 2.5%
US Unemployment Rate (12/31/2012) 8.0% 8.7% 9.1%
US Housing prices (Q4/Q4) 3.0% -0.8% -1.8%
S&P 500 (Q4/Q4) 3.4% 2.5% 6.5%
Probability of US Recession in 2012 36.2% 32.0% 28.4%
6 6
2013 Economic Forecast
Projections in January 2013 Projections in January 2012
Whole sample
<$5 million $5-$100 million
Whole sample
<$5 million $5-$100 million
2013 US GDP 0.4% 0.3% 0.6% 1.9% 1.8% 2.2%
2014 US GDP 0.9% 0.9% 1.0% n/a n/a n/a
Probability of US recession in the next year 36.2% 36.9% 32.9% 32.0% 32.7% 28.8%
US Housing Prices 3.0% 2.9% 2.2% 2.5% 2.3% 3.5%
S&P 500 3.4% 3.5% 3.5% -0.8% -0.9% -0.5%
US Unemployment Rate (12/31) 8.0% 8.0% 8.0% 8.7% 8.7% 8.7%
7 7
Confidence in Business Growth Prospects Compared to One Year Ago
2013 versus 2012 Respondents
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
More confident Somewhat moreconfident
Neither more norless confident
Somewhat lessconfident
Less confident
21% 24% 25%
15% 15% 22%
32% 26%
12% 8%
8 8
The Most and The Least Influential Impediments to U.S. GDP Growth Next Year
Impediments
Most Influential Least Influential
Respondents in 2013
2012
Respondents in 2013
2012 Whole sample
<$5 million
$5-$100 million
Whole sample
<$5 million
$5-$100
million
Limited access to capital 22% 21% 19% 20% 36% 36% 48% 34%
Government regulations (tax, healthcare) 42% 42% 44% 32% 16% 16% 14% 25%
Global political and/or economic environment
29% 28% 29% 31% 5% 4% 5% 11%
Domestic (U.S.) economic and/or political environment
9% 9% 7% 21% 43% 44% 34% 23%
9 9
Year When U.S. Unemployment Rate First Reaches 6% or Below
0%10%20%30%40%50%60%70%80%90%
100%
4%
14% 22%
17% 16% 10%
2% 3% 12% 8%
26%
27%
15% 6% 4% 1% 2%
11%
2013 2012
10 10
Number of Employees Businesses Are Planning to Hire in the Next 6 Months by Size
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0 1-2 3-5 6-10 11-15 16-20 21-30 31-40 41-50 76-100
Whole sample 45% 32% 13% 5% 2% 1% 1% 0% 0% 0%
< $5 million 48% 34% 11% 4% 1% 0% 0% 0% 0% 0%
$5 million -$100 million 32% 22% 18% 12% 6% 2% 4% 1% 1% 1%
11 11
Number of Employees Businesses Are Planning to Hire in the Next 6 Months with Revenue Size
Under $5 Million, 2013 vs 2012
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 1-2 3-5 6-10 11-15
2013, <$5 million 48% 34% 11% 4% 1%
2012, <$5 million 47% 34% 10% 3% 1%
12 12
Number of Employees Businesses Are Planning to Hire in the Next 6 Months with Revenue Size
Between $5 Million and $100 Million 2013 vs 2012
0%
20%
40%
60%
80%
100%
0 1-2 3-5 6-10 11-15 16-20 21-30 31-40 41-50 51-75 76-100 Morethan100
2013, $5M - $100M 32% 22% 18% 12% 6% 2% 4% 1% 1% 0% 1% 0%
2012, $5M - $100M 27% 21% 21% 10% 5% 3% 3% 1% 1% 1% 0% 1%
13 13
Percentage of Respondents Who Raised Pay for Employees in the Last 12 Months
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Unsure
45%
55%
0%
42%
57%
1%
2013 2012
14 14
Percentage of Respondents Who Plan To Raise Pay for Employees in the Next 12 Months
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Unsure
39%
44%
17%
41% 41%
18%
2013 2012
15 15
Percentage of Respondents Who Plan to Give Employees Raises To Account for the Increase in
Payroll Tax
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Unsure
9%
83%
8% 9%
83%
8% 8%
87%
5%
Whole sample <$5 million $5-$100 million
16 16
Percentage of Respondents Who Think Instability in Washington DC is Negatively
Impacting Their Ability To Hire
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Unsure
61%
31%
8%
62%
31%
7%
57%
34%
9%
Whole sample <$5 million $5-$100 million
17 17
Percentage of Business Owners Who Personally Made More Money Last Year Than Year Prior
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Unsure
