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Category: Small Business Tips

NFIB Small Business Economic Trends

NFIB Small Business Economic Trends – March

 

Embargoed Tuesday, May 8 at 6 a.m.

 

(Based on 1554 respondents to the April survey of a random sample of

NFIB’s member firms, surveyed through 4/29/18)

 

 

Overview

 

The Index of Small Business Optimism increased slightly in April to 104.8, a gain of 0.1 points. The Index has been higher only 20 times out of the last 433 surveys.

 

  • Labor quality remained the #1 problem for the fourth straight month.
  • Reports of improved earnings trends were the highest in survey history.
  • Reports of compensation increases held at the highest level since 2000.
  • Reported job creation posted another solid gain.

 

Hiring plans remained strong, as did reports of actual net increases in employment over the past few months.  Reports of labor quality as a top business problem remained at record levels.  Reports of capital outlays rebounded to strong levels after a minor decline in March.  There appears to be more interest in credit to support spending, but not strong.  Cash flows from solid profit trends and tax cuts are supporting higher spending and hiring without debt, boosting this recovery to the second longest expansion in history.

 

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Small Business Optimism and Ten Components

                                                                   

[Column 1 is the current reading, column 2 the change from the prior month, column 3 the percent of the total change in the Index accounted for by each component; “*” means the percent <0.5% or not a meaningful calculation.  Index is based to the average value in 1986, components are not. The term “net” means that the percent of owners giving an unfavorable answer has been subtracted from the percent of owners giving a positive or favorable response.  For some questions, there is no “unfavorable” response category]

 

LABOR MARKETS

 

Reports of employment gains remain strong among small businesses, inconsistent with the BLS report for March employment gains.  The increase in new business establishments is running well ahead of eliminations, a real boost to new employment.  Owners reported adding a net 0.28 workers per firm on average, the third highest reading since 2006 (down from 0.36 workers reported last month, the highest since 2006).

 

Sixteen percent (up 2 points) reported increasing employment an average of 2.7 workers per firm and 9 percent (unchanged) reported reducing employment an average of 2.5 workers per firm (seasonally adjusted).

 

 

Fifty-seven percent reported hiring or trying to hire (up 4 points), but 50 percent (88 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill.  Twenty-two percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (up 1 point), exceeding the percentage citing taxes or regulations.  Shortages of qualified workers are clearly holding back economic growth.

 

 

Thirty-five percent of all owners reported job openings they could not fill in the current period, unchanged and tied with March 2018, July and October 2017 for the highest reading since November 2000.  Twelve percent reported using temporary workers, up 2 points.  Reports of job openings were most frequent in construction (48 percent) and manufacturing (48 percent).  The inability of construction firms to organize teams is slowing the construction of new homes at all levels.

 

 

A seasonally-adjusted net 16 percent plan to create new jobs, down 4 points from March but historically strong.  Not seasonally adjusted, 27 percent plan to increase total employment at their firm (down 3 points), and 3 percent plan reductions (up 1 point).  In some industries, nearly half the firms have unfilled openings, especially severe in construction and manufacturing.

 

Labor markets are very tight, for both skilled and unskilled workers. The strong demand indicated by the NFIB data anticipates an unemployment rate below 4 percent.  Expected real sales volumes and reports of positive sales trends were very good and growth has been solid, leaving labor demand historically very strong.

 

 

CAPITAL SPENDING

 

Sixty-one percent reported capital outlays, up 3 points.  Of those making expenditures, 43 percent reported spending on new equipment (up 4 points), 27 percent acquired vehicles (up 3 points), and 16 percent improved or expanded facilities (unchanged).  Five percent acquired new buildings or land for expansion (down 3 points) and 15 percent spent money for new fixtures and furniture (up 3 points).  Non-residential fixed investment has grown at a better than 6 percent rate for the past 5 quarters (compared to under 1 percent in 2015 and 2016) and small business has made a major contribution.

 

 

Twenty-nine percent plan capital outlays in the next few months, up 3 points.  Plans were most frequent in manufacturing (38 percent) where additional capacity and productivity-enhancing investments are needed and construction (32 percent) where labor-saving investments are needed to increase the number of housing starts and completions.  Hiring difficulties will lead firms to engage in more training and adopt more labor saving technology to support growth and serve growing numbers of customers.

