business leaders outlook - small business 2014€¦ · 12 months leading up to the 2014 chase...
TRANSCRIPT
Business Leaders Outlook
SMALL BUSINESS2014
2 | Small Business Leaders Outlook: Introduction
For several years, a theme in business leaders’ outlook was
uncertainty. What would happen with federal fiscal policy and
the tax changes that come out of it? How were new rules for
the financial sector going to ripple through the economy? And
perhaps most prominently, how would federal healthcare reform
really look upon rollout, and how would it affect the choices small
businesses have to make?
In some ways, a lack of answers was more limiting than bad
answers. Business leaders need facts on which to base plans. In the
12 months leading up to the 2014 Chase Business Leaders Outlook
survey of small businesses, several of those issues moved forward
in the halls of government and began to take more concrete shape.
As a result, this year’s survey sees some shifts in the concerns
and outlook of the nation’s small businesses. Healthcare costs, the
ability to grow sales and revenue, taxes and economic conditions
are still very much on their minds, and at least half say they’re
“very” or “extremely” concerned about those issues. Among those
leading concerns, healthcare costs and taxes have declined notably
as worries from 2013, while economic conditions and sales and
revenue growth have held constant.
The survey finds a small business community eager to move forward
but not yet ready to limit its options. Its leaders appear to prize working
capital and liquidity over commitments to capital investments. They
expect rising sales and profits to meet most of these cash needs,
and their planned pursuit of credit remains modest. Even though they
anticipate rising income, however, few plan to increase hiring.
A brightening view of the broader world
In a pattern that has become consistent, small business leaders feel
more confident the closer they are to home: Nearly three-quarters are
optimistic or very optimistic about their own company’s performance,
and only about one-quarter feel that way about the global economy.
As some uncertainty clears, business challenges remain
Chase Small Business Banking | 3
The high optimism about own-company and own-industry
performance has remained roughly constant. What’s different in
2014 is improved confidence in the world outside the company’s
walls. “Optimistic” or “very optimistic” responses increased by 5
percent for the local economy, 5 percent for the national economy
and 5 percent for the global economy.
Outlook on the national economy varies somewhat by industry.
Wholesale and professional services companies are more optimistic
about it than others. Meanwhile, the construction industry leaders
were more likely than others to be “very optimistic” about industry
and company performance. Regionally, the West and Midwest
showed the most significant increases in optimism on the global
and national economies, and respondents in the South and West
boosted their optimism about their local economies.
21%
28%
24%
29%
3%
6%
8%
11%
2%
5%
2%
2%
1%
1%
6%
7%
4%
5%
3%
3%
26%
21%
38%
32%
45%
40%
15%
18%
10%
12%
46%
44%
50%
53%
11%
11%
12%
11%
20%
20%
Very optimisticOptimisticVery pessimistic Pessimistic
What is your outlook on the following for the next 12 months?
Global economy
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
National economy
Local economy
Industry performance
Company performance
“�I�am�confident�in�the�economy.�I�have�
grown�my�business�year�over�year�in�‘the�
great�recession’�and�now�feel�as�though�
the�4-plus�years�of�hard�decisions�are�now�
going�to�pay�off�in�spades.”�
—A member of the Chase Small Business Online Community
4 | Small Business Leaders Outlook: Revenue and Sales Growth
Revenue and Sales Growth
6 | Small Business Leaders Outlook: Revenue and Sales Growth
Sales growth, economic uncertainty, taxes, cash flow, credit and
healthcare costs are the challenges most business leaders named
among their top three business challenges for 2014. However, a
majority of small businesses expect revenue and sales to grow,
along with profits.
The most common “top three challenges” are the same top six
answers that appeared in the 2013 survey, in the same order.
However, a look inside those results shows notable movement. Some
of these shifts are more significant than others, but it may be notable
that concerns that relate more directly to business operations—
such as cash flow—have increased or held steady. Meanwhile,
external and policy-based concerns such as the economy, taxes and
healthcare costs have eased, as developments in government and
around the country continue to reduce uncertainty about those issues.
Same chief concerns, but in different proportions
Increase moderately Increase substantially
What are your expectations for your business for the next 12 months?
Revenue / Sales
16%
13%
51%
46%
2014
2013
Profits
14% 48%2014
2013
Capital expenditures
25%5%2014
2013
Credit needs
24%9%2014
2013
10%
6%
8%
45%
24%
22%
Chase Small Business Banking | 7
Regulatory requirements / changes 17%
Maintaining or increasing productivity19%
What are the top three most significant challenges facing your business in 2014?
Being able to grow sales / revenue
Taxes
Managing cash flow
Availability of capital / credit
Costs of commodities
Other
Foreign competition / competitive environment
U.S. competition / competitive environment
Lack of consumer confidence
Uncertainty of economic conditions
51%44%
42%
32%
26%
25%
24%
16%
17%
13%
13%
10%
8%
11%
0%
4%
5%
35%
29%
28%
26%
Healthcare costs 20%
Managing labor costs13%
Managing all other costs15%
Limited supply of candidates with the right skills 14%
10%
9%
8%
4%
2%
20132014
8 | Small Business Leaders Outlook: Revenue and Sales Growth
were concerned about them—although “very concerned” declined
four points compared to 2013. Managing cash flow was a top-
three challenge for 28 percent of leaders, and 37 percent said they
were notably concerned about it. Just over one-quarter said the
availability of capital or credit was among their top three challenges,
and just over a third said they were concerned about it.