37%
61%
2%
37%
61%
2%
2013 2012
18 18
Percentage of Owners Who Personally Expect To Make More Money Next Year
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Unsure
48% 41%
11%
49%
38%
13%
2013 2012
19 19
Policies to Help Spur U.S. Job Creation
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Regulatory reform Tax incentives Increased access tocapital
Education reform Increasedcompetitive position
with foreign tradepartners
Whole sample 28% 28% 26% 6% 13%
<$5 million 28% 27% 26% 6% 13%
$5-$100 million 35% 30% 19% 3% 12%
2012 resp. 28% 21% 30% 5% 15%
20 20
Percentage of Respondents Who Support Increase of U.S. Government Debt Limit
Next Year
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Unsure
34%
58%
8% 8%
79%
13%
2013 2012
21 21
Percentage of Respondents Who Support Policies/Actions To Weaken U.S. Dollar
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Unsure
8%
79%
13% 9%
78%
13%
2013 2012
22 22
Percentage of Respondents Who Support Policies/Actions To Lower Interest Rates
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Unsure
40%
48%
12%
41%
49%
10%
2013 2012
23 23
Percentage of Respondents Who Support U.S. Government Policies/Actions To Financially
Support Struggling European Economies
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Unsure
12%
73%
15% 18%
66%
16%
2013 2012
24 24
Percentage of Respondents Who Support Balanced U.S. Government Budget
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Unsure
84%
11%
5%
79%
15%
6%
2013 2012
25 25
The Earliest Time to Support an Increase in the U.S. Government Debt Limit
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
First half of2013
Second halfof 2013
2014 2015 2016 2017 orlater
Never
35%
6% 6% 2% 2%
6%
43%
Whole sample
26 26
Outlook for Business in 2013 after Fiscal Cliff Was Averted
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
better worse neutral - neither better norworse
14% 20%
66%
27 27
How Respondents Feel the Affordable Care Act Will Affect the Overall Health Care Costs
of their Businesses
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Increase the healthcare costs
Decrease the healthcare costs
no significant effect unsure
42%
6%
27% 25%
28 28
Percentage of Respondents Who Currently Offer Some Kind of Health Care Plan for Employees
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Not applicable, I am a 1-2person company.
41%
28% 31%
29 29
Adjustments That Respondents Are Planning to Make to Business Healthcare Plan
0%10%20%30%40%50%60%70%80%90%
100%
Dropemployee
healthinsurance
coverage andpay employer
mandatepenalty tax
Switch todefined
contributionhealthcare
plan
Keep currentemployeehealthcare
coverage butshop for
cheaper rates
Keep currentemployeehealthcare
coverage butreduce other
employeebenefits
Keepinsurance, but
reducecoverage(benefits)
No changes
9% 3%
28%
5% 16%
39%
30 30
Details About the Respondents Geographic Location
31 31
Details About the Respondents Percentage of Respondents Who Feel Their State Supports
Business Policies That Benefit Their Business
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No
50% 50%
32 32
Details About the Respondents Percentage of Respondents Who Feel Their State Should Be
More Involved in Making Capital More Accessible to Businesses
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No
64%
36%
33 33
Details About the Respondents Percentage of Respondents Who Feel That They Have Access to Information about Available Capital Programs That Their
Business Could Be Participating in Their State Today
0%
20%
40%
60%
80%
100%
Yes No
44%
56%
34 34
Details About the Respondents Industry
31%
10%
10% 11%
7%