 

 

SALES  

 

A net 8 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months compared to the prior three months, unchanged and the fifth consecutive strong month.  After a blow-out holiday season, consumer spending slowed in the first quarter according to the Bureau of Economic Analysis, contributing to a weaker first quarter GDP number.  On Main Street, there was no slowdown in reports of improving sales trends.  Customers (consumers and other businesses) turned out in numbers that rivaled performances turned in all year and March data indicated that the consumer is back, which will boost the second estimate of first quarter growth.

 

 

 

The net percent of owners expecting higher real sales volumes rose 1 point to a net 21 percent of owners.  Fifty-nine percent of construction firms and 56 percent of manufacturing firms expect higher real sales volumes in the coming months.  Wages and salaries grew by about $3,000 per family last year (about 40 percent better than 2016) and will be boosted by the tax cuts this year.  Consumer sentiment has remained solid, anticipating continued good spending in the coming months.

 

 

INVENTORIES:

 

The net percent of owners reporting inventory increases rose 1 percentage point to a net 4 percent (seasonally adjusted), positive and extending a four month run of substantial inventory building (a boost to GDP growth).

 

 

The net percent of owners viewing current inventory stocks as “too low” (a positive number means more think stocks are too low than too high, a positive for inventory building) improved 2 points to a negative 4 percent.  The build in inventory is clearly not excessive in the minds of owners expecting continued strong sales.

 

 

The net percent of owners planning to build inventories was unchanged at 1 percent, the eighteenth positive reading in the past 19 months.  This has been very supportive of GDP growth over that period.

 

INFLATION:

 

The net percent of owners raising average selling prices fell 2 points to a net 14 percent seasonally adjusted, breaking a steady march to higher levels that started in November of 2016.  The Federal Reserve’s target of 2 percent inflation (based on the headline Personal Consumption Deflator) has not been reached, but it is close.  But, if Main Street slows the frequency of its price hikes, reaching the goal will become more difficult.  Unadjusted, 9 percent of owners reported reducing their average selling prices in the past three months (up 1 point), and 26 percent reported price increases (unchanged).

 

 

 

Seasonally adjusted, a net 22 percent plan price hikes (down 3 points).  With reports of increased compensation running high, there is more pressure to pass these costs on in higher selling prices, although tax cuts and growing operating profits alleviate some of this pressure.  Still, as the gap between the percent raising compensation and raising prices closes, more of these costs will be passed on to customers.  The NFIB data predict a PCE inflation rate of 2.1 percent in the months ahead.

 

 

COMPENSATION AND EARNINGS:

 

Reports of higher worker compensation were unchanged at a net 33 percent, the highest reading since 2000.  Although government reports of wage and salary gains remain historically low, they are the best in a long time, and don’t include benefits.  Historically wage gains were larger, but that was in environments with much higher inflation.  Plans to raise compensation rose 2 points to a net 21 percent,  but below its recent peak of 24 percent in January.

 

Owners complain at record rates of labor quality issues, with 88 percent of those hiring or trying to hire reporting few or no qualified applicants for their open positions.  Twenty-two percent (up 1 point) selected “finding qualified labor” as their top business problem, more than cited taxes, weak sales, or the cost of regulations as their top challenge.

 

 

The frequency of reports of positive profit trends improved 3 percentage point to a net negative 1 percent reporting quarter on quarter profit improvements, the best reading in the survey’s 45 year history.  Although the new tax law will impact profits this year, much of the current improvement is due to gains in operating profits and stronger sales.  Sales gains from stronger growth fall to the bottom line before costs such as rising labor costs catch up.  Overall, the new tax law and the strong economy are very supportive of profit improvements.

 

CREDIT MARKETS:

 

Four percent of owners reported that all their borrowing needs were not satisfied, unchanged and historically low.  Thirty-two percent reported all credit needs met (up 1 point) and 50 percent said they were not interested in a loan, up 3 points but one of the lowest readings since 2010.  Only 2 percent reported that financing was their top business problem compared to 18 percent citing taxes, 13 percent citing regulations and red tape, and 22 percent the availability of qualified labor.  Weak sales garnered 8 percent of the vote, down 3 points and only 3 points above the 45 year record low reading.  Five percent reported loans “harder to get”, historically low.  In short, credit availability and cost are not issues and haven’t been for many years, even with the Federal Reserve raising interest rates.