One in five ranked healthcare costs among their top three challenges,
which represents a four-point drop from year to year. Assessed as
a standalone question, more than half of the respondents said they
were “very” or “extremely” concerned about healthcare costs. That
made it one of the most pressing issues, even though “extremely
concerned” responses fell five points from year to year.As before, the top perceived challenge is the ability to grow sales
and revenue. But it has intensified this year: It is the only answer
in either year to make more than half the respondents’ lists, and 7
percent more people named it among their top three challenges. In
a separate question that didn’t involve ranking business challenges
but tested each one on its own, this remained one of the top
concerns. More than half said they were “very concerned” or
“extremely concerned” about it.
The second issue on the list was uncertainty of economic
conditions; 35 percent called that a top-three concern, but that
represents a seven-point drop from last year. Asked about this
challenge alone, half said they were very or extremely concerned.
Among the other high-ranking concerns this year, taxes made
29 percent of the top-three lists and half of respondents said they
Industry spotlight: Professional services
Small businesses in the professional services arena
showed particular concern over productivity and healthcare
costs, and their concern over environmental regulations
grew this year. They’re more optimistic than most of their
counterparts about the national economy. On their “wish
lists” for government action priorities, they had less demand
than they did last year for deficit reduction. Like other small
businesses, those in professional services continue to
move into the social media sphere—but compared to other
industries, they’re more likely to use LinkedIn.
Regional spotlight: the Northeast
Many small businesses across the country report they
have little need to use credit this year, but the Northeast
stood out in one respect: Businesses there were 6 percent
more likely than in 2013 to say they would not apply to
borrow because they’d recently been denied credit. Small
businesses in the Northeast also showed less demand than
last year for deficit reduction measures from Washington.
Chase Small Business Banking | 9
A limited supply of job candidates with the right skills was a low-
ranking answer when business leaders named their top three
challenges; only 14 percent selected it. But when respondents
reacted to each issue individually, the talent shortage was the only
challenge to increase significantly year to year. One in 10 said they
were “extremely concerned” about finding people with the right skills.
2014 2013
31% 34%19% 21%5% 5%Uncertainty of
economic conditionsUncertainty of
economic conditions
34% 35%18% 16%5% 7%Being able to
grow sales / revenue Being able to
grow sales / revenue
How concerned are you about the following challenges?
22% 24%15% 16%18% 16%Regulatory
requirements / changes Regulatory
requirements / changes
17% 19%28% 30%10% 7%Limited supply of candidates
with the right skills Limited supply of candidates
with the right skills
8% 6%30% 33%21% 25%Taxes Taxes
14% 10%27% 28%25% 30%Healthcare
costsHealthcare
costs
Not at all concerned Very concerned Extremely concerned
10 | Small Business Leaders Outlook: Revenue and Sales Growth
Rising expectations for sales and profits, but capital spending looks flat
Two out of three small business leaders expect revenue and
sales to increase “substantially” or “moderately” over the next
12 months, which represents an eight-point increase from last
year. Almost two out of three now expect profits to do the same,
a seven-point increase.
The expectation of a cash influx does not correspond to heightened
plans for capital spending, though. The 30 percent who see
substantial or moderate increases in that category are unchanged
nationally from the 2013 results. Meanwhile, businesses in the
Midwest were 8 percent less likely this year than last to project
increased capital spending over the coming 12 months.
Seeking growth in familiar ways, on familiar ground
There was little movement from 2013 to 2014 in the avenues small
business leaders said they’ll pursue to generate company growth.
Attracting new customers remains the answer for more than three-
quarters of them, and other organic means such as expanded
product and service offerings, up- and cross-selling to existing
customers and moving into new domestic markets round out the top
answers. Only a handful cited plans for mergers or acquisitions.
Small business also continues to view overseas as foreign territory.
Fewer than 10 percent said global market expansion figured into
their 2014 growth plans, and three-quarters said they neither buy,
sell nor have operations in foreign countries—slightly fewer than
last year but still the prevalent answer by far. Among those with
no overseas ties, more than nine in 10 report no plans to create
them—through either sales, purchases or operations—in the next
three years. Of those companies that do sell or operate in foreign
countries, three out of five report that activity makes up one-quarter
or less of their total sales. Only 10 percent say the global market
accounts for more than three-quarters of their sales.
Industry spotlight: Retail
Among industries, retailers showed a particularly
heightened concern over sales and revenue growth for
2014. But among small businesses that plan to hire this
year, retailers were more likely to cite anticipated sales
growth as the reason. Retailers nationwide showed a strong
and growing reliance on Facebook and Twitter.
Chase Small Business Banking | 11
Financing in pursuit of cash—or cash instead of financing
Just over 33 percent of small business leaders anticipate their credit
needs to rise, a slight uptick from last year, while just under 40
percent say they don’t plan to use financing at all this year. Among
those who will take on debt, the leading reason is to amass working
capital—significantly more popular than the number two response,
capital equipment purchases, and an increase over the same
response in 2013. Other double-digit uses of intended financing
included the purchase of software and IT and the purchase of
structures and facilities.
Among companies that don’t plan to borrow, there was just as
clear a storyline. Almost two in five said the reason they won’t
use financing is that they don’t have to—increased revenue and
profits are generating the cash they need. That answer was
significantly more common than it was a year ago. Fewer small
business leaders—about one in five, or 5 percent fewer than last
year—say economic uncertainty is what’s keeping them from
assuming new debt.
