2013 Economic Forecast: Insights from Small and Mid-Sized ... · 2013 Economic Forecast: Insights...

1 1

2013 Economic Forecast: Insights from

Small and Mid-Sized Business Owners

John K. Paglia, Ph.D., CFA, CPA

Associate Professor of Finance

Director, Pepperdine Private Capital Markets Project

Craig Everett, Ph.D., MBA

Assistant Professor of Finance

Associate Director, Pepperdine Private Capital Markets Project

2 2

This research was made possible with the support of Dun &

Bradstreet Credibility Corp., the leading provider of credit

building and credibility solutions for businesses.

DUN & BRADSTREET CREDIBILITY CORP.

Jeffrey Stibel, Chair and Chief Executive Officer

Judy Hackett, Chief Marketing Officer

Aaron Stibel, Senior Vice President, Technology

Brenda Gary, Senior Marketing Director

Bernice Brennan, Manager, Creative Services & Marketing Communications

Trenice Taylor, Marketing Manager

Noel Fundan, E-mail Marketing Manager

3 3

ACKNOWLEDGEMENTS

I’d also like to thank the following people at The Graziadio School

of Business and Management for their contributions:

Dean Linda Livingstone

Associate Dean David M. Smith

Mike Sims, Executive Officer, CER

Douglass Gore, Director of Public Relations

Mark Chun, Director, Center for Applied Research

Irina Shaykhutdinova, Research Analyst

4 4

• 25 questions

• Invite to participate distributed to sample from Dun

& Bradstreet Credibility Corp.’s business database

• 2,713 completed responses

• Where relevant, responses are segmented by

revenues sizes (<$5 million; $5 million to $100

million)

• Responses collected from January 14 – January 28

About the 2013 Economic Forecast Survey

5 5

Changes in Economic Forecast Over The Years

January

2013 January

2012 January

2011

This year US GDP (Q4/Q4) 0.4% 0.7% 2.0%

Next year US GDP (Q4/Q4) 0.9% 1.9% 2.5%

US Unemployment Rate (12/31/2012) 8.0% 8.7% 9.1%

US Housing prices (Q4/Q4) 3.0% -0.8% -1.8%

S&P 500 (Q4/Q4) 3.4% 2.5% 6.5%

Probability of US Recession in 2012 36.2% 32.0% 28.4%

6 6

2013 Economic Forecast

Projections in January 2013 Projections in January 2012

Whole sample

<$5 million $5-$100 million

Whole sample

<$5 million $5-$100 million

2013 US GDP 0.4% 0.3% 0.6% 1.9% 1.8% 2.2%

2014 US GDP 0.9% 0.9% 1.0% n/a n/a n/a

Probability of US recession in the next year 36.2% 36.9% 32.9% 32.0% 32.7% 28.8%

US Housing Prices 3.0% 2.9% 2.2% 2.5% 2.3% 3.5%

S&P 500 3.4% 3.5% 3.5% -0.8% -0.9% -0.5%

US Unemployment Rate (12/31) 8.0% 8.0% 8.0% 8.7% 8.7% 8.7%

7 7

Confidence in Business Growth Prospects Compared to One Year Ago

2013 versus 2012 Respondents

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

More confident Somewhat moreconfident

Neither more norless confident

Somewhat lessconfident

Less confident

21% 24% 25%

15% 15% 22%

32% 26%

12% 8%

8 8

The Most and The Least Influential Impediments to U.S. GDP Growth Next Year

Impediments

Most Influential Least Influential

Respondents in 2013

2012

Respondents in 2013

2012 Whole sample

<$5 million

$5-$100 million

Whole sample

<$5 million

$5-$100

million

Limited access to capital 22% 21% 19% 20% 36% 36% 48% 34%

Government regulations (tax, healthcare) 42% 42% 44% 32% 16% 16% 14% 25%

Global political and/or economic environment

29% 28% 29% 31% 5% 4% 5% 11%

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

9% 9% 7% 21% 43% 44% 34% 23%

9 9

Year When U.S. Unemployment Rate First Reaches 6% or Below

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

100%

4%

14% 22%

17% 16% 10%

2% 3% 12% 8%

26%

27%

15% 6% 4% 1% 2%

11%

2013 2012

10 10

Number of Employees Businesses Are Planning to Hire in the Next 6 Months by Size

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0 1-2 3-5 6-10 11-15 16-20 21-30 31-40 41-50 76-100