 

 

Thirty-one percent of all owners reported borrowing on a regular basis (down 1 point).  The average rate paid on short maturity loans was up 30 basis points at 6.4 percent, rates are rising gradually with Fed policy moves.  In anticipation of the Federal Reserve rate hikes, borrowers have increased their demand for fixed rate loans with longer maturities.

 

As the Federal Reserve moves away from its focus on keeping rates low, more firms are reporting changes in the interest rates they pay.  For those experiencing a rate increase, not a happy event, but not an impediment to borrowers who now see much higher rates of return on investments in a growing economy with lower tax rates.  Bigger picture, it is important to be returning the job of capital allocation to markets and interest rates, and not Federal Reserve policy. We have twice experienced in recent times the cost of interest rate suppression, “too low for too long”.

 

 

 

 

THE LARGER PERSPECTIVE:

 

GDP growth for the first quarter came in at 2.3 percent, considerably shy of the 2.9 percent “guess” by the New York Federal Reserve but well above the Atlanta Fed’s 2 percent “guess.”  Most observers feel the economy was much stronger in the first quarter of 2018, although consumers did slow spending considerably in January and February after their holiday binge.  March has come in better, and that will show up in the second “guess”. After the cold weather pause, it appears consumer spending is back on track.  Business invesment grew just above a 6 percent rate, 1.5 points faster than the average in this recovery.  Small business capital spending has picked up the pace.  GDP growth for the first quarter will likely be revised up at the next “guess,” as consumers were back spending in March and exports grew substantially while imports (a negative for GDP arithmetic) slowed.

 

Federal Reserve policy now revolves around two issues. First, will inflation finally hit the Federal Reserve’s 2 percent target? Second, will they raise rates even faster if economic growth runs at 3 percent or better (as even the CBO forecasts) and inflation starts to pick up?  Removing the “punch bowl” just when the party is really hopping is a habit (and responsibility) of the Fed.  Currently the Fed plans two more rate hikes this year, but if inflation finally starts to run, more are possible – unless the Fed decides to let the economy “run hot” with more inflation.  Inflation pressures on Main Street remain “moderate” and indeed fell back a bit in April.

 

Overall, the outlook remains very positive.  Forecasters have the growth pace near 3 percent, even with the weak start in the first quarter (which will likely be revised up).  The main impediment to growth will be the short supply of labor, which plagues all industries but especially manufacturing and housing.  House prices are rising sharply but are not directly included in the inflation measures.  Housing starts are still running below the estimated 1.5 million needed based on demographics.  This pressure will show up in rents and ultimately in the PCE inflation measure.  That said, 2018 will be a “happy new year”.

 

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NFIB began surveys of its membership in October 1973.  Surveys were conducted in the first month of each quarter through 1985 when monthly surveys were instituted.  The first month in each quarter is based on between 1,200 and 2,000 respondents, while the following two monthly surveys contain between 400 and 900 respondents.  The term “net percent” means that the percent of owners giving an unfavorable response has been subtracted fromthe percent giving a favorable response.  If, for example, 20 percent reported that they were going to increase the number of workers at the firm and 5 percent reported an intention to reduce the number of workers, the “net percent” would be 20 percent – 5 percent  or a net 15 percent planning to expand

 

 

 

employment.  These figures are seasonally adjusted unless noted.  The graphs show quarterly data (first survey month in each quarter), updated when available by subsequent monthly surveys.

 

 

 

 

 

 

                                                                                                                 

 

 

 

 

 

 

 

 

 

Small Business Optimism and Ten Components

                                                                   

[Column 1 is the current reading, column 2 the change from the prior month, column 3 the percent of the total change in the Index accounted for by each component; “*” means the percent <0.5% or not a meaningful calculation.  Index is based to the average value in 1986, components are not. The term “net” means that the percent of owners giving an unfavorable answer has been subtracted from the percent of owners giving a positive or favorable response.  For some questions, there is no “unfavorable” response category]

 

LABOR MARKETS

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Sometimes its the little stuff!

Success in big or small businesses depends on several factors that work together in a seamless manner. However, it is important to note that what works for large enterprises, may not necessarily apply to small businesses. Here are some valuable tips that act as treasures for the success of small businesses.

Excellent customer service

If you operate a small business, success takes more than offering great products because even if they were the best in the market, without great customer service, then it is all in vain. You should employ customer service tactics that touch lives in a special way, to the extent that you create memorable experiences. Community projects provide a great avenue to touch lives, and this enhances public outlook as part of excellent customer service.

