Small Business Owners' Outlook Positive for 2007, Business Confidence Survey Shows

November 3, 2006; 02:25 AM
Small business owners are expressing optimism for 2007, saying they expect their companies to grow at a faster clip than this year, according to results of the latest Administaff's Business Confidence Survey. These executives also said they plan to increase their workforce, give raises and invest in their companies in the coming year.

Business owners' confidence appears to be holding steady over the same period last year, results show. More than two-thirds -- 70 percent -- said they expect their companies to exceed this year's growth levels, compared with 68 percent of respondents who answered the same question in 2005.

That growth will be reflected in increased staffing, salaries and capital spending:

   *  70 percent plan to add employees
   *  Only 5 percent expect a drop-off in their workforce
   *  59 percent expect to increase employee compensation
   *  33 percent plan to maintain their current compensation levels
   *  64 percent expect to pay more overtime
   *  44 percent plan to increase capital spending

"We are seeing business owners express optimism as their companies continue to grow," said Paul J. Sarvadi, Administaff chairman and chief executive officer. "That kind of confidence helps keep the economy moving ahead."

Also today, Administaff released third-quarter compensation data compiled from its client base of more than 5,000 small and medium-sized businesses throughout the country.

"The outlook is bright in the small business community," Sarvadi said. "Average compensation is up 7.1 percent in 2006 versus a 5.8 percent increase for 2005, bonuses are up 12 percent and commissions -- an indication of the sales pipeline for our client base -- are up 5.2 percent." In addition, overtime pay is running 10.1 percent of regular pay.

Hiring a top concern

Executives still expect challenges in 2007, especially when it comes to retaining talented employees and finding qualified candidates to fill new positions. More than any other concern, business owners listed "hiring the right people" as a top issue. A strong majority -- 67 percent -- said they will increase their efforts to retain employees next year.

To retain employees, most said they planned to review and take steps to improve compensation, incentives, bonuses and commissions. Others said they would strengthen their benefits packages. Additional retention strategies cited included:

   *  Offering training and development, and job enrichment
   *  Improving communication with employees
   *  Enhancing employee recognition programs
   *  Improving the work environment
   *  Adding flex-time scheduling

Key business issues

Cost and availability of health care remain a concern for small business owners. After hiring, the rising cost of health care ranked as a top issue. Other challenges cited, listed in order, are:

   *  Controlling costs
   *  Retaining valued employees
   *  The economy
   *  Increased business competition

Many expressed optimism while acknowledging the need to be responsive to the marketplace. "We are looking to grow and control the growth," one executive wrote. "As we develop our products and services, the competition is going to be on our heels. We need to find ways to keep our niche and keep competitive."

Another wrote: "The bright overall macroeconomic picture suggests continued capital spending by industry and government, and that's great for innovative small businesses like mine."

Others were slightly more cautious. "These things are hard to judge. I would put a big margin of error on any forecast I make at the moment," said one business owner.

About the Business Confidence Survey

Respondents to the Administaff Business Confidence Survey are among the small and medium-sized companies Administaff serves throughout the country. The questions were designed to take the pulse of the small business community and gauge the expectations of business owners going into 2007.

Administaff conducted the survey in late October. Researchers surveyed chief executive officers, chief financial officers and other executives in a variety of industries at its client companies across the United States. The overall sampling error is +/- 5 percent at the 95 percent confidence level.

Administaff (www.administaff.com) is the nation's leading professional employer organization (PEO), serving as a full-service human resources department that provides small and medium-sized businesses with administrative relief, big-company benefits, reduced liabilities and a systematic way to improve productivity. The company operates 41 sales offices in 22 major markets.