By Richard Bynum
A new survey of small business owners nationwide shows nearly half are concerned about the U.S. economy. At the same time, however, a similar number expect their profits to increase during the first half of 2016.
These Spring 2016 findings from the PNC Economic Outlook Survey come as good news as the national economy tries to gain more momentum. Small businesses are the engine of economic growth. Since 1990, as big business eliminated 4 million jobs, small businesses added 8 million new jobs – and account for more than half of all U.S. sales.
Since we started this survey in 2003, we have found these owners are resilient regardless of the economic cycle. During the Spring survey (conducted Jan. 21 through March 8, 2016), the stock market was down significantly and 53 percent said they were not satisfied the potential presidential candidates were addressing the key issues for business owners.
Those are factors beyond their control. In terms of their own business operations, however, nearly half (45 percent) expect their profits to increase during the first half of 2016. Only 12 percent expect a decrease, the lowest since 2006. In terms of sales, 51 percent expect an increase.
Cautious Optimism = Solid Fundamentals
PNC’s Chief Economist Stuart Hoffman said the market downturn and the campaign rhetoric both likely influenced business owners’ mood since the start of the year. Their cautious optimism about sales, profits and hiring represents solid fundamentals for the economy – and far from a warning sign of recession from these owners.
Looking at their bottom line, seven in 10 owners expect to make a net profit in 2016. About one in four expect to make more than 10 percent over operating expenses.
One in three hope to grow substantially their business by 10 percent or more over the next two years. They cited higher customer demand as the top factor. This is followed closely by their own personal drive, hiring the right people and understanding their marketplace and competition.
We’ve conducted this survey for 13 years because it’s critical that we understand the views and opinions of individual business owners. How they interpret the economy and how they expect their business to perform helps us to better anticipate and meet their needs.
Strategic Planning in Five Phases
When it comes to long-term success, a strategic plan is critical. As business owners develop a strategic vision, the U.S. Small Business Administration offers five phases to help make the plan become a reality:
- Organization: How will you combine people, resources and structure to achieve your goals?
- Observation: You see so much more from an airplane than the ground. That’s strategic thinking. Increase your powers of observation to know better what motivates people, solve problems more effectively and distinguish between alternatives.
- Views: Four viewpoints can frame your strategy – the environment, marketplace, project and measurement views. Use them as tools to think about outcomes, identify critical elements and adjust your actions.
- Driving Forces: What will it take to achieve your vision? Examples of forces include: individual and organizational incentives, qualitative factors (i.e., defined vision, values and goals) and quantitative factors (i.e., results, experience, productivity).
- Ideal Position: This should result from the first four phases. The ideal position outline should include: the conditions for your business to succeed; the marketplace niche you will fill; current or future opportunities; core competencies; and the strategies and tactics to pull it all together.
Strategic thinking requires an owner to envision her or his ideal outcome for the business, then work backwards by focusing on the steps to reach that vision.
Richard Bynum is executive vice president and head of business banking at PNC Bank.
For complete details of the PNC Economic Outlook Survey findings visit our media room.
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