NFIB Research Foundation Study: Economic and Political Uncertainty Top Impediments to Small Business Growth
NFIB’s Research Foundation studied external impediments to small business growth and found that 72% of small business owners would like to expand by adding employees within the next five years, but various impediments are currently standing in their way. According to the Growth – External Factorsreport,uncertainty and weak sales are the two primary impediments to small business growth.
Executive Summary:
- Small-business owners want to grow, though most want to grow modestly in absolute terms. Seventy-two (72) percent desire to add employees in the coming five years, a plurality wanting to add between one and four positions. Eighteen (18) percent do not want to change size and 6 percent want to contract.
- Not all desired growth is “new growth”. While 41 percent want to add employees compared to where they were in 2008, 24 percent simply want to recoup employees lost over the last three years. Another 17 percent have down-sized their business, though a few in that group want to replace some of the positions lost during the Great Recession.
- The two principal impediments to current small-business growth are business uncertainty and weak sales. These two impediments are identified, equally, though small employers who emphasize one do not necessarily emphasize the other. The single most important indicator that would renew small-business owner confidence in business conditions is increased sales in their businesses. Eight percent see no serious impediments to growth.
- Just over half of small-business owners who claim the lack of market demand is an impediment to growth plan to substantially change their approach to marketing their goods and/or services in the next five years. Twenty-eight (28) percent of that group (19% of the population) plan to introduce a product, service or process that they have created, modified or significantly refined and to promote or license it/them as an innovation.
- Over half (53%) who think the lack of finance is an impediment also think that internally generated cash flows will be their most important source of financing desired investment over the next five years. Bank loans will be the second most common source. However, 33 percent of those identifying lack of finance as an impediment to growth say that existing financial obligations are “seriously constraining” their ability to finance desired business investment and another 44 percent say that they are constraining it. Just 5 percent think finance is an impediment to growth, plan to use banks as their primary source of finance, and do not have current “constraining” financial obligations.
- Sixty-one (61) percent reporting the lack of skilled employees as an impediment (or 24% of the population) would hire at least one additional employee at the current market wage rate in the next six months if they could find people with appropriate skills. Over 37 percent (9% of the
population) would employ more than one. During the depths of the Great Recession, almost three times as many had too few skilled employees on the payroll as had too many. - Just 15 percent of small-business owners cite the lack of a strong management or advisory team as an impediment to growth. Of the group currently possessing a management team, 47 percent are highly confident their current team can provide the necessary assistance to reach the firm’s growth objectives in the next five years.
- The regulatory thicket is a greater impediment to growth for those citing law/regulatory issues than is a specific regulation or set of them. Sixty-three (63) percent of the group (31% of the population) had a current investment or project impacted by regulatory matter, with one quarter of them either cancelling a project scheduled over the last six months or abandoning investment and/or project plans.
- The practical capacity to access necessary technology is not often considered an impediment to growth.