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02.24.16
PRIVATE CAPITALMARKETS PROJECT
bschool.pepperdine.edu/privatecapital
P E P P E R D I N E
2017 Economic Forecast: Insights from Small and Mid-Sized Business Owners
Craig Everett, Ph.D., MBA Director, Pepperdine Private Capital Markets Project
bschool.pepperdine.edu/privatecapital
©2012-2017 PepperdineUniversity. 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.Executive Director, Peate Institute for Entrepreneurship and Professor of Finance
Lisa Perry, MBADirector, Marketing and Communications
Irina ShaykhutdinovaResearch 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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• 25 questions• Invite to participate distributed to sample from Dun & Bradstreet Credibility Corp.’s business database
• 1,317 completed responses• Where relevant, responses are segmented by revenues sizes (<$5 million; $5 million to $100 million)
• Responses collected from Feb 3 – Feb 17, 2017
ABOUT THE 2017 ECONOMIC FORECAST SURVEY
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ECONOMIC FORECAST
Projections inJanuary2016 Projections inJanuary2017
Wholesample <$5million $5-$100
millionWholesample <$5million $5-$100
million
ThisyearUSGDP 0.4% 0.4% 0.5% 1.7% 1.6% 2.1%
NextyearUSGDP 1.3% 1.3% 1.1% 2.3% 2.3% 2.4%
Probability ofUSrecession inthenextyear 6.3% 6.4% 5.6% 4.9% 5.0% 4.5%
S&P500 0.9% 1.1% 0.0% 5.8% 5.9% 5.3%
USUnemploymentRate(12/31) 32.5% 32.8% 29.9% 24.6% 25.2% 20.9%
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CONFIDENCEINGDPGROWTHPROJECTIONS
7
0%10%20%30%40%50%60%70%80%90%100%
Veryunsure Somewhatunsure
Neitherconfidentnotunsure
Somewhatconfident
Veryconfident
9% 8%
30%
44%
9%9% 9%
30%
43%
9%9% 5%
24%
54%
8%
bschool.pepperdine.edu/privatecapital
CONFIDENCE IN BUSINESS GROWTH PROSPECTS
8
0%20%40%60%80%100%
Moreconfident Somewhatmoreconfident
Neithermorenor lessconfident
Somewhatlessconfident
Lessconfident
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%
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Impediments
MostInfluential LeastInfluential
Respondents in2017Respondentsin2016
Respondents in2017Respondentsin2016Whole
sample<$5
million$5-$100million
Wholesample
<$5million
$5-$100million
Limitedaccesstocapital 20% 22% 9% 26% 40% 38% 55% 41%
Governmentregulations(tax,healthcare) 39% 38% 49% 35% 15% 15% 13% 15%
Globalpoliticaland/oreconomicenvironment 32% 32% 36% 23% 9% 10% 4% 9%Domestic(U.S.)economicand/or politicalenvironment 16% 17% 8% 23% 29% 30% 26% 28%
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
ThisyearUSGDPchange 2.0% 0.7% 0.4% 0.6% 1.1% 0.4% 1.7%
NextyearUSGDPchange 2.5% 1.9% 0.9% 1.2% 1.6% 1.3% 2.3%
USUnemploymentRateattheendoftheyear 9.1% 8.7% 8.0% 7.7% 6.1% 6.3% 4.9%
S&P500yearchange 6.5% 2.5% 3.4% 4.0% 4.4% 0.9% 5.8%
Probability ofUSRecessionthisyear 28.4% 32.0% 36.2% 29.2% 25.5% 32.5% 24.6%
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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 31-40 41-50 101-200
Morethan200
Whole sample 34% 38% 16% 6% 2% 2% 1% 0% 1% 0% 0%<$5million 37% 39% 15% 6% 1% 1% 1% 0% 0% 0% 0%$5million -$100million 14% 26% 25% 13% 4% 7% 3% 1% 3% 1% 2%
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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,<$5million 47% 34% 10% 3% 1% 0% 0%
2013,<$5million 48% 34% 11% 4% 1% 0% 0%
2014,<$5million 43% 35% 14% 5% 1% 1% 0%
2015,<$5million 45% 33% 13% 5% 1% 1% 1%
2016,<$5million 34% 35% 18% 7% 3% 1% 1%
2017,<$5million 37% 39% 15% 6% 1% 1% 1%
