2019 economic forecast: insights from small and …...• invite to participate distributed to...

02.09.19

PRIVATE CAPITALMARKETS PROJECT

bschool.pepperdine.edu/privatecapital

P E P P E R D I N E

2019 Economic Forecast: Insights from Small and Mid-Sized Business Owners

Craig Everett, Ph.D., MBA Director, Pepperdine Private Capital Markets Project


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PUBLISHED BY

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ACKNOWLEDGEMENTS

Special thanks to the following people at The Graziadio School of Business and Management for their contributions.

PEPPERDINE GRAZIADIO SCHOOL OF BUSINESS AND MANAGEMENT

Deryck J. van Rensburg, Ph.D.Dean

John K. Paglia, Ph.D.Associate Dean, Professor of Finance

Lisa PerryDirector, Marketing and Communications

Irina MicunovicResearch Associate


This research was made possible with the support of Dun & Bradstreet.

DUN & BRADSTREET

Jeffrey StibelVice Chairman

Judy Hackett, Chief Marketing Officer

Aaron StibelChief Technology Officer

Heather HerndonDirector, Marketing and Communications

Lauren SimpsonMarketing and Communications Manager

Bernice BrennanManager, Creative Services & Marketing Communications

Ben PollockMarketing Manager

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• Invite to participate distributed to sample from Dun & Bradstreet Credibility Corp.’s business database

• 592 completed responses• Where relevant, responses are segmented by revenues sizes (<$5 million; $5 million to $100 million)

• Responses collected from January 24 – February 24, 2019

ABOUT THE 2019 ECONOMIC FORECAST SURVEY


ECONOMIC FORECAST

Projections in January 2018 Projections in January 2019

Whole sample

<$5 million $5-$100 million

Whole sample

<$5 million $5-$100 million

This year US GDP 2.0% 2.0% 2.6% 1.3% 1.2% 1.9%

Next year US GDP 2.4% 2.4% 2.8% 1.4% 1.3% 1.8%

Probability of US recession in the next year 4.4% 4.3% 4.3% 4.5% 4.6% 3.9%

S&P 500 8.1% 8.2% 8.3% 2.6% 2.0% 4.6%

US Unemployment Rate (12/31) 24.0% 24.0% 22.9% 31.0% 32.1% 24.2%

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ARE RESPONDENTS PLANNING TO OR ARE THEY IN THE PROCESS OF PREPARING THEIR BUSINESS FOR A POTENTIAL RECESSION

7

19%

24%57%

Yes, we are in the process ofpreparing for a potential recession.

We're planning to prepare BUT wehaven't started yet.

No, we don't plan on preparing fora potential recession.


CONFIDENCE IN BUSINESS GROWTH PROSPECTS

8

0%

20%

40%

60%

80%

100%

More confident Somewhat moreconfident

Neither more nor lessconfident

Somewhat less confident Less confident

2012 22% 32% 26% 12% 8%2013 21% 24% 25% 15% 15%2014 27% 29% 24% 10% 11%2015 35% 31% 22% 7% 6%2016 50% 36% 10% 4%2017 44% 44% 9% 3%2018 47% 41% 9% 3%2019 28% 51% 13% 6% 1%


