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.