2017 Economic Forecast: Insights from Small and …...2016 Respondents in 2017 Respon dents in 2016 Whole sample

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


©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


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


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%


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%


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

9


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%


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%


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%


PERCENTAGE OF RESPONDENTS WHO RAISED PAY FOR EMPLOYEES IN THE LAST 12 MONTHS BY SIZE

14

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


PERCENTAGE OF RESPONDENTS WHO PLAN TO RAISE PAY FOR EMPLOYEES IN THE NEXT 12 MONTHS

15

0%

20%

40%

60%

80%

100%


58% 55%

79%

60% 58%

77%65% 62%

80%69% 67%

85%

2014 2015 2016 2017


PERCENTAGE OF RESPONDENTS WHO PLAN TO GIVE EMPLOYEES RAISES TO ACCOUNT FOR THE INCREASE IN PAYROLL TAX

16

0%

20%

40%

60%

80%

100%


12% 13% 8%18% 18% 15%

22% 23% 17%22% 22% 20%

2014 2015 2016 2017


PERCENTAGE OF RESPONDENTS WHO THINK INSTABILITY IN WASHINGTON DC IS NEGATIVELY IMPACTING THEIR ABILITY TO HIRE

17

0%

20%

40%

60%

80%

100%


57% 58%49%43% 43% 41%

49% 49% 46%48% 46%60%

2014 2015 2016 2017


PERCENTAGE OF BUSINESS OWNERS WHO PERSONALLY MADE MORE MONEY LAST YEAR THAN YEAR PRIOR

18

0%

20%

40%

60%

80%

100%


42% 41%52%

47% 46%58%

47% 46%59%

48% 46%60%

2014 2015 2016 2017


PERCENTAGE OF OWNERS WHO PERSONALLY EXPECT TO MAKE MORE MONEY NEXT YEAR

19

0%

20%

40%

60%

80%

100%


60% 60% 63%68% 68% 69%71% 72% 69%73% 72% 74%

2014 2015 2016 2017


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%


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


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


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


DETAILS ABOUT THE RESPONDENTSANNUAL REVENUES

24

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


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


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


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

27

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


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

28

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


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

29

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


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


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


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


DETAILS ABOUT THE RESPONDENTSFIRM AGE

33

2%4% 4%11%

18%

26%

35%

<1year

Atleast1butlessthan2





20ormore


DETAILS ABOUT THE RESPONDENTSNUMBER OF FULL-TIME EMPLOYEES

34

46%

21%

13%

6%14% 1-2 3-5

6-10 11-15

More than15


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


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

[email protected]

Documents

2017 Economic Forecast: Insights from Small and …...2016 Respondents in 2017 Respon dents in 2016 Whole sample