Impediments

Most Influential Least Influential

Respondents in 2019Respondents in

2018

Respondents in 2019Respondents in

2018Whole sample

<$5 million

$5-$100 million

Whole sample

<$5 million

$5-$100 million

Limited access to capital 20% 22% 10% 26% 44% 41% 54% 36%

Government regulations (tax, healthcare) 29% 28% 34% 33% 15% 16% 13% 18%

Global political and/or economic environment 38% 35% 46% 28% 10% 11% 7% 11%

Domestic (U.S.) economic and/or political environment

16% 17% 14% 16% 24% 25% 20% 30%

THE MOST AND THE LEAST INFLUENTIAL IMPEDIMENTS TO U.S. GDP GROWTH NEXT YEAR

9


CHANGES IN ECONOMIC FORECAST OVER THE YEARS

2011 2012 2013 2014 2015 2016 2017 2018 2019

This year US GDP change 2.0% 0.7% 0.4% 0.6% 1.1% 0.4% 1.7% 2.0% 1.3%

Next year US GDP change 2.5% 1.9% 0.9% 1.2% 1.6% 1.3% 2.3% 2.4% 1.4%

US Unemployment Rate at the end of the year

9.1% 8.7% 8.0% 7.7% 6.1% 6.3% 4.9% 4.4% 4.5%

S&P 500 year change 6.5% 2.5% 3.4% 4.0% 4.4% 0.9% 5.8% 8.1% 2.6%

Probability of US Recession this year

28.4% 32.0% 36.2% 29.2% 25.5% 32.5% 24.6% 24.0% 31.0%

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NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS BY SIZE

11

0%5%

10%15%20%25%30%35%40%

0 1-2 3-5 6-10 11-15 16-20 21-30 41-50 51-75 101 -200

Whole sample 31% 36% 20% 7% 3% 1% 1% 0% 1% 1%< $5 million 35% 38% 19% 5% 2% 0% 0% 0% 0% 0%$5 million -$100 million 13% 22% 26% 15% 6% 5% 5% 1% 4% 4%


NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS WITH REVENUE SIZE UNDER $5 MILLION

12

0%20%40%60%80%

100%

0 1-2 3-5 6-10 11-15 16-20 21-302012, <$5 million 47% 34% 10% 3% 1% 0% 0%2013, <$5 million 48% 34% 11% 4% 1% 0% 0%2014, <$5 million 43% 35% 14% 5% 1% 1% 0%2015, <$5 million 45% 33% 13% 5% 1% 1% 1%2016, <$5 million 34% 35% 18% 7% 3% 1% 1%2017, <$5 million 37% 39% 15% 6% 1% 1% 1%2018, <$5 million 32% 39% 17% 7% 2% 1% 1%2019, <$5 million 35% 38% 19% 5% 2% 0% 0%


NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS WITH REVENUE SIZE BETWEEN $5 MILLION AND $100 MILLION

13

0%20%40%60%80%

100%

0 1-2 3-5 6-10 11-15 16-20 21-30 31-40 41-50 More than50

2012, $5M - $100M 27% 21% 21% 10% 5% 3% 3% 1% 1% 2%2013, $5M - $100M 32% 22% 18% 12% 6% 2% 4% 1% 1% 1%2014, $5M - $100M 23% 26% 22% 13% 6% 2% 3% 2% 1% 2%2015, $5M - $100M 27% 22% 24% 11% 3% 4% 3% 3% 1% 2%2016, $5M - $100M 18% 23% 25% 14% 6% 5% 1% 2% 2% 4%2017, $5M - $100M 14% 26% 25% 13% 4% 7% 3% 1% 3% 2%2018, $5M - $100M 21% 27% 21% 15% 7% 6% 3% 1% 0% 0%2019, $5M - $100M 13% 22% 26% 15% 6% 5% 5% 0% 1% 8%


POLICIES TO HELP SPUR U.S. JOB CREATION

14

0%10%20%30%40%50%60%70%80%90%

100%

Regulatory reform Tax incentives Increased access to capital Education reform Increased competitivenesswith foreign trade partners

Repeal or ModifyAffordable Care Act

2011 17% 19% 44% 14%2012 28% 21% 30% 5% 15%2013 28% 28% 26% 6% 13%2014 13% 19% 22% 6% 8% 32%2015 13% 23% 23% 8% 9% 23%2016 12% 23% 26% 7% 12% 20%2017 22% 25% 24% 6% 8% 15%2018 15% 26% 27% 9% 10% 13%2019 17% 24% 21% 9% 16% 13%


POLICIES SUPPORTED IN 2019

15

76%

80%

46%

62%

36%

27%

72%

40%

29%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Balanced US Budget

Comprehensive immigration reform with a path to citizenship

Repeal of the Affordable Care Act

Significant Reform of the Affordable Care Act

Continuation of ‚ÄúQuantitative Easing‚Äù by Federal Reserve

Congress continuing to extend long-term unemployment benefits

Increased border security

Increased federal gun laws

Increased enforcement of Federal marijuana law


DETAILS ABOUT THE RESPONDENTSGEOGRAPHIC LOCATION

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DETAILS ABOUT THE RESPONDENTSINDUSTRY