What financing mechanism will these businesses use? Just under
two-thirds said they will use lines of credit, and about half will use
a business or commercial credit card. A quarter say they’ll borrow
using personal credit cards.
“�I�expect�slight�improvement�in�2014.��
I�have�been�seeing�some�signs�already.�
People�are�less�afraid�to�spend�money.”�
—A member of the Chase Small Business Online Community
12 | Small Business Leaders Outlook: Taxes and Regulation
Taxes and Regulation
Chase Small Business Banking | 13
14 | Small Business Leaders Outlook: Taxes and Regulation
It’s safe to say business leaders regard government regulation with
perennial concern, and the 2014 survey results bear that out. Three
out of five small business leaders express the view that the current
regulatory environment has made it more difficult to expand and hire
new workers—a result precisely equal to what they said in 2013.
Only 2 percent say regulations make hiring easier.
Look within the overall number, though, and there is notable
change from last year. Healthcare regulation remains the
regulatory threat about which the most small business leaders
are “extremely concerned”—one-third of them say so. The next
three leading answers all have to do with taxation and government
policy—taxes overall, fiscal policy and payroll taxes—and for
each of these three threats, “extreme concern” fell off compared
to 2013. This may reflect the fact that longer-term agreements
among members of Congress appear to have broken the cycle
of deadlines and “cliffs” that lent so much uncertainty to previous
years. This is not to overstate the change, however, because
the three tax categories remain the leaders’ greatest regulatory
concerns apart from healthcare.
Other oft-cited regulatory concerns among small business leaders
included local and state regulations, industry regulations and labor
rules. Financial industry regulation—which also saw some reduction
in uncertainty with the implementation of more Dodd-Frank provisions
and which applies to only some of the businesses in the survey—was
an extreme concern to only 12 percent of respondents.
Regulations still weigh heavy, but in changing ways
Chase Small Business Banking | 15
Healthcare changes shift from theory to reality
As designed upon its passage in 2010, the Affordable Care
Act was to bring some of its most significant changes in 2014.
Adjustments since then, most notably the federal government’s
decision to delay implementation of some key employer mandates,
have made 2014 less of a turning point than expected. Nonetheless,
most business leaders, like most people, have a more concrete
understanding of the law and its effects than they had a year ago,
and uncertainty about its impact has subsided. That may contribute
to the fact that only 17 percent of businesses said regulation was
one of their top three challenges for 2014, even though healthcare
costs remain a point of significant concern for them.
In that environment, two-thirds of small businesses report they
do not cover health insurance for their employees—a response
statistically identical to last year’s. Another finding that shows little
overall movement is the 70 percent of small businesses that say
they do not feel a competitive disadvantage because they don’t offer
coverage. However, the larger small businesses in the survey did
show a significant jump in the belief that the absence of coverage
leads to a competitive disadvantage. Two out of five of those larger-
company leaders feared this effect, eight points more than in 2013.
Perhaps in part because many of their companies fall below the
50-employee threshold in the law, almost nine out of 10 of the
small businesses that do not offer health insurance today said they
Regional spotlight: the Midwest
The Midwest was one of the regions whose optimism about
the global and national economies grew the most from year
to year. The Midwest was the only region where businesses
reported a year-to-year decline in their likelihood to increase
capital spending. They have less concern than last year
about taxes and deficit reduction, and more concern than
last year about the talent shortage. Among businesses that
plan to hire, those in the Midwest were more likely this year
to say overworked staffs were the reason for it.
“�The�morale�of�the�country�is�impacted��
by�the�gridlock�in�Washington,�DC.�Until��
we�see�cooperation�and�teamwork�out�of��
the�politicians�then�we’ll�continue�to��
grow�slowly.”�
—A member of the Chase Small Business Online Community
16 | Small Business Leaders Outlook: Taxes and Regulation
believe the healthcare mandate will not affect them. Of those who
do not offer insurance now, 6 percent said they would pay
penalties rather than add insurance, and 5 percent said they would
add insurance. Among the larger companies surveyed, however,
10 percent said they would add insurance.
Among companies that do offer coverage to their employees, cost
control is a pressing concern. The survey asked what they have
done to offset higher healthcare costs—and what they plan to do
about them in the future.
Among actions already taken, about one-third of leaders say they
have imposed higher deductibles, and one-quarter say they’ve
required employees to pay a greater percentage of healthcare
costs. About as many have restrained hiring because of those
costs. Decreasing benefits, limiting coverage to the legal minimum,
offering medical savings accounts and reducing employee hours to
below the 30-hour full-time threshold were other commonly cited
approaches, as was eliminating or charging for spousal coverage.
Fully 30 percent of respondents said they haven’t taken any steps
to address rising health costs.
Turning to actions companies may take in the future, leaders
identified the same top four options as the ones who had already
taken steps. About a quarter will raise deductibles, and almost that
many will restrain hiring or have employees pay more. More than
one-third say they do not plan any future steps to respond to the
rising cost of healthcare.
Actions planning to take Actions already taken
None 30% 36%
What actions has your company already taken / does your company plan to take to offset the higher costs of healthcare?