6% 5%
4% 3% 3%
4% 3% 2% 1%
Services
Retail trade
Construction
Finance & real estate
Manufacturing
Information technology or services
Health care
Wholesale trade
Unclassified establishments
Educational services
Arts, entertainment or recreation
Transportation and warehousing
Forestry, fishing, hunting or agriculture
Utilities & mining
35 35
Details About the Respondents Annual Revenues
6% 22%
25% 13%
19%
5% 3%
2% 1% 3% 1% $0 or pre-revenue stage
$1 - $100,000
$100,001 - $500,000
$500,001 - $1,000,000
$1,000,001 - $5,000,000
$5,000,001 - $10,000,000
$10,000,001 - $25,000,000
$25,000,001 - $50,000,000
$50,000,001 - $100,000,000
$100,000,001 - $500,000,000
More than $500,000,000
36 36
Details About the Respondents Annual Revenues Change Over Last 12 Months
-1.7%
7%
3% 3% 4% 4%
4% 4% 2% 3%
24%
9%
5%
8%
5% 4% 3%
2% 2%
4%
-4.0%
1.0%
6.0%
11.0%
16.0%
21.0%
26.0%
Decline Increase
37 37
Details About the Respondents Annual Revenues Change Expectations (Next 12 Months)
2% 1% 1% 2% 2% 2%
3% 2% 2%
22%
13%
8%
11%
6% 6% 5%
2% 2%
8% 6.4%
-4%
1%
6%
11%
16%
21%
26%
Decline Increase
38 38
Details About the Respondents Annual Income
6% 22%
25% 13%
19%
5% 3%
2% 1% 3% 1% $0 or pre-revenue stage
$1 - $100,000
$100,001 - $500,000
$500,001 - $1,000,000
$1,000,001 - $5,000,000
$5,000,001 - $10,000,000
$10,000,001 - $25,000,000
$25,000,001 - $50,000,000
$50,000,001 - $100,000,000
$100,000,001 - $500,000,000
More than $500,000,000
39 39
Details About the Respondents Firm age
7% 6% 5%
7%
14% 22%
39%
Less than 1 year
At least 1 but less than 2
At least 2 but less than 3
At least 3 but less than 5
At least 5 but less than 10
At least 10 but less than 20
20 or more
40 40
Details About the Respondents Number of Employees
7%
35%
21%
15%
5%
4% 4% 3%
3% 1% 2%
0 1-2
3-5 6-10
11-15 16-20
21-30 31-50
51-100 101-200
More than 200
41 41
About Pepperdine Private Capital Markets Project
The Pepperdine Private Capital Markets Project at the Graziadio School of
Business and Management is the first simultaneous, comprehensive, and on-going
investigation of the major private capital market segments. The research seeks to
understand the true cost of private capital across market types and the investment
expectations of privately-held business owners; providing lenders, investors and
the businesses that depend on them with critical data to make optimal investment
and financing decisions, and better determine where the opportunities to create
lasting economic value may be realized. Download reports and find more
information at http://bschool.pepperdine.edu/privatecapital.
About Pepperdine University’s Graziadio School of Business and
Management
Founded on the core values of integrity, stewardship, courage, and compassion,
Pepperdine University’s Graziadio (GRAT-ZEE-ah-DEE-oh) School of Business
and Management has been developing values-centered leaders and advancing
responsible business practice since 1969. Student-focused, experience-driven, and
globally-oriented, the Graziadio School offers fully accredited top-ranked MBA,
Masters of Science, and bachelor’s completion business programs. More
information found at http://bschool.pepperdine.edu/newsroom/.
42 42
THANK YOU!
John K. Paglia, Ph.D., CFA, CPA
Associate Professor of Finance
Director, Pepperdine Private Capital Markets Project
http://bschool.pepperdine.edu/privatecapital
john.paglia@pepperdine.edu
805.379.5809
Craig Everett, Ph.D., MBA
Assistant Professor of Finance
Associate Director, Pepperdine Private Capital Markets Project
http://bschool.pepperdine.edu/privatecapital
craig.everett@pepperdine.edu
310.506.8543
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