New York The majority of the nation’s small business owners believe 2011 will be better than (44 percent) or the same (42 percent) as 2010, with only 15 percent expecting it will be worse, according to the latest Citibank small business survey. Moreover, Citibank’s latest survey shows an increase in entrepreneurs’ optimism about both current and future business conditions, offering a strong indication that after battling through the recession, small businesses are finally poised for growth.
According to the survey, the number of business owners calling current conditions excellent or good increased to 33 percent in January, up from just 24 percent in September and 23 percent in March of 2010. Similarly, the number of business owners who rate their business situation as worse than a year ago declined to 32 percent, down from 36 percent in September and 43 percent in March of last year.
“Small businesses are one of the main engines for economic growth and job creation, and their increasing optimism as we enter 2011 represents an incredibly positive development,” said Raj Seshadri, the head of Small Business Banking at Citibank. “Though challenges remain, our latest survey provides strong evidence that many small businesses see improvement in the current environment and better conditions this year.”
Business Environment Full of Unknowns
Of course, from unemployment to the rising costs of running a business, entrepreneurs still face many unknowns. Business owners say rising raw material prices (25 percent) and the increasing cost of healthcare (23 percent) pose the biggest challenges in 2011. And though concern over another downturn dropped to 78 percent in the latest survey, down from 86 percent in September, it is clearly still on the minds of many entrepreneurs.
Yet many small business owners do not appear concerned about the impact of government policies in 2011, with 40 percent expecting policies to remain the same and 18 percent expecting them to be more favorable; 42 percent say they expect less favorable policies this year.
When discussing what would make the most positive impact on their business this year, respondents cite reducing taxes (30 percent), lowering healthcare costs (17 percent), and increasing credit availability (17 percent.)
Business Costs Expected to Rise, Hiring Plans Tepid
The increasing optimism did not reveal itself in hiring plans, which remained flat compared to previous surveys. The majority of small business owners (78 percent) continue to say they plan to keep the same number of employees over the next 12 months, while 14 percent say they will increase employees and 8 percent say they will reduce jobs. When discussing what would spur hiring, 80 percent say increased sales.
On an array of expenses, the majority of respondents expect the costs of running their business to increase this year. According to the survey:
At the same time, 55 percent do not expect to raise the prices they charge this year, compared to 45 percent who say they will raise prices.
Respondents say that to grow or improve their business in 2011, they plan to work longer hours themselves (59 percent), increase marketing (52 percent), or increase employee productivity (43 percent). More than half (52 percent) say they plan to offer new products or services in the coming year, while four in 10 (43 percent) plan to expand into new markets.
Realistic but Passionate
Despite the challenging conditions, business owners remain passionate about their choice of career, with 73 percent saying they would start their business again even if they knew then what they know now about the challenges they would face, and 64 percent saying they would recommend entrepreneurship as a career to their children, up from 59 percent in September.
Additionally, younger owners and those with fewer years in business show more optimism about the overall economy and their business than older business owners. More than half of small business owners aged 18-44 (58 percent) and nearly two-thirds of those with fewer than five years in business (64 percent) believe 2011 will be better than 2010.
“While we continue to closely watch hiring and expansion plans, it is very encouraging to see the resiliency and optimism among the nation’s small business owners,” said Seshadri. “Our survey shows that the entrepreneurial spirit remains alive and well and that small businesses are ready to grow as the economy improves.”
About the Survey
This Citibank poll was conducted via telephone by Abt SRBI from Jan. 11 to Jan. 28 among a national random sample of 1,002 small businesses in the United States, with revenue over $100,000 and no more than 100 employees. The margin of error is approximately +/- 3.1% percentage points at 95% confidence. Surveys are subject to other error sources as well, including sampling coverage error, recording error, and respondent error.
Citibank is a member of Citi®, the leading global financial services company, which has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Additional information may be found at www.citigroup.com or www.citi.com.