Imposed higher deductibles
Restrained hiring
Decreased quality or breadth of benefits offered
Offered medical savings accounts
Limited coverage to the minimum permissible under the law
Provided wellness program
Dropped employer- sponsored coverage
Reduced employee hours to fewer than 30 per week
Dropped spouse coverage/added surcharge for spouse coverage
32% 25%
Required employees to pay greater percentage of costs
25% 23%
24% 24%
18% 14%
12% 10%
12% 14%
11% 12%
10% 8%
7% 7%
5%5%
Chase Small Business Banking | 17
Is the current regulatory environment making it easier or more difficult for small and medium sized businesses to expand and hire new workers?
60%
2%
38%
More difficult
No impact
Easier
18 | Small Business Leaders Outlook: Taxes and Regulation
If they were in charge: business leaders’ regulatory wish lists
In each year’s survey, business leaders have the opportunity to
name the three areas they would most like the government to focus
on to support their growth in the next 12 months. As they did last
year, leaders opted for a lower, simpler tax structure: Lowering tax
rates, with accompanying reductions in credits and deductions,
appeared on 63 percent of their lists, the only response more than
half the respondents chose.
Half the respondents wished for a reduction in regulation, a slight
increase from 2013. And with the threat of a fiscal cliff sharply
diminished this year in the wake of agreements in Washington, just
fewer than half asked for federal deficit reduction—7 percent fewer
than in 2013. Just as many said they wanted financial stability and
better access to capital, the same as in 2013. Other commonly
chosen desires were infrastructure improvements, workforce
development, a comprehensive jobs plan and consumer protection,
most of which roughly mirrored 2013 levels.
Industry spotlight: Manufacturing
Concern over labor costs and the shortage of skilled talent
grew as a concern for manufacturers in 2014, and they
showed more concern than most other industries over
foreign competition. Among businesses that said they’d
use financing, manufacturers were the most likely to say
their borrowing would go toward foreign trade and capital
equipment purchases. Their expressed likelihood to borrow
for structures, facilities and working capital increased
compared to 2013. This group showed a notable increase
this year in expectations for sales and revenue increases.
Chase Small Business Banking | 19
Lower tax rates and reduce credits and deductions
Reduce the federal deficit
Ensure financial stability and access to affordable capital
Improve infrastructure
Create and foster a skilled workforce
Create a comprehensive jobs plan
Protect consumers’ interests
Reduce regulations
63%
50%
48%
48%
25%
21%
20%
18%
Which three areas should the government focus on in the next 12 months that would best support the growth of small and medium sized businesses?
Respondents were allowed to select three options.
20 | Small Business Leaders Outlook: Talent
Talent
Chase Small Business Banking | 21
22 | Small Business Leaders Outlook: Talent
Even though a growing majority of small business leaders anticipate
revenue and sales to rise in the coming year along with profits,
most of them plan to stand pat on their headcounts.
Two-thirds of companies say they intend to keep full-time
employment the same over the next 12 months. About a third
anticipate increases, and only a handful project declines.
A marginally more positive pattern holds true for part-time
employment, with about three in five projecting no change and 35
percent saying they’ll take on more people. Plans for compensation
follow suit: 36 percent say employee compensation will likely rise,
and three in five small business leaders say they anticipate no
changes this year.
Those reported projections for employment and compensation
closely mirror what leaders said in 2013.
Most small businesses expect activity to rise, but fewer plan more hiring
“�Attracting�a�quality�workforce�is�always�
a�challenge�for�a�small�business�owner.��
Hiring�the�right�candidate�the�first�time�
can�make�a�huge�difference�in�a�small�
company’s�bottom�line.”�
—A member of the Chase Small Business Online Community
Chase Small Business Banking | 23
What are your employment and compensation projections for the next 12 months?
4% 67% 29%Full-time employees
4% 61% 35%Part-time employees
4% 60% 36%Employee compensation
Decrease Remain the same Increase
24 | Small Business Leaders Outlook: Talent
There was, however, a notable distinction among small businesses
of different sizes. Those in the smaller range roughly paralleled the
overall findings. But small businesses with more than $500,000
in annual sales revealed more aggressive plans. They were 9
percent more likely than the smaller cohort to plan increases in full-
time employment and 11 percent more likely to plan increases in
compensation—which in itself represents a seven-point increase
over the same response in 2013.
Insufficient demand
Uncertainties about higher healthcare / insurance costs
Increased efficiency / productivity
Uncertainties about regulations or government policies
Increased taxes
No need for new employees
Few skilled / qualified workers available
Other
No desire to expand / happy with current level/family business
Limited access to capital
Company’s financial position has deteriorated
Worries about the sustainability of the economic recovery
39%42%
35%39%
30%32%
24%
21%20%
20%
20%26%
17%16%
11%8%
6%
6%2%
1%
1%10%
What are the primary reasons for restraining your hiring plans?
20132014
Regional spotlight: the South
Small businesses in the South showed the least concern
about consumer confidence, greater confidence than last
year about their local economies, and the most optimism
about sales and profit growth for 2014. Their concerns
about regulatory reduction, infrastructure improvement
and the talent shortage all grew from 2013 to 2014. More
leaders in the South than last year said they have plans in
place to sell or transfer the business.
Chase Small Business Banking | 25
Sales demand is a chief driver of plans to hire—or plans not to
If the majority of small businesses nonetheless say they will restrain
their hiring plans, it’s worth knowing why. Business leaders who
plan no hiring growth for 2014 were most likely to cite insufficient
demand (39 percent) as a primary reason, followed closely
by worries about the sustainability of the economic recovery
(35 percent). Just under a third said worries over insurance or
healthcare costs would keep their hiring in check. But a quarter,
up from a fifth last year, said they wouldn’t need to hire because
increased efficiency and productivity were generating more from
the people they already had. The number who said they have no
need for new employees also rose sharply from year to year.
