2019 economic forecast: insights from small and …...• invite to participate distributed to...
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02.09.19
PRIVATE CAPITALMARKETS PROJECT
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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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© 2012-2019 Pepperdine University. All rights reserved. Pepperdine Private Capital Access Index (“PCA Index”) is a trademark of PepperdineUniversity. PCA Index content is the intellectual property of Pepperdine University or its third party content providers. Any copying,republication or redistribution of PCA Index content, including but not limited to caching, framing or similar means, is expressly prohibitedwithout the prior written consent of Pepperdine University. Pepperdine University shall not be liable for any errors, omissions or delays inPCA Index content, or for any actions taken in reliance thereon.
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
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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
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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.
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CONFIDENCE IN BUSINESS GROWTH PROSPECTS
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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%
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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
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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
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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%
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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%
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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%
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POLICIES TO HELP SPUR U.S. JOB CREATION
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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%
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POLICIES SUPPORTED IN 2019
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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 “Quantitative Easing” by Federal Reserve
Congress continuing to extend long-term unemployment benefits
Increased border security
Increased federal gun laws
Increased enforcement of Federal marijuana law
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DETAILS ABOUT THE RESPONDENTSGEOGRAPHIC LOCATION
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DETAILS ABOUT THE RESPONDENTSINDUSTRY
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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
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DETAILS ABOUT THE RESPONDENTSANNUAL REVENUES
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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
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ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS: WHOLE SAMPLE
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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
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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
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ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES FROM $5M TO $100M
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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
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ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): WHOLE SAMPLE
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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
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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
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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
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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
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DETAILS ABOUT THE RESPONDENTSTOTAL BUSINESS ASSETS
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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
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DETAILS ABOUT THE RESPONDENTSFIRM AGE
27
1%1%2% 8%
13%
25%50%
< 1 year
At least 1 but less than 2
At least 2 but less than 3
At least 3 but less than 5
At least 5 but less than 10
At least 10 but less than 20
20 or more
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DETAILS ABOUT THE RESPONDENTSNUMBER OF FULL-TIME EMPLOYEES
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38%
22%
15%
7%18%
1-2 3-5
6-10 11-15
More than 15
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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
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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
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DETAILS ABOUT THE RESPONDENTSMINORITY-OWNED TYPES
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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%
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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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Thank YouCraig Everett, Ph.D., MBA
Director,Pepperdine Private Capital Markets
Projecthttp://bschool.pepperdine.edu/privatecapital
craig.everett@pepperdine.edu310.506.8543
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