Whole sample 45% 32% 13% 5% 2% 1% 1% 0% 0% 0%

< $5 million 48% 34% 11% 4% 1% 0% 0% 0% 0% 0%

$5 million -$100 million 32% 22% 18% 12% 6% 2% 4% 1% 1% 1%

11 11

Number of Employees Businesses Are Planning to Hire in the Next 6 Months with Revenue Size

Under $5 Million, 2013 vs 2012

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 1-2 3-5 6-10 11-15

2013, <$5 million 48% 34% 11% 4% 1%

2012, <$5 million 47% 34% 10% 3% 1%

12 12

Number of Employees Businesses Are Planning to Hire in the Next 6 Months with Revenue Size

Between $5 Million and $100 Million 2013 vs 2012

0%

20%

40%

60%

80%

100%

0 1-2 3-5 6-10 11-15 16-20 21-30 31-40 41-50 51-75 76-100 Morethan100

2013, $5M - $100M 32% 22% 18% 12% 6% 2% 4% 1% 1% 0% 1% 0%

2012, $5M - $100M 27% 21% 21% 10% 5% 3% 3% 1% 1% 1% 0% 1%

13 13

Percentage of Respondents Who Raised Pay for Employees in the Last 12 Months

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Unsure

45%

55%

0%

42%

57%

1%

2013 2012

14 14

Percentage of Respondents Who Plan To Raise Pay for Employees in the Next 12 Months

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Unsure

39%

44%

17%

41% 41%

18%

2013 2012

15 15

Percentage of Respondents Who Plan to Give Employees Raises To Account for the Increase in

Payroll Tax

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Unsure

9%

83%

8% 9%

83%

8% 8%

87%

5%

Whole sample <$5 million $5-$100 million

16 16

Percentage of Respondents Who Think Instability in Washington DC is Negatively

Impacting Their Ability To Hire

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Unsure

61%

31%

8%

62%

31%

7%

57%

34%

9%

Whole sample <$5 million $5-$100 million

17 17

Percentage of Business Owners Who Personally Made More Money Last Year Than Year Prior

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Unsure

37%

61%

2%

37%

61%

2%

2013 2012

18 18

Percentage of Owners Who Personally Expect To Make More Money Next Year

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Unsure

48% 41%

11%

49%

38%

13%

2013 2012

19 19

Policies to Help Spur U.S. Job Creation

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Regulatory reform Tax incentives Increased access tocapital

Education reform Increasedcompetitive position

with foreign tradepartners

Whole sample 28% 28% 26% 6% 13%

<$5 million 28% 27% 26% 6% 13%

$5-$100 million 35% 30% 19% 3% 12%

2012 resp. 28% 21% 30% 5% 15%

20 20

Percentage of Respondents Who Support Increase of U.S. Government Debt Limit

Next Year

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Unsure

34%

58%

8% 8%

79%

13%

2013 2012

21 21

Percentage of Respondents Who Support Policies/Actions To Weaken U.S. Dollar

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Unsure

8%

79%

13% 9%

78%

13%

2013 2012

22 22

Percentage of Respondents Who Support Policies/Actions To Lower Interest Rates

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Unsure

40%

48%

12%

41%

49%

10%

2013 2012

23 23

Percentage of Respondents Who Support U.S. Government Policies/Actions To Financially

Support Struggling European Economies

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Unsure

12%

73%

15% 18%

66%

16%

2013 2012

24 24

Percentage of Respondents Who Support Balanced U.S. Government Budget

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Unsure

84%

11%

5%

79%

15%

6%

2013 2012

25 25

The Earliest Time to Support an Increase in the U.S. Government Debt Limit

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

First half of2013

Second halfof 2013

2014 2015 2016 2017 orlater

Never

35%

6% 6% 2% 2%

6%

43%

Whole sample

26 26

Outlook for Business in 2013 after Fiscal Cliff Was Averted

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

better worse neutral - neither better norworse

14% 20%

66%

27 27

How Respondents Feel the Affordable Care Act Will Affect the Overall Health Care Costs

of their Businesses

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Increase the healthcare costs

Decrease the healthcare costs

no significant effect unsure

42%

6%

27% 25%

28 28

Percentage of Respondents Who Currently Offer Some Kind of Health Care Plan for Employees

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No Not applicable, I am a 1-2person company.