What about small business that do plan to increase hiring? By a
wide margin, their most commonly cited reason was expected sales
growth. More than four leaders out of five cited it, twice the number
who cited the number two reason, that their current sales forces
were overworked. The need for skills not present in the current
workforce and improvements in the company’s financial position
were the other responses to reach double digits, in a category that
saw little change from 2013. Retailers are placing more emphasis
this year on sales growth as a reason to bring on new people.
Expected sales growth
Need skills not possessed by current workforce
Company’s financial position has improved
High employee turnover
Decreased economic uncertainty
Labor costs have decreased
Other
Current workforce overworked
84%85%
42%37%
34%30%
29%27%
7%
7%
6%
4%
2%3%
1%5%
What are the primary reasons for increasing your hiring plans?
20132014
26 | Small Business Leaders Outlook: Talent
Finding candidates with needed skills is a rising concern
Between intention to hire and actual hiring, however, lies the task of
finding the right fit. Here, the persistent “talent paradox” continues
to hold sway, with companies struggling to land the right talent even
amid continued high unemployment.
More small business leaders (29 percent) said they were “very”
or “extremely” concerned about the limited supply of skilled
candidates than said they were “not at all concerned” (25 percent).
The year-to-year movement is most telling here: The “concerned”
responses increased compared to 2013 while “not concerned” fell
by a corresponding degree.
Business leaders are sticking to established plans as they work
to combat the talent shortage. When asked what steps they are
taking, they gave responses almost identical to last year’s: Two-
fifths said they were offering higher wages to targeted candidates,
and just as many said they were focusing recruitment and retention
efforts on older workers. Non-financial rewards, willingness to
accept lower skill sets and changes in policy were other commonly
cited approaches.
Industry spotlight: Construction
In naming their top business challenges, small businesses
in construction were more likely to cite productivity and
a limited supply of skilled job candidates. But they also
had greater expectations than other sectors for increases
in sales, revenues and profits, and they were more likely
than others to be “very optimistic” about the performance
of their own industries and own companies. Along with
manufacturers, they were the group most likely to say
they plan to use financing to acquire capital equipment.
Financing for working capital was also a rising response
in the construction industry, though more leaders in that
category also said they might not seek financing this year
because they fear they won’t qualify.
Chase Small Business Banking | 27
Planning for the future
One of the greatest talent milestones a small business faces is a
change at the top. This year, more leaders reported they have plans
to sell, transfer or exit their businesses within certain periods: 9
percent within two years or less, 14 percent within the next three
to five years, and 18 percent within the next six to 10 years. The
58 percent of business leaders with no transition plans represent a
five-point drop. The South, in particular, is more prone to have plans
to sell or transfer compared to last year.
However, the percentage of small business leaders who report
they have formal succession plans in place dropped to just over
one-quarter. Among those who say they will leave their businesses
within a defined time window, just over one-third intend to sell to
another individual and 16 percent plan to sell to or merge with
another business. The plan to sell or merge is more prominent
among larger small businesses, 23 percent of whom report this
intention. Among small businesses overall, there was a notable
drop in the number who plan to liquidate, down to 11 percent.
28 | Small Business Leaders Outlook: Digital Marketing
Digital Marketing
Chase Small Business Banking | 29
30 | Small Business Leaders Outlook: Digital Marketing
The growth of digital and social media is a familiar fact in general
society. The growing embrace of these media by small businesses
is a less well-known but parallel development. Across every major
channel, a greater percentage of respondents than last year
said they “currently have and plan to keep” company websites,
LinkedIn accounts, Facebook pages, Twitter accounts, paid digital
advertising programs and blogs.
Websites, LinkedIn and Facebook all neared or exceeded 50
percent use, with websites nearing three-quarters adoption.
Current LinkedIn and Facebook use rose seven points from 2013.
And a smaller but stable number of small businesses, ranging from
11 to 17 percent, report for each of these media channels that they
do not have them but plan to adopt them within the next 12 months.
Retailers are more likely than their counterparts in other industries
to use Facebook and Twitter, and their use of both has increased
this year along with their use of blogs and paid advertising.
Meanwhile, professional services companies use LinkedIn more
than other industries do.
The social media surge was largely consistent among small
businesses of different sizes, though larger businesses were
slightly and uniformly more likely than smaller ones to use each of
the digital media types. The greatest year-to-year change among
the larger businesses was a 13-point jump in LinkedIn use, and 9
percent more of them turned to Twitter. Smaller businesses showed
the greatest year-to-year movement into LinkedIn and Facebook,
each of which increased by 6 percent.
The world grows more digital, and small business follows suit
Chase Small Business Banking | 31
Does your business currently use any of the following?
Company website
LinkedIn account
Facebook page
Paid digital advertising
Blog
Twitter account
71% 68%
49% 42%
46% 39%
12%
Do not have, plan to get in next 12 monthsCurrently have, plan to keep
12% 11%
11% 10%
12% 11%
26% 21%
13% 12%
22% 18%
16% 16%
16% 14%
17% 15%
2014 2013
32 | Small Business Leaders Outlook: Digital Marketing
Beyond the “on” switch: degrees of importance, degrees of difficulty
Most people have seen social media accounts or pages that don’t
reflect a lot of care on the part of their owners. If the small businesses
in the survey are active in these channels, does it automatically
follow that they care about them? Small business leaders’ sense
of the importance of digital advertising and social media advanced
somewhat in 2014 but still has plenty of room to grow.