17

16%

15%

14%

9%8%

7%

6%

4%4%

3%

2%2% 2% 2%

1%1%1%

2%

Professional, scientific or technical servicesConstructionOther services (except public administration)Retail tradeManufacturingInformation technology or servicesHealth careWholesale tradeFinance or insuranceTransportation and warehousingArts, entertainment or recreationForestry, fishing, hunting or agricultureEducational servicesReal estate or rental and leasingRestaurantsAdmin, support, waste management or remediation servicesUtilitiesUnclassified establishments


DETAILS ABOUT THE RESPONDENTSANNUAL REVENUES

18

2%2% 2%2% 4%

6%

11%

12%

15%13%

12%

6% 5%3% 1%

4%$0 or pre-revenue stage$1 - $5,000$5,001 - $10,000$10,001 - $25,000$25,001 - $50,000$50,001 - $100,000$100,001 - $250,000$250,001 - $500,000$500,001 - $1,000,000$1,000,001 - $2,000,000$2,000,001 - $5,000,000$5,000,001 - $10,000,000$10,000,001 - $25,000,000$25,000,001 - $50,000,000$50,000,001 - $100,000,000$100,000,001 - $500,000,000


ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS: WHOLE SAMPLE

19

4%

1%3% 4% 3% 4% 4%

2% 2%

20%

14%

8% 8%6%

5% 4%2%

1%

5%

1.2%0%

5%

10%

15%

20%

25%

> 50%41-50%

31-40%21-30%

16-20%11-15%

6-10%4-5%

2-3%

Stayed fla

t2-3%

4-5%6-10%

11-15%16-20%

21-30%31-40%

41-50%> 50%

Average

Decline Increase


ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES UNDER $5M

20

5%

1%3% 4% 3% 4% 5%

2% 2%

21%

14%

7% 7%5% 4% 4%

2% 1%

5%

0.6%0%

5%

10%

15%

20%

25%

> 50%41-50%

31-40%21-30%

16-20%11-15%

6-10%4-5%

2-3%

Stayed fla

t2-3%

4-5%6-10%

11-15%16-20%

21-30%31-40%

41-50%> 50%

Average

Decline Increase


ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES FROM $5M TO $100M

21

2% 2% 2% 2%1% 1%

4%

16%17%

14%13%

10%

5%6%

1%2%

4.2%

0%2%4%6%8%

10%12%14%16%18%

> 50%21-30%

16-20%11-15%

6-10%4-5%

2-3%

Stayed fla

t2-3%

4-5%6-10%

11-15%16-20%

21-30%31-40%

> 50%

Average

Decline Increase


ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): WHOLE SAMPLE

22

1% 1% 1% 1% 1% 2% 2% 2%

18%

14%

10%

14%

7% 7%5%

2% 3%

7%8.6%

0%2%4%6%8%

10%12%14%16%18%20%

> 50%41-50%

21-30%16-20%

11-15%6-10%

4-5%2-3%

Stayed fla

t2-3%

4-5%6-10%

11-15%16-20%

21-30%31-40%

41-50%> 50%

Average

Decline Increase


ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES UNDER $5M

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1% 1% 1% 2% 1% 2% 2% 2%

19%

15%

10% 11%

6% 6% 6%

2% 3%

7%9.0%

0%2%4%6%8%

10%12%14%16%18%20%

> 50%41-50%

21-30%16-20%

11-15%6-10%

4-5%2-3%

Stayed fla

t2-3%

4-5%6-10%

11-15%16-20%

21-30%31-40%

41-50%> 50%

Average

Decline Increase


ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES $5M TO $100M

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4% 4%1% 1%

13%

8%

13%

30%

12%8%

1%4%

7.5%

0%

5%

10%

15%

20%

25%

30%

35%

11-15%6-10%

4-5%2-3%

Stayed fla

t2-3%

4-5%6-10%

11-15%16-20%

31-40%> 50%

Average

Decline Increase


DETAILS ABOUT THE RESPONDENTSANNUAL INCOME

25

7% 6%5%

7%

10%

17%19%

13%

6% 4% 3% 3% Negative (net loss) $1 - $5,000

$5,001 - $10,000 $10,001 -$25,000

$25,001 - $50,000 $50,001 - $100,000

$100,001 - $250,000 $250,001 - $500,000

$500,001 - $1,000,000 $1,000,001 - $2,000,000

$2,000,001 - $5,000,000 Greater than $5,000,000


DETAILS ABOUT THE RESPONDENTSTOTAL BUSINESS ASSETS

26

2%5% 6% 7%

5%

11%

11%12%11%

8%

10%4% 3%

1% 2%1%

