Take a look at The Business Journal’s report to see why all-time high optimism among small and mid-size business owners could in turn make their New Year projections a reality.
New Year Projections Call for Growth – but Where?
Some state-of-the-state reports seem to tell you what you already know; however, The Business Journal’s report titled, 2017 Predictions: Growth Industries and Locations Plus the Topics that Will Matter Most offers interesting and actionable insights.
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8 Takeaways from New Year Projections for Small and Mid-Size Companies
Optimism at a 10-year High
There are many factors contributing to the positive numbers reflected in both The Business Journals’ SMB (Small and Mid-size Business) study as well as others, such as the NFIB (National Federation of Independent Business) Small Business Optimism index. While continued recovery from The Great Recession is one factor, NFIB also points to a post-election optimism surge based on the belief that a more business-friendly administration will create a climate conducive to commercial growth.
Optimistic small business owners drive economic growth. In light of optimism, small business owners’ New Year projections include plans to increase hiring and to earn more revenues. In fact, 8 out of the 10 factors that contribute to the index grew in November 2016 compared to the previous month:
- 15% plan to hire more workers ( +1 from October)
- 24% plan to make capital outlays ( -3 )
- 4%t plan to increase inventories ( +2 )
- 12% expect the economy to improve ( +19 )
- 11% expect real sales to be higher ( +10 )
- Current inventory is down 4% ( – )
- Current job openings at 31% ( +3 )
- Credit conditions expected to improve ( +1)
- 11% say now is a good time to expand ( +2 )
- +1 show improved earnings trends
Growth in 3 out of 4 of the Top 50 MSAs
“MSA” refers to Metropolitan Statistical Areas as defined by the U.S. Census Bureau. The top 50 MSAs are home to two-thirds of all U.S. businesses, so growth or decline in these areas is significant. The Business Journal report shows that 74 percent of the top 50 MSAs grew between 2009 and 2014. Smaller MSAs (not among the top 50) had far fewer growth markets – just 35 percent. Of note, four Texas MSAs appeared among the top 10 (and 3 of the top 4) and three Florida cities were also among the top 10 fastest growing metropolitan areas from 2009 and 2014:
- Austin +15.3%
- Miami +11.26%
- Houston +8.7%
- Dallas/Fort Worth +7.1%
- Orlando +8.5%
- San Antonio +6.4%
- Raleigh +5.5%
- Tampa +5.4%
- Salt Lake City +5.3%
- Oklahoma City +5.1%
Corporate Responsibility isn’t Just for Big Business Anymore
An estimated 45 percent of SMB owners will be actively working to make sustainability part of their company’s culture in 2017, compared to just 40 percent in 2011. For the first time, more than half (51 percent) of SMBs say that businesses have a responsibility to address key social and environmental issues, up from just 46 percent from last year.
The Year of the Latino Entrepreneur?
The Hispanic-owned business growth rate of over 40 percent is more than three times the national average, projected to grow to 4.8 million businesses in 2017 (up from 3.3 million Hispanic-owned businesses in 2012). Among the nine industries covered in the report, the Hispanic-owned business growth rate is faster than non-Latino-owned businesses for:
- Other services
- Administrative support
- Health care and social assistance
- Transportation and warehousing
However, the growth rate of Latino-owned businesses is equal when it comes to Accommodations and Food Services, but trails in:
- Professional, scientific and technical
- Real estate / renting and leasing
Mobile-Only? Not so Fast
New Year projections say mobile ad spending will reach almost $53 billion next year, nearly doubling the $31 billion spent in 2015. While 87 percent of SMB owners say they use their smartphones to access business news and information (up from 57 percent two years ago and 75 percent last year), they are still spending marketing and advertising dollars on traditional marketing channels as well. Small and mid-size business owners say they plan to increase spending on mobile advertising next year, but plan to reduce use and spending on print ads, trade shows and events, and direct mail during 2017-18.
Top Concerns of Small Business Owners
it’s not all good news; though. Few small and mid-size business owners weren’t hit by significant (if not astronomical) increases in the cost of health insurance over the past couple of years. New Year projections say that 63 percent are “very concerned” about the cost of health insurance and employee benefits, and not only because of the costs themselves. SMB enterprises often find themselves at a competitive hiring disadvantage with large companies that have more resources to pour into employee benefit packages, which is a distinct advantage in the battle over top talent.
Cyber security is also a top concern for small and mid-size business owners. An estimated half-million SMBs will actually shut down in 2017 because of cyber security breaches. 78 percent of SMB owners say they are “somewhat concerned” or “very concerned” about the safety and security of their company’s technology, email and other data.
Fastest-Growing and Struggling Segments
Educational Services enjoyed the highest growth rate from 2008 to 2014; however, due to their sheer numbers the industries that dominated in growth included:
- Healthcare and social assistance ( +8.1 )
- Accommodations ( +6.7 )
- Professional, science, and technology services ( +4.1 )
Of the 17 industries noted in the study, ten experienced growth during the period. Of the seven that declined, Construction was the hardest hit:
- Construction ( – 13.8 )
- Manufacturing ( -10.3 )
- Finance and insurance ( -6.2 )
A Millennial-Dominated Workforce
Millennials have been the largest segment of the workforce for the past several years; however, by 2020 they will make up a full half of the U.S. employee landscape, which is predicted to be:
- 7% Gen Zers (born 1998- )
- 50% Millennials (born 1981-1997)
- 20% Gen Xers (born 1965-1980)
- 22% Baby Boomers (born 1946-1964)
- 1% Traditionalists (born 1945 or earlier)
Members of the Millennial generation tend to view work far differently than preceding generations and few define themselves by professional success alone. They want – and expect – employers to create an organizational culture characterized by:
- 88% – a fun, social environment
- 81% – the ability to set their own schedule
In fact, only 63 percent are motivated primarily by money; preferring instead to have the flexibility to work a flexible schedule, both in and outside of the office, that is more focused on accomplishing the work required than showing up for hours required. They’re also more interested in work that helps fulfill a greater purpose compared to previous generations (45 percent of Millennials compared to 33 percent of Baby Boomers).