The leaders who said digital advertising is “not at all important” or
“not very important” (41 percent) do slightly outnumber those who
say it’s “very important” or “extremely important” (33 percent). For
social media, “not important” responses outweighed “important”
ones 42 to 30 percent. However, “important” advanced five points
for social media and three points for digital advertising compared
to 2013. “Not at all important” was down five points this year for
social media and four points for digital advertising.
When small business leaders were asked what challenges they
were facing with digital advertising and social media, few significant
roadblocks emerged. The most frequently cited problem, cost,
appeared on only 9 percent of surveys, and that represents a five-
point drop from 2013. Four percent cited a lack of time, which is
also five points below the 2013 response. Other issues, such as
seeing the return on investment, keeping sites updated, targeting
the right demographics, staffing and required technical knowledge,
were all low-single-digit responses that changed little from last year.
Regional spotlight: the West
Taxes declined this year as a concern for business leaders
in the West. They expressed less concern this year about
local, state and environmental regulations, and were
among the most optimistic about the global and national
economies. They expressed less demand this year for
deficit reduction as a government priority. Among those
who said they’d be hiring in 2014, leaders in the West were
more likely to say overworked staffs were the reason.
Industry spotlight: Wholesale
Small businesses in the wholesale sector were among the
most optimistic about the national economy. They showed
a particularly strong concern over sales and revenue
growth but also had a particularly strong expectation that
sales, revenues and profits would grow this year. This was
the industry most likely to name foreign competition as a
top-three concern—and the number of wholesalers who
said so doubled compared to last year. They were also
more likely this year to indicate they’d use financing to
help fuel foreign trade.
Chase Small Business Banking | 33
As one participant in the Chase Small Business Online Community
noted, “Having a social presence is becoming more and more
important, and if you ignore it, you will be left behind.” But another
said, “Keeping content fresh and relevant can be challenging.
And in an environment like social media where you can’t control
what other people say or do, I’m always concerned about my
company’s reputation and how it is perceived. … If you don’t take
care of a problem, it can easily end up on your page for hundreds/
thousands to see.”
How important are digital advertising and social media to your business?
22%19% 16% 17%
15%24% 21% 16%
22%20% 16% 14%
21%25% 14% 11%
Social media
Social media
Digital advertising
Digital advertising
Not very important
Not at all important Very important
Extremely important
2014
2013
34 | Small Business Leaders Outlook: Comparing Small and Middle Market Businesses
Comparing Small and Middle Market Businesses
Chase Small Business Banking | 35
36 | Small Business Leaders Outlook: Comparing Small and Middle Market Businesses
This year’s Chase Business Leaders Outlook survey included
executives from two groups: small business leaders with annual
sales between $100,000 and $20 million, and middle market
business leaders with annual sales between $20 million and
$500 million. Surveying both audiences for the second year in
a row provides a holistic view of the opportunities, challenges and
trends facing a wide range of American businesses—and provides
insight into how their outlooks compare to one another based
on size and strategic goals, and how they differ from 2013. The
questions asked were almost identical from one group to the next,
but many of the answers showed significant differences in the way
business leaders perceive the year ahead.
In broad terms, middle market business leaders appear to be more
optimistic about the national economy, their local economies and
their own companies’ performance than small business leaders.
This might reflect the greater sense of engagement and control that
size brings, or that middle market organizations feel they have less
to fear from short-term ups and downs.
However, respondents from mid-sized businesses are more
concerned than ones from small businesses about regulations and
labor issues, and appear to have higher expectations for revenue
and sales growth for the coming year. Small businesses are less
concerned about government fiscal policy than middle market
businesses but are more concerned about payroll and employment
taxes. Middle market businesses are more likely to be tied to the
global economy through sales, purchases and operations—and
therefore slightly more confident than small businesses when it
comes to the global outlook. Hiring plans also seem to differ among
the two groups, with middle market business leaders more likely
to report plans to increase their hiring and compensation in the
coming year than their small business counterparts.
Size aside, the outlook is bright
Chase Small Business Banking | 37
From the global economy to the home office, varying degrees of optimism
As the chart at the left shows, both small and mid-sized businesses
uphold the pattern that leaders feel increasingly optimistic the
closer they look to home. Middle market businesses have a
somewhat more optimistic view than small businesses of the
global and national economies, which could reflect their greater
degree of engagement and feeling of control in large markets.
PessimisticOptimistic Neutral
What is your outlook on the following for the next 12 months?
15%58%27%
24%47%29%
13%33%54%
32%26%42%
17%26%57%
9%31%60%
12%30%58%
7%30%63%
Global economy
Middle market
Middle market
Middle market
Middle market
Small business
Small business
Small business
Small business
National economy
Local economy
Industry performance
3%17%80%
7%20%73%
Middle market
Small business
Company performance
38 | Small Business Leaders Outlook: Comparing Small and Middle Market Businesses
What are the top three most significant challenges facing your business in 2014?