bschool.pepperdine.edu/privatecapital
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 Morethan50
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%
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PERCENTAGE OF RESPONDENTS WHO RAISED PAY FOR EMPLOYEES IN THE LAST 12 MONTHS BY SIZE
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0%
20%
40%
60%
80%
100%
Whole sample <$5million $5-$100million
52% 48%
74%
53% 51%
78%
56% 51%
69%64% 60%
82%
2014 2015 2016 2017
bschool.pepperdine.edu/privatecapital
PERCENTAGE OF RESPONDENTS WHO PLAN TO RAISE PAY FOR EMPLOYEES IN THE NEXT 12 MONTHS
15
0%
20%
40%
60%
80%
100%
Whole sample <$5million $5-$100million
58% 55%
79%
60% 58%
77%65% 62%
80%69% 67%
85%
2014 2015 2016 2017
bschool.pepperdine.edu/privatecapital
PERCENTAGE OF RESPONDENTS WHO PLAN TO GIVE EMPLOYEES RAISES TO ACCOUNT FOR THE INCREASE IN PAYROLL TAX
16
0%
20%
40%
60%
80%
100%
Whole sample <$5million $5-$100million
12% 13% 8%18% 18% 15%
22% 23% 17%22% 22% 20%
2014 2015 2016 2017
bschool.pepperdine.edu/privatecapital
PERCENTAGE OF RESPONDENTS WHO THINK INSTABILITY IN WASHINGTON DC IS NEGATIVELY IMPACTING THEIR ABILITY TO HIRE
17
0%
20%
40%
60%
80%
100%
Whole sample <$5million $5-$100million
57% 58%49%43% 43% 41%
49% 49% 46%48% 46%60%
2014 2015 2016 2017
bschool.pepperdine.edu/privatecapital
PERCENTAGE OF BUSINESS OWNERS WHO PERSONALLY MADE MORE MONEY LAST YEAR THAN YEAR PRIOR
18
0%
20%
40%
60%
80%
100%
Whole sample <$5million $5-$100million
42% 41%52%
47% 46%58%
47% 46%59%
48% 46%60%
2014 2015 2016 2017
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PERCENTAGE OF OWNERS WHO PERSONALLY EXPECT TO MAKE MORE MONEY NEXT YEAR
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0%
20%
40%
60%
80%
100%
Whole sample <$5million $5-$100million
60% 60% 63%68% 68% 69%71% 72% 69%73% 72% 74%
2014 2015 2016 2017
bschool.pepperdine.edu/privatecapital
POLICIES TO HELP SPUR U.S. JOB CREATION
20
0%20%40%60%80%100%
Regulatoryreform Taxincentives Increasedaccesstocapital
Education reform Increasedcompetitiveness withforeigntradepartners
RepealorModifyAffordableCareAct
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%
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POLICIES SUPPORTED IN 2017
21
80%
76%50%
66%
35%
26%
69%
27%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Increasedborder security
BalancedUSBudget
Comprehensive immigrationreformwithapathtocitizenship
Increasedfederalgunlaws
RepealoftheAffordableCareAct
SignificantReformoftheAffordableCareAct
Continuationof'QuantitativeEasining'byFederalReserve
Congresscontinuingtoextendlong-termunemploymentbenefits
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DETAILS ABOUT THE RESPONDENTSGEOGRAPHIC LOCATION
22
Less than or equal to 1011 - 2526 - 5051 - 7576 - 100101 - 150151 - 200more than 200
CA
OR
WA
MT ND MN
IDWY
SD
NVUT
AZ
CO
NM
TX
NE
KS
OK AR
LAMS AL
FL
GA
TNSC
NC
VAWVKYMO
ILIA
WIMI
INOH
MD
PANJ
NY
ME
NHVTMARI
CT
HIAK
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DETAILS ABOUT THE RESPONDENTSINDUSTRY
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15%
14%
9%
8%5%5%
4%4%
4%4%3%3%
3%1% 1% 14% 3%
ConstructionProfessional, scientific ortechnical servicesRetailtradeManufacturingInformation technologyorservicesTransportation andwarehousingWholesaletradeRealestateorrental andleasingHealthcareFinanceorinsuranceEducational servicesArts,entertainment orrecreationForestry,fishing, hunting oragricultureRestaurantsHotel/motelorrelatedservicesOtherservices(exceptpublic administration)Unclassified establishments
