Study Finds Business Expectations for Revenue Have Lessened

July 28, 2006; 02:31 AM
Confidence among small businesses in the United States has decreased sharply as the economic cycle moves past the half-way mark for 2006, according to a new study from the International Profit Associates Small Business Research Board (IPA SBRB). The businesses surveyed indicated that expectations for revenue have lessened and fuel/energy costs are becoming a more critical issue.

The IPA Small Business Confidence Index (IPA SBCI), which measures expectations about revenue growth, the general economy and hiring looking forward 12 months currently stands at 39.3, declining nearly 20 percent from 47.3 in April and from 52 at the beginning of the year. By comparison the IPA SBCI stood at 55 at the beginning of 2005.

Those businesses who think revenues will increase during the next twelve months have decreased significantly. Only 46 percent of small businesses in the current survey believe their revenue will increase during the next year. This compares to 59 percent in April and 67 percent at the beginning of 2006.

Confidence regarding hiring for the next 12 months has also declined significantly since the last IPA SBRB study. Thirty percent of the small business owners and senior managers surveyed say their will increase hiring during the next twelve months. This compares to 39 percent in April and 40 percent in January.

Confidence in the general economy for the coming twelve months is wavering with 42 percent of small business owners and managers saying that the general economy will be better, compared to 44 percent in April and 49 percent at the beginning of the year.

“The IPA SBCI’s measurements of confidence in the general economy, revenue growth and hiring are all pointed downward,” 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. “This means that small and medium-sized businesses must do all they can to succeed in trying times.” Steinberg also said, “When small business owners are impacted by cost increases over which they have no control such as rising energy prices, it is even more important that they control the costs they can control in their business.”

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

Energy/fuel costs          15%
Cost of materials          13%
Taxes                         12%
Economic conditions     12%
Finding quality employees 11%
Healthcare costs          10%
Interest Rates               8%
Government regulation     5%                                  
Foreign competition    3%
Ability to obtain capital 3%
Other                         6%

“The continuing spike in the price of gasoline has pushed it to the top of the list of concerns of small businesses in America,” said Steinberg. “With the cost of materials second, these two cost-driven factors should remind business owners 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. A total of 358 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.