Revenue / sales growth Revenue / sales growth
Regulatory requirements
Taxes
Managing labor costs
Managing cash flow
Limited supply of talent
Availability of capital / credit
U.S. competition
Healthcare costs
Taxes
Managing all other costs
Limited supply of talent
Managing labor costs
Foreign competition
Lack of consumer confidence
Cost of commodities
Foreign competition
Lack of consumer confidence
U.S. competition
Cost of commodities
Maintaining or increasing productivity
Availability of capital / credit
Regulatory requirements
Uncertainty of economic conditions
Uncertainty of economic conditions
66% 51%
40%35%
33%
29%
33%
28%
31%
26%
23%
20%
19%
19%
12%
15%
11%
13%
10%9%
10% 4%
8%
10%
14%
17%
Middle market Small business
Chase Small Business Banking | 39
Current concerns and future plans
In naming their top three business challenges for the coming
year, the two groups agree on the biggest—revenue growth and
economic uncertainty issues—but diverge sharply on others. Middle
market businesses are more worried about regulations and labor
cost, and small businesses worry more about taxes and cash flow.1
Middle market leaders have more robust expectations for revenue
and sales growth than small business leaders, and while both
groups have modest plans for capital spending, middle market
respondents are more likely to project increases in this area for the
coming year. When asked about their strategies for growth in 2014,
the two groups name the same top approaches: attracting new
customers, expanding and diversifying offerings, up- and cross-
selling, and expanding within domestic markets. However, small
businesses plan to place more emphasis than middle market ones
on attracting new customers and less on developing new offerings.
In keeping with their size and scope, middle market businesses
are much more likely to plan overseas market expansion and
acquisitions than small businesses are.
There were fewer parallels between the two groups on the subject
of financing, and most of the differences appear to stem from
the changes in scale from one group to the next. Among those
who plan to borrow, the need for capital equipment purchases
is the primary driver for middle market business leaders—at
a 13 percent higher rate for this area of spend than for small
businesses. Small business leaders, on the other hand, are
most likely to borrow to fulfill working capital needs, which they
report a 6 percent higher need for than their mid-size business
counterparts. Acquisition is also one of the top reasons
(23 percent) middle market leaders plan to use financing, but
only 6 percent of small businesses report the same intent.
Among executives who say they won’t need financing in 2014,
both groups cite the same two reasons for staying out of credit
markets for now—increased revenue and concern about ongoing
economic uncertainty. However, middle market businesses
are much more likely (73 percent) than small businesses (37
percent) to rely on current cash flow to maintain expenses without
borrowing, and small businesses are more likely (21 percent)
than the middle market ones (16 percent) to be dissuaded from
borrowing by economic uncertainty.
1 Middle market and small business leaders chose from a slightly different menu of responses for this question, but the different priorities were still notable.
40 | Small Business Leaders Outlook: Comparing Small and Middle Market Businesses
Employment
More than half of middle market leaders say that they expect to
increase hiring this year, but less than a third of small business
leaders report the same expectation. Meanwhile, small businesses
are much more likely to project increases in part-time hiring.
Consistent with their expectations for sales growth—and perhaps
driven by their response to the talent shortage—middle market
businesses are also 27 percent more likely to plan increases in
employee compensation in 2014.
Small and middle market business executives who plan to hire
this year cite many of the same reasons for doing so, in the same
proportions: expected sales growth, overwork of the current
workforce, lack of needed skills among the current workforce or
an improved financial position. Differences among the two groups
begin to appear when discussing the rationale behind not hiring.
For middle market leaders, the greatest reason for restraining hiring
this year is their focus on increased efficiency and productivity—
they cite this twice as often as small business leaders do—as well
as concerns over healthcare uncertainties. Insufficient demand is
a reason listed nearly equally among the two groups—and among
small business leaders, it’s the most common reason reported.
Both groups report some concern over a perceived shortage of
job candidates with the right skill sets for their open roles, though
this concern is greater among middle market leaders. The real
differences on this topic emerged when executives were asked what
they plan to do about it. Two-thirds of middle market respondents
say they would use in-house training programs to address the talent
shortage, against only 4 percent of small businesses. Offering higher
wages is one of the top two talent management strategies for small
business leaders, and one that is 7 percent more popular among
their mid-sized business counterparts. Both groups say they will
work to recruit and retain older workers, though this strategy was
almost twice as popular among small businesses. Small businesses
are also about two and a half times more willing to accept lower skill
sets at a lower wage to secure talent in place.
Chase Small Business Banking | 41
Taxes and regulations
Do regulations affect middle market businesses more than smaller
ones? Middle market business leaders seem to believe so: They are
10 percent more likely than small businesses to say the regulatory
environment makes it more difficult to expand and hire new workers.
The question of regulatory “wish lists”—what business leaders
would like to see the government focus on—is yet another area
where small and middle market businesses report many of the same
priorities, but in a different order. Small business leaders appear to
place more emphasis on dollars-and-cents issues.
Two-thirds of middle market leaders report that they’d like to see
reduced regulation, which is 16 percent higher than among small
business leaders. For small businesses, the top choice is simpler,
lower taxes, which is the number two answer for middle market
companies. Both groups place significant emphasis on reducing
the federal deficit and ensuring financial stability and access to
capital, though the latter answer is 20 percent more common for
small businesses.
Middle market businesses are significantly more likely than small
businesses to express concern about healthcare regulations,
while small businesses are more likely to be concerned about
taxes. Some questions delving into the specific areas of regulatory
concern illuminate distinct differences in how businesses of
different sizes look at the regulatory landscape. Small businesses,
for example, report much less concern about fiscal policy, industry
regulation, labor regulation and environmental regulation than middle
market ones, while payroll and employment taxes weigh more
heavily on the minds of small business leaders.