41%

28% 31%

29 29

Adjustments That Respondents Are Planning to Make to Business Healthcare Plan

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

100%

Dropemployee

healthinsurance

coverage andpay employer

mandatepenalty tax

Switch todefined

contributionhealthcare

plan

Keep currentemployeehealthcare

coverage butshop for

cheaper rates

Keep currentemployeehealthcare

coverage butreduce other

employeebenefits

Keepinsurance, but

reducecoverage(benefits)

No changes

9% 3%

28%

5% 16%

39%

30 30

Details About the Respondents Geographic Location

31 31

Details About the Respondents Percentage of Respondents Who Feel Their State Supports

Business Policies That Benefit Their Business

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No

50% 50%

32 32

Details About the Respondents Percentage of Respondents Who Feel Their State Should Be

More Involved in Making Capital More Accessible to Businesses

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Yes No

64%

36%

33 33

Details About the Respondents Percentage of Respondents Who Feel That They Have Access to Information about Available Capital Programs That Their

Business Could Be Participating in Their State Today

0%

20%

40%

60%

80%

100%

Yes No

44%

56%

34 34

Details About the Respondents Industry

31%

10%

10% 11%

7%

6% 5%

4% 3% 3%

4% 3% 2% 1%

Services

Retail trade

Construction

Finance & real estate

Manufacturing

Information technology or services

Health care

Wholesale trade

Unclassified establishments

Educational services

Arts, entertainment or recreation

Transportation and warehousing

Forestry, fishing, hunting or agriculture

Utilities & mining

35 35

Details About the Respondents Annual Revenues

6% 22%

25% 13%

19%

5% 3%

2% 1% 3% 1% $0 or pre-revenue stage

$1 - $100,000

$100,001 - $500,000

$500,001 - $1,000,000

$1,000,001 - $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

More than $500,000,000

36 36

Details About the Respondents Annual Revenues Change Over Last 12 Months

-1.7%

7%

3% 3% 4% 4%

4% 4% 2% 3%

24%

9%

5%

8%

5% 4% 3%

2% 2%

4%

-4.0%

1.0%

6.0%

11.0%

16.0%

21.0%

26.0%

Decline Increase

37 37

Details About the Respondents Annual Revenues Change Expectations (Next 12 Months)

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

3% 2% 2%

22%

13%

8%

11%

6% 6% 5%

2% 2%

8% 6.4%

-4%

1%

6%

11%

16%

21%

26%

Decline Increase

38 38

Details About the Respondents Annual Income

6% 22%

25% 13%

19%

5% 3%

2% 1% 3% 1% $0 or pre-revenue stage

$1 - $100,000

$100,001 - $500,000

$500,001 - $1,000,000

$1,000,001 - $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

More than $500,000,000

39 39

Details About the Respondents Firm age

7% 6% 5%

7%

14% 22%

39%

Less than 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

40 40

Details About the Respondents Number of Employees

7%

35%

21%

15%

5%

4% 4% 3%

3% 1% 2%

0 1-2

3-5 6-10

11-15 16-20

21-30 31-50

51-100 101-200

More than 200

41 41

About Pepperdine Private Capital Markets Project

The 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

Founded on the core values of integrity, stewardship, courage, and compassion,

Pepperdine University’s Graziadio (GRAT-ZEE-ah-DEE-oh) School of Business

and Management has been developing values-centered leaders and advancing

responsible business practice since 1969. Student-focused, experience-driven, and

globally-oriented, the Graziadio School offers fully accredited top-ranked MBA,

Masters of Science, and bachelor’s completion business programs. More

information found at http://bschool.pepperdine.edu/newsroom/.

42 42

THANK YOU!

John K. Paglia, Ph.D., CFA, CPA

Associate Professor of Finance

Director, Pepperdine Private Capital Markets Project

http://bschool.pepperdine.edu/privatecapital

john.paglia@pepperdine.edu

805.379.5809

Craig Everett, Ph.D., MBA

Assistant Professor of Finance

Associate Director, Pepperdine Private Capital Markets Project

http://bschool.pepperdine.edu/privatecapital

craig.everett@pepperdine.edu

310.506.8543