Loyalty programs

As a small business operator, you might not need to do a lot to attract new clients in some instances. The biggest challenge is how to retain them when they become loyal customers. Loyalty programs that suit your business and your customers are an excellent way to achieve this, and this is a strategy that large firms use as well to achieve success in business. Therefore, probability of customer retention is greater with relevant loyalty programs.

Unique experiences

Price is a major factor when it comes to success in business, but small businesses lack the muscle to compete with larger ones in this aspect, as they try to either match or beat prices that large companies offer. The trick, in this case, is for small businesses to provide alternative experiences that are unique in comparison to price. That sets small enterprises apart and causes them to succeed.

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Small Business Tips and Tricks: Leverage the Gig Economy for your IT Needs

Freelancer

The gig economy is most often associated with lower skilled work, such as the omnipresent ride service drivers. However, as the culture around gig work evolves and the number of opportunities rises, increasingly talented and skilled workers are seeking short-term positions, including in the IT space.

The key to finding the right employees for your business is in taking a close look at your own business’ data, and matching it with the skills and needs of IT gig workers.

Here are three key facts about the gig economy, and how businesses can leverage the increasing number of IT workers who prefer temporary work:

  • 53 million Americans work as freelancers. And that number continues to grow. That means businesses can turn their attention to finding the best employee for the job, even if that person interviews and works entirely from home. The IT field has many unique opportunities for telecommunication rather than on-site work, which opens up businesses to a vast pool of potential temporary workers, depending on the project.
  • IT departments can save around 30% on payroll costs with temporary hires. While this requires some attention to detail with picking the right freelancers, the payoff is plainly large. As skilled IT professionals continue to turn to the gig economy as their primary income source, it is increasingly tenable to plan projects around scaling active staff to the exact needs of the moment.
  • Not every IT job requires a permanent position. By predicting when a current high level of need is potentially going to taper off, using short-term subcontractors can save money and avoid the issue of having a large IT team with months of downtime.

By following these three small business tips and tricks, you can lower your IT overhead and focus on scaling your staff — and expenditures — based on the work at hand.

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Small Business Marketing Tips for Halloween

“Americans will spend $6.9 billion on Halloween costumes, decorations, and candy this year and many of those shoppers, who will spend on average about $74, will turn to pop-up Halloween shops.” ~ The National Retail Federation

Halloween is only a few short weeks away. As you can see, it’s full of money-making opportunities for businesses (yes, this includes your small business too). Of course, this requires you to do some marketing.

While the money you spend on Halloween marketing is tax-deductible, this doesn’t mean you need to spend a lot of money to make a lot of money. There are lots of great small business Halloween “tricks” you can use to ramp up your marketing while utilizing a small budget, including:

  • If you sell any products that people could use in their Halloween themed projects, now is the time to showcase these. If you have a few of these products that lend themselves well to a specific Halloween theme, create a package so you can offer them together at a discounted rate.
  • Encourage your customers to use social media to show you what they’re doing here as well.
  • Create a special hashtag for sharing your products and your customers’ creations.
  • Incorporate Halloween symbols in your marketing. Even a small pumpkin or Frankenstein on the special signs you hang around the office this month are enough to show off some Halloween spirit.

 

Many of these ideas are also quite easy to put into action. Hopefully, you can use some of them to collect revenue (instead of candy) this Halloween, making it a “spooktacular” one for your business.

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All Onboard! Onboarding for New Hire Retention

US Registries - HR Onboarding

US Registries – HR On-boarding

Recruiting and hiring the best talent is a rigorous, time-consuming process, and one that can be especially high-stakes when you are a small business in the midst of growing a strong workforce. And if your hiring decision is high-stakes, keeping your talent on-board is critical.

The Cost of Employee Turnover

Employee turnover carries a high cost, much of it hidden from the balance sheets but no less real. According to INC., the cost of losing an employee is roughly 150% of the employee’s annual salary. Some of these hidden losses include:

  • Lowered productivity
  • Overworked employees
  • Replacement hiring, recruiting and training costs

 

Why Onboarding is Important for New Hire Retention

According to Small Business Trends, onboarding is a “crucial development opportunity.”