1% $0$1 - $5,000$5,001 - $10,000$10,001 - $25,000$25,001 - $50,000$50,001 - $100,000$100,001 - $250,000$250,001 - $500,000$500,001 - $1,000,000$1,000,001 - $2,000,000$2,000,001 - $5,000,000$5,000,001 - $10,000,000$10,000,001 - $25,000,000$25,000,001 - $50,000,000$50,000,001 - $100,000,000$100,000,001 - $500,000,000


DETAILS ABOUT THE RESPONDENTSFIRM AGE

27

1%1%2% 8%

13%

25%50%

< 1 year

At least 1 but less than 2





20 or more


DETAILS ABOUT THE RESPONDENTSNUMBER OF FULL-TIME EMPLOYEES

28

38%

22%

15%

7%18%

1-2 3-5

6-10 11-15

More than 15


DETAILS ABOUT THE RESPONDENTSNUMBER OF PART-TIME EMPLOYEES

29

35%

36%

14%5%

3%7% 0 1-2

3-5 6-10

11-15 More than 15


DETAILS ABOUT THE RESPONDENTSNUMBER OF FEMALE EMPLOYEES

30

18%

46%

20%

6%

1%9% 0 1-2

3-5 6-10

11-15 More than 15


DETAILS ABOUT THE RESPONDENTSMINORITY-OWNED TYPES

31

0%

20%

40%

60%

80%

100%

African AmericanOwned

Asian AmericanOwned

Hispanic AmericanOwned

Native AmericanOwned

Service-DisabledVeteran Owned

Women Owned

Whole sample 16% 4% 13% 5% 15% 47%< $5 million 16% 3% 13% 4% 16% 48%$5 million -$100 million 6% 13% 13% 19% 13% 38%


About Pepperdine Private Capital Markets ProjectThe Pepperdine Private Capital Markets Project at the Graziadio School of Business and Management is the first simultaneous, comprehensive, and on-going investigation of the major private capital market segments. The research seeks to understand the true cost of private capital across market types and the investment expectations of privately-held business owners; providing lenders, investors and the businesses that depend on them with critical data to make optimal investment and financing decisions, and better determine where the opportunities to create lasting economic value may be realized. Download reports and find more information at http://bschool.pepperdine.edu/privatecapital.

About Pepperdine University’s Graziadio School of Business and Management A leader in cultivating entrepreneurship and digital innovation, The Graziadio School of Business and Management at Pepperdine University focuses on the real-world application of MBA-level business concepts. The Graziadio School provides student-focused, globally-oriented education through part-time, full-time, and Executive MBA programs at our 5+ Southern California campuses, Northern California campus, as well as through online and hybrid formats. In addition, The Graziadio School offers a variety of Master of Science programs, a Bachelor of Science in Management degree completion program, Presidential and Key Executives MBA and executive education certificate programs. Follow the Graziadio School atwww.facebook.com/pepperdine.graziadio and https://twitter.com/graziadioschool

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http://bschool.pepperdine.edu/privatecapital

http://bschool.pepperdine.edu/

http://www.facebook.com/pepperdine.graziadio

https://twitter.com/graziadioschool


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Thank YouCraig Everett, Ph.D., MBA

Director,Pepperdine Private Capital Markets

Projecthttp://bschool.pepperdine.edu/privatecapital

[email protected]

http://bschool.pepperdine.edu/privatecapital

mailto:[email protected]

2019 economic forecast: insights from small and …...• invite to participate distributed to...

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