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DETAILS ABOUT THE RESPONDENTSANNUAL REVENUES
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3% 4% 2%3%4%8%
15%
11%12%
12%
10%4% 3%
2% 1%4%
$0orpre-revenuestage$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
bschool.pepperdine.edu/privatecapital
ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS: WHOLE SAMPLE
25
5%2% 1%
3% 3% 3%5%
2% 3%
23%
10%7%
9%6% 5% 4%
2% 2%4%
1.4%
0%
5%
10%
15%
20%
25%
Decline Increase
bschool.pepperdine.edu/privatecapital
ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES UNDER $5M
26
5%
2% 2%3% 3% 3%
5%2% 3%
24%
9%6%
8%6% 5% 4%
2% 2%5%
1.2%0%
5%
10%
15%
20%
25%
Decline Increase
bschool.pepperdine.edu/privatecapital
ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES FROM $5M TO $100M
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2% 2%4%
1%
4%6% 6%
4%
18%
10%12%
10% 9%
5%3% 2% 3% 2.9%
0%2%4%6%8%
10%12%14%16%18%20%
Decline Increase
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ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): WHOLE SAMPLE
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1% 1% 1% 0%2% 1% 1%
17%
12% 13% 13%
7% 8%6%
3%4%
8%
10.4%
0%2%4%6%8%
10%12%14%16%18%20%
Decline Increase
bschool.pepperdine.edu/privatecapital
ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES UNDER $5M
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1%1% 1% 1% 2% 1% 1%
17%
12% 12% 13%
7% 7% 7%
3%4%
8%
10.6%
0%2%4%6%8%
10%12%14%16%18%
Decline Increase
bschool.pepperdine.edu/privatecapital
ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES $5M TO $100M
30
1%4%
1% 1%
20%
13% 13%15%
9%
13%
2% 2% 2%5%
9.0%
0%
5%
10%
15%
20%
25%
Decline Increase
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DETAILS ABOUT THE RESPONDENTSANNUAL INCOME
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8% 8%6%
7%
13%
18%
15%
11%5%3%1%
5% Negative(netloss) $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 Greaterthan$5,000,000
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DETAILS ABOUT THE RESPONDENTSTOTAL BUSINESS ASSETS
32
2% 8% 6%7%
9%
10%11%10%
9%
8%
9%4% 2%
2%2%2%
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
33
2%4% 4%11%
18%
26%
35%
<1year
Atleast1butlessthan2
Atleast2butlessthan3
Atleast3butlessthan5
Atleast5butlessthan10
Atleast10butlessthan20
20ormore
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DETAILS ABOUT THE RESPONDENTSNUMBER OF FULL-TIME EMPLOYEES
34
46%
21%
13%
6%14% 1-2 3-5
6-10 11-15
More than15
bschool.pepperdine.edu/privatecapital
DETAILS ABOUT THE RESPONDENTSNUMBER OF PART-TIME EMPLOYEES
35
41%
34%
15%4%1%
5% 0 1-2
3-5 6-10
11-15 More than15
bschool.pepperdine.edu/privatecapital
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 Aleaderincultivatingentrepreneurshipanddigitalinnovation,TheGraziadioSchoolofBusinessandManagementatPepperdineUniversity focusesonthereal-worldapplicationofMBA-levelbusinessconcepts.TheGraziadio Schoolprovidesstudent-focused,globally-orientededucationthroughpart-time,full-time,andExecutiveMBAprogramsatour5+SouthernCaliforniacampuses,NorthernCaliforniacampus,aswellasthroughonlineandhybridformats.Inaddition,TheGraziadio SchooloffersavarietyofMasterofScienceprograms,aBachelorofScienceinManagementdegreecompletionprogram,PresidentialandKeyExecutivesMBAandexecutiveeducationcertificateprograms.FollowtheGraziadio Schoolatwww.facebook.com/pepperdine.graziadio andhttps://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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