  • It’s your chance to make a good first impression, establish expectations, and introduce the new hire to the company’s culture.
  • A well-structured, organized onboarding program will reassure, not scare away, your new hire.
  • Data from WaspBarCode affirms the importance of onboarding: new hires are “58 percent more likely to stay with the organization after three years” when a well-developed onboarding program is in place.

 

Tips to Keep Your New Hire Onboard

  • Have a written onboarding plan and revise it as your company grows and your culture matures.
  • Train your onboarders in the onboarding process so that they introduce the new hire to the company in a structured, organized manner.
  • Give new hires time to acclimate and learn their position, the company, and culture. Slow and steady wins the race!
  • Establish two-way communications. Give your new hire the opportunity to ask questions and clarify information.

A well-crafted  onboarding program provides the long-term benefits of consistent expectations and a cohesive workforce. To start crafting your onboarding program, you can download a Standard Operating Procedure template from North Carolina State University.

 

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Cost Saving Tips and Tricks for Small Businesses

Time to cut cost

Every business owner, especially small business owners, are looking for new ways to save more money, be more efficient, and ultimately as a result increase profits. Let’s explore some ways that small business owners can save more of their hard-earned money!

Get Rid of The Paper

Paperless offices are the way of the future. Thanks to an array of business technologies it is no longer imperative to have paper copies of everything. Document scanners allow businesses to share and send documents instantaneously and they save them on printing and storage costs while making the office a more efficient place overall. This also includes offering your customers electronic invoices.

Think About Leasing

When buying equipment for your office consider leasing it instead of purchasing it outright. Not only do you avoid spending a lot of money upfront for the equipment, but you also will save on maintenance and repair costs too since most lease agreements will also cover these expenses.

Collect Upfront

Collect a portion of cash upfront from the customers that you extend credit too. It doesn’t have to be a substantial percentage, but if you collect even say 25 percent upfront from your credit customers you minimize your risks, improve your overall cash flow, and save money in your collection efforts.

Payroll Debit Cards

Issuing payroll debit cards instead of cutting checks every pay period is a great way to save money on administrative costs since the expense of cutting checks is cut out, and you lower risk of fraud, which is a major benefit since according to the Association of Certified Fraud Examiners 60 percent of all fraud incidents within a business involve employees.

Get Listed!

Getting your business listed in online directories, like the North American Trade Registry,  is a great way to make your business more efficient in terms of drawing more customers organically without spending too many of your resources on marketing efforts. Using trade registries is also a great way to generate more sales leads!

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Gone Viral!

Old gone viral sign.

Old gone viral sign.

Video marketing and graphic animation, once a luxury reserved for big business, is an increasing necessity for small business, Graphic and video content engages customers and communicates your message better and faster than any other medium, according to the Rhode Island Small Business Journal (RISBJ). The reasons are simple: the human brain processes visual information 60,000 times faster than the written word while also engaging viewers on a “human level.” Recent statistics reported by Invisia corroborate the efficacy of video marketing, citing increases in conversion up to 80% on website landing pages and 20% or more on website home pages.

Before small businesses list in B2B Directories like the free US Registries, it is good business to have marketing plans in place, strategies for capitalizing on increases in incoming leads, and websites updated with engaging, informative information. Visit the US Registries website at: http://www.northamericantraderegistry.com.

Small business owners often state that graphic animation and video content isn’t apropos to their industry, according to RISBJ. But the medium’s power to engage, tell a story about products and services, and humanize your business is proven. A quick look at some of the websites listed on Forbes Best Small Companies In America, 2016 reveals how video content and graphic animation is utilized across industries to engage customers. From venture capital to manufacturing to consulting to banking to B2B, graphics and video tell the story and bring products and services to life.

Graphic Animation and Video Content: Use an Agency or Produce Yourself?

Most advertising and PR agencies offer high-quality, professional video and graphic animation services. While these services can take a large bite out of small business marketing budgets, 73% of businesses incorporating video into their marketing campaigns “report positive results to their ROI,” according to Invisia. Small Business Trends (SBT) recently reviewed Slidely Promo social video creation platform as an alternative for small businesses. In partnership with Getty Images, Slidely Promo lets businesses “create instant, stunning promotional videos for social platforms” for as little as $49 per month, according to SBT.

To learn more about inexpensive video and graphic animation using Slidely Promo, visit their website: https://slide.ly/prom

 

 

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