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IPA SBRB Study: Small Business Confidence Declines from Start of the Year

SB Informer
Thursday, April 27, 2006; 02:24 AM

Buffalo Grove, IL - Small businesses in the United States are less confident than at the beginning of the year, which had already declined from the beginning of 2005, according to a new study from the International Profit Associates Small Business Research Board (IPA SBRB). The businesses surveyed still reflect confidence in providing increased compensation to employees and the outlook for hiring.

The IPA Small Business Confidence Index (IPA SBCI), which measures expectations about revenue growth, the general economy and hiring looking forward 12 months, which now stands at 47.3, declined nearly 10% from 52 at the beginning of the year. By comparison the IPA SBCI stood at 55 at the beginning of 2005.

Small businesses are providing increased compensation to employees. For 2006, nearly 70% of the businesses surveyed said they are providing raises with 36% providing raises of 5% or more and 33% providing raises of less than 5%.

At the beginning of the year, 67% of those businesses surveyed said they thought revenue would increase for the entire year. In the current survey, 59% still feel their revenues will improve during the next 12 months.

Confidence regarding hiring for the next 12 months is only slightly changed with 39% saying they will increase hiring in the current survey compared with 40% at the beginning of the year.

Confidence in the general economy for the coming twelve months is wavering with 44% of small business owners and managers saying that the general economy will be better, compared to 49% at the beginning of the year. At the beginning of 2005, 53% of those in the IPA SBRB study said the economy would be better over the next year.

However, 27% of those in the current survey say the economy will be worse during the next 12 months. This compares with 18% at the beginning of the year.

“At the beginning of the year, economic conditions topped the list of concerns for small business owners and 49% of respondents expected the economy to improve. As the confidence level has fallen to 44%, owners are now more concerned about the costs of operating their own businesses rather than the economy in general.” said Gregg Steinberg, President of International Profit Associates, the largest privately-held provider of management consulting and professional services to small and medium-size businesses in North America. “Controlling material costs has now become the number one concern of the owners of small and medium-size businesses.”

The owners and managers were asked about the single most important factor impacting their businesses. The responses in the current survey are:

Cost of Materials                       18%
Healthcare costs                                 14%
Finding quality employees             13%
Taxes                                                      12%
Economic conditions                        11%
Energy/fuel costs                                  9%
Interest Rates                                       6%
Government regulation                        4%                                  
Foreign competition                 3%
Ability to obtain capital                   3%
Other                                                 6%

(Please note that the IPA SBRB will issue its first survey of the construction/contractor industries in the next week.)

“While the cost of gasoline is driving the public's attention, it is one of the basic material costs that now represent more than a quarter of the responses as the single major concern for small and medium-size business owners,” said Steinberg. “The important thing for business owners to remember is to have strong real-time controls in place that take into account changing market conditions and provide for immediate operational adjustments."

The International Profit Associates Small Business Research Board ascertains and reports the opinions of small business owners and managers on a wide variety of topics related to their own businesses as well as national and international issues that may impact their operations.

Participants in the poll provide feedback on significant issues and allow for real-time insight into the state of small businesses nationwide. The universe of participants is developed from among small businesses across the United States. Nearly 500 small business owners and senior managers participated in this IPA SBRB poll. The IPA SBRB study is a voluntary survey conducted via phone and email. The poll was structured and supervised through an independent resource.

The latest information about the IPA Small Business Research Board can be found at www.ipasbrb.com.

International Profit Associates, Inc. (IPA) is the largest privately-held provider of management consulting services to small and medium-size businesses in North America.     IPA and its more than 1,800 professionals offer a wide range of proven and innovative methodologies to help businesses grow and prosper regardless of the economic cycle. IPA either provides directly or through its affiliated companies a comprehensive array of business advisory services, tax and estate planning services or merger, acquisition and other financial advisory services in the United States and Canada. More information about IPA can be found at www.ipa-iba.com.

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