Capital One Small Business Growth Index Reveals Crucial Info About Small Business Environment

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The Capital One Small Business Growth Index, a biannual survey of 500 small business owners that evaluates attitudes towards individual business growth, industry conditions, and the economy as a whole, continues to be a vital tool in assessing the current environment of small businesses throughout the nation.

According to the Fall 2018 Small Business Growth Index, the majority of small business owners are optimistic and satisfied with the current small business environment, but at the same time are facing a number of challenges and are concerned about how new governmental policies will affect them. These results are particularly significant because they are largely a result of the Tax Cuts and Jobs Act, a new piece of legislation signed by the Trump administration in December 2017 that lowers individual tax rates and increases the business expense tax deduction limit, as well as new tariffs that were introduced in January 2018. While the Spring 2018 Small Business Growth Index, published in April, evaluated early reactions towards the new tariffs and tax legislation, the Fall 2018 Small Business Growth Index evaluates more educated attitudes on these economic changes. As small business owners continue to realize just how complex the Tax Cuts and Jobs Act is (and just how much it might affect them), they are increasingly seeking out legal advice; 78% of small business owners have met with or plan to meet with an accountant or financial advisor too discuss the tax plan.

Small Business Owners Are More Optimistic Than Ever

Although the Tax Cuts and Jobs Act has been criticized for favoring large corporations with more expenses to deduct who will reach the $1million limit (unlike small businesses who will see little to no change) and are more likely to be able to afford hobby related expenses that are no longer deductible, the overall impact on small businesses has largely been positive. Despite these concerns, 2018 has so far proved to be a year of strong economic conditions and business growth that has facilitated an environment of optimism in the small business community. Over the past year, 48% of small businesses have experienced an increase in sales during the past 6 months, and 67% of American small business owners consider business conditions to be “good” or “excellent.”

 Of the small business owners who consider current business conditions to be good or excellent,

  • 65% credit business growth,
  • 54% praise national economic conditions, and
  • 51% cite improved business

Small Business Owners Are Concerned About Economic Policies

Despite the fact that 59% of small business owners surveyed felt the change in presidential leadership has had a positive impact on small businesses, small business owners remain concerned about certain policies and how they will impact their firms. Currently,

  • 49% of small business owners are concerned about the cost of healthcare,
  • 43% are concerned by tax policies, and
  • 36% are concerned about economic growth.

Another major concern, cited by one-third of small business owners (33%), is the Trump administration’s new tariffs and how they will affect small businesses. The series of tariffs passed by the Trump administration first in January, and then again in June, protected industries such as steel and aluminum, but also drove up the prices of production materials for businesses that previously could only afford to purchase foreign materials; now, these businesses, who going forward must pay high rates of American companies or else pay a 25% tariff on foreign steel, may struggle to afford production materials at all. As a result, many small businesses are concerned about their long-term sustainability.

Small Businesses Are Struggling To Hire

Another challenge facing small businesses today is that they are struggling to attain and retain employees. Today, 33% of small business owners plan to hire within the next 6 months, up from 25% one year ago; this increased rate of planned hires is a result of expansion due to increased economic growth, but also as a result of newfound hiring difficulties. Thirty-eight percent of small business owners blame larger corporations for hiring difficulties. While the Tax Cuts and Jobs Act created a better financial situation for small businesses that allowed them to expand, it also put them at a significant disadvantage in the hiring market; because the legislation allowed businesses to deduct higher amounts but restricted “personal” businesses expenses, larger corporations could now afford to offer benefits to employees that small businesses could no longer afford. As a result, the most qualified employees began to leave smaller firms for larger ones, and began to seek employment at small businesses with decreased frequency.

According to small business owners, the top reasons they are struggling to hire includes

  • the skills gap (cited by 34% of small business owners). It is increasingly difficult to find workers with specific skills, and small businesses do not have the same resources to train workers that larger corporations
  • competition from other businesses (cited by 30% of small business owners)
  • financial resources (cited by 30% of small business owners), and
  • the tight labor market (cited by 28% of small business owners).

Small Business Owners Are At a Disadvantage – But Should Remain Optimistic

“The Small Business Growth Index tells us that business owners are tackling challenges like hiring and retention with fewer resources than larger companies,” said Brad Jiulianti, head of small business card at Capital One. “Despite these challenges, we are encouraged by the continued optimism among business owners, especially given the major role they play in our nation’s economy.”

Capital One Wants to Help

In recent years, Capital One has emerged as a staunch supporter of small businesses that seeks to bridge the resource gap between modest firms and large-scale corporations. In addition to releasing the bi­annual Capital One Small Business Growth Index, Capital One provides a Spark Cash Card, which offers 2% cash­back on everything you buy, to small businesses.

Don’t forget to submit to Capital One’s Power of 2 Contest for small businesses by the November 3rd deadline – or peruse other entries for inspiration on how you can use cash back rewards to drive your business forward.Share how you use your cash­back rewards here and­ get the chance to win first prize of $50k, second prize of $25k, and third prize of $15k.

Published in cooperation with Capital One.

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