The size difference does breed two very different outlooks on health
insurance. All but 3 percent of middle market businesses already
offer employee coverage, but only one-third of small businesses
do. Healthcare regulation and management of rising healthcare
costs were areas of specific concern for businesses of both sizes,
and both report plans to address these rising costs through higher
deductibles and greater employee cost-sharing strategies.
Overall, small businesses are less likely to have developed formal
plans to address the rising healthcare costs this year, and are more
likely to employ cost-reduction strategies such as restraint in hiring
to address immediate needs.
42 | Small Business Leaders Outlook: Comparing Small and Middle Market Businesses
Middle market businesses are twice as likely to report that they
will ask employees to pay a greater share of the costs and are
15 percent more likely to say higher deductibles will figure into their
future strategies. Middle market companies are also five times more
likely than small businesses to offer employee wellness programs
and three times more likely to offer medical savings accounts—
possibly as strategies for off-setting the additional costs passed
on to their employees.
Almost half of middle market respondents say they believe failing
to offer coverage would put them at a competitive disadvantage.
Among small business respondents who don’t currently offer
coverage, about one-third have the same apprehension. In light of
the 50 full-time employee threshold under the Affordable Care Act,
many more small businesses that don’t currently offer insurance (89
percent) say that the new federal mandates won’t apply to them,
compared to 56 percent of middle market companies. Among those
who do anticipate an effect from the legislation, middle market
businesses are almost six times more likely than small ones to say
they’d react by adding employee coverage.
Selling or transferring ownership
Two-thirds of middle market leaders and almost as many small
business leaders report that they have no current plans to sell or
transfer ownership of their companies. Those who do have plans
to do so are about equally likely to anticipate this event occurring
between now and five years from now. But small business leaders
are 7 percent more likely than middle market leaders to plan a sale
or transfer in the six- to 10-year window.
Whether or not a company has leadership transition pinned to the
calendar, the unpredictability of circumstance makes it a good idea
to have a formal plan in place. In the middle market, businesses
are split almost down the middle, with 54 percent reporting a
current plan on the books. Only 26 percent of small businesses
say they have a succession plan in place, which may reflect the
more informal leadership structures many of these businesses
use, or a more organic expectation among family businesses that
succession is a simple matter of generational change.
Chase Small Business Banking | 43
Overall, the differences between outlooks from small and mid-
sized business leaders appear to correspond to the realities these
different groups face based on their business size. Some variations
are matters of degree, as with concerns over taxes or regulation.
Others reflect sharp differences in the way these businesses are
structured, as with healthcare coverage. Overall, there are probably
as many distinctions as there are businesses represented in the
survey—because in practice, businesses are arrayed along a
continuous spectrum of size, not two clearly defined groups, and
each has a different market to serve. However, these comparisons
can help us understand the ways business size affects a leader’s
outlook on the varied challenges and opportunities that lie ahead.
44 | Small Business Leaders Outlook: Conclusion
Conclusion
Chase Small Business Banking | 45
46 | Small Business Leaders Outlook: Conclusion
Uncertainty can be a roadblock for businesses of any size, but
uncertainty isn’t a single phenomenon. It comes from different
directions—the economy, the government, the globe—and takes
its form in many topics, such as regulation, taxes, and bottom-line
performance. The more leaders think they know what to expect,
the more confident they can be in making concrete plans.
The result is that small business leaders have a positive outlook
about what will happen to them in 2014 and a more cautious
outlook about what they’ll do in response. Sales, revenues and
profits? Most expect them to rise. Hiring, borrowing and capital
spending? Even with the anticipation of new cash, most expect
those indicators to remain stable.
Those findings, along with a pronounced interest in maintaining a
stock of working capital, suggest small business leaders want to
keep a nimble footing in 2014. They see some of the logjams in
their world beginning to break up. They see more options ahead.
And for now, they want to keep those options open.
The road ahead begins to clear
Chase Small Business Banking | 47
About the Chase Business Leaders Outlook Survey
In early 2014, Chase Business Banking and Chase Commercial
Banking conducted separate surveys of small business and middle
market executives to learn their views and plans with respect to
their companies, their industries, and the economy.
The 2014 Chase Small Business Leaders Outlook Survey, which
is the focus of this report, conducted a total of 2,387 online
interviews from January 15 to February 18, 2014 among Chase
business customers and panel participants from companies
with annual revenue of between $100,000 and $20 million. The
survey team conducted statistical testing between revenue groups
throughout the report to identify significant differences at the 95
percent confidence level. Respondents were weighted to ensure a
representative distribution across revenue size, region and industry.
The 2014 Chase Middle Market Business Leaders Outlook Survey,
whose results helped inform part of this report, gathered the views of
nearly 1,100 senior executives from February 4 to February 21, 2014.
The purpose of the study is to gain clearer insight into the business
and economic trends that influence the decision-making of
business leaders from a cross-section of industries and to provide
these executives with information regarding the perspectives and
actions of their peers.
© 2014 JPMorgan Chase & Co. All rights reserved. Chase and J.P. Morgan are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries. The material contained
herein is intended as a general market commentary, in no way constitutes J.P. Morgan research and should not be treated as such. Further, the information and any views contained herein may
differ from that contained in J.P. Morgan research reports.