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A Higher Degree of You02.10.15

2015 Economic Forecast: Insights from Small and Mid-Sized Business Owners

Craig Everett, Ph.D., MBA Director, Pepperdine Private Capital Markets Project

A Higher Degree of You

bschool.pepperdine.edu/privatecapital

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PUBLISHED BY

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ACKNOWLEDGEMENTS

I’d also like to thank the following people at The Graziadio School of Business and Management for their contributions:

David M. Smith, Ph.D.Interim Dean

John K. Paglia, Ph.D.Associate Dean, Associate Professor of Finance

Cynthia ChiltonDirector of Marketing

Irina ShaykhutdinovaResearch Associate

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• 25 questions• Invite to participate distributed to sample from Dun & Bradstreet Credibility Corp.’s business database

• 3,573 completed responses• Where relevant, responses are segmented by revenues sizes (<$5 million; $5 million to $100 million)

• Responses collected from Jan 20 – Feb 6, 2014

ABOUT THE 2014 ECONOMIC FORECAST SURVEY



This research was made possible with the support of Dun & Bradstreet Credibility Corp., the leading provider of credit building and credibility solutions for businesses.

DUN & BRADSTREET CREDIBILITY CORP.

Jeffrey StibelChairman and Chief Executive Officer

Judy Hackett, Chief Marketing Officer

Aaron StibelSenior Vice President, Technology

Heather HerndonDirector, Marketing and Communications

Brenda GaryVice President, Marketing Operations

Lauren SimpsonMarketing and Communications Manager

Bernice BrennanManager, Creative Services & Marketing Communications

Trenice TaylorMarketing Manager

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2015 ECONOMIC FORECAST

Projections in January 2015 Projections in January 2014

Whole sample <$5 million $5‐$100

millionWhole sample <$5 million $5‐$100

million

This year US GDP 1.1% 1.1% 1.6% 0.6% 0.6% 1.2%

Next year US GDP 1.6% 1.6% 2.0% 1.2% 1.1% 1.7%

Probability of US recession in the next year 25.5% 25.8% 22.1% 29.2% 29.9% 23.0%

S&P 500 4.4% 4.4% 5.1% 2.8% 2.8% 3.5%

US Unemployment Rate (12/31) 6.1% 6.1% 6.1% 7.7% 7.7% 7.1%

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CONFIDENCE IN GDP GROWTH PROJECTIONS

7

0%

20%

40%

60%

80%

100%

Very unsure Somewhatunsure

Neitherconfident not

unsure

Somewhatconfident

Very confident

10% 10%

34% 38%

8%



CONFIDENCE IN BUSINESS GROWTH PROSPECTS COMPARED TO ONE YEAR AGO

2015 VERSUS 2014 RESPONDENTS

8

0%20%40%60%80%

100%

More confident Somewhat moreconfident

Neither morenor lessconfident

Somewhat lessconfident

Less confident

2015 35% 31% 22% 7% 6%2014 27% 29% 24% 10% 11%



Impediments

Most Influential Least Influential

Respondents in 2015Respondents in 2014

Respondents in 2015Respondents in 2014Whole

sample<$5

million $5‐$100 million

Whole sample

<$5 million

$5‐$100 million

Limited access to capital 24% 25% 15% 19% 40% 39% 54% 41%

Government regulations (tax, healthcare) 38% 37% 46% 43% 15% 16% 10% 16%

Global political and/or economic environment 27% 27% 23% 33% 9% 9% 7% 6%

Domestic (U.S.) economic and/or political environment 18% 17% 21% 14% 29% 29% 24% 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

January2015

January2014

January2013

January2012

January2011

This year US GDP (Q4/Q4) 1% 0.6% 0.4% 0.7% 2.0%

Next year US GDP (Q4/Q4) 2% 1.2% 0.9% 1.9% 2.5%

US Unemployment Rate (12/31/2012) 26% 7.7% 8.0% 8.7% 9.1%

US Housing prices (Q4/Q4) n/a 2.8% 3.0% ‐0.8% ‐1.8%

S&P 500 (Q4/Q4) 4% 4.0% 3.4% 2.5% 6.5%

Probability of US Recession in 2012 6% 29.2% 36.2% 32.0% 28.4%

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

11

0%

20%

40%

60%

80%

100%

Whole sample <$5 million $5‐$100 million

53% 51%

78%

52% 48%

74%

2015 2014



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

12

0%

20%

40%

60%

80%

100%


60% 58%77%

58% 55%

79%

2015 2014



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

13

0%

20%

40%

60%

80%

100%


18% 18%15%

12% 13% 8%

2015 2014



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

14

0%

20%

40%

60%

80%

100%


43% 43%41%

57% 58%49%

2015 2014



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

15

0%

20%

40%

60%

80%

100%


47% 46%58%

42% 41%52%

2015 2014



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

16

0%

20%

40%

60%

80%

100%


47% 46%58%

42% 41%52%

2015 2014



POLICIES TO HELP SPUR U.S. JOB CREATION

17

0%

20%

40%

60%

80%

100%

Regulatory reform Tax incentives Increased access tocapital

Education reform Increased competitiveposition with foreign

trade partners

Repeal or ModifyAffordable Care Act

2015 13% 23% 23% 8% 9% 23%2014 13% 19% 22% 6% 8% 32%2013 28% 28% 26% 6% 13%2012 28% 21% 30% 5% 15%2011 17% 19% 44% 14%



POLICIES SUPPORTED IN 2015

18

30%

82%

59%27%

43%

54%

33%

28%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Raising the debt ceiling when limit is reached in…

Balanced US Budget

Comprehensive immigration reform with a path…

Democrats retaining control of the Senate in…

Repeal of the Affordable Care Act

Significant Reform of the Affordable Care Act

Continuation of "Quantitative Easing" by Federal…

Congress continuing to extend long‐term…



DETAILS ABOUT THE RESPONDENTSGEOGRAPHIC LOCATION

19

Less than or equal to 1011 - 2526 - 5051 - 7576 - 100101 - 150151 - 200more than 200

CA

OR

WA

MT ND MN

ID WY

SD

NV UT

AZ

CO

NM

TX

NE

KS

OK AR

LA MS AL

FL

GA

TN SC

NC

VA WV KY MO

IL IA

WI MI

IN OH

MD

PA NJ

NY

ME

NH VT MA RI

CT

HI AK



DETAILS ABOUT THE RESPONDENTSINDUSTRY

20

33%

10%10%7%

6%6%

5%5%

4% 4% 3% 3% 1%3% ServicesConstructionRetail tradeFinance & real estateManufacturingInformation technology or servicesHealth careForestry, fishing, hunting or agricultureEducational servicesArts, entertainment or recreationWholesale tradeTransportation and warehousingUtilities & miningUnclassified establishments



DETAILS ABOUT THE RESPONDENTSANNUAL REVENUES

21

6% 7% 4%6%7%

12%

15%12%

9%

8%6%

2% 2%

1% 1%3%

$0 or pre‐revenue stage$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

22

4%2% 2% 3% 3% 3%

5%2% 3%

26%

10%

6%8%

4% 5% 5%2% 2%

6%2.5%

0%

5%

10%

15%

20%

25%

30%

Decline Increase



ANNUAL REVENUES CHANGE FOR LAST 12 MONTHS : REVENUES UNDER $5M

23

5%2% 2% 3% 3% 3%

4%2% 3%

27%

10%

6%8%

4% 4% 4%2% 2%

6%

2.2%

0%

5%

10%

15%

20%

25%

30%

Decline Increase



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

24

1% 1% 1%2%

1%

6%

4% 4%

16%

13%

7%

17%

7%8%

7%

3%2% 2%

6.4%

0%2%4%6%8%

10%12%14%16%18%

Decline Increase



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

25

1% 1% 1% 1% 1% 1%3%

1% 1%

21%

14%

11% 11%

6% 7%5%

3% 3%

9% 9.7%

0%

5%

10%

15%

20%

25%

Decline Increase



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

26

1% 1% 1% 1% 1% 1%3%

1% 1%

21%

13%

10% 11%

6%7%

5%3% 3%

9% 9.9%

0%

5%

10%

15%

20%

25%

Decline Increase



ANNUAL REVENUE CHANGE EXPECTATIONS (NEXT 12 MONTHS): REVENUES $5M TO $100M

27

1% 1% 1% 1%

3%2% 2%

18%16%

11%

14%

11%

6%4%

3%2%

6%

9.0%

0%2%4%6%8%10%12%14%16%18%20%

Decline Increase



DETAILS ABOUT THE RESPONDENTSANNUAL INCOME

28

10%13%

7%

9%

15%

16%

13%

7%4%

2%1%1%

1% 1% Negative (net loss)$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 ‐ $50,000,000$50,000,001 ‐ $100,000,000Greater than $100,000,000



DETAILS ABOUT THE RESPONDENTSFIRM AGE

29

6% 8%8%

11%

14%20%

33%

Less than 1 year

At least 1 but less than 2





20 or more



DETAILS ABOUT THE RESPONDENTSNUMBER OF FULL-TIME EMPLOYEES

30

11%

48%19%

9%4% 9% 0 1‐2

3‐5 6‐10

11‐15 More than 15



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 A leader in cultivating entrepreneurship and digital innovation, The Graziadio School of Business and Management at Pepperdine University focuses on the real‐world application of MBA‐level business concepts. The Graziadio School provides student‐focused, globally‐oriented education through part‐time, full‐time, and Executive MBA programs at our 5+ Southern California campuses, Northern California campus, as well as through online and hybrid formats. In addition, The Graziadio School offers a variety of Master of Science programs, a Bachelor of Science in Management degree completion program, Presidential and Key Executives MBA and executive education certificate programs. Follow the Graziadio School atwww.facebook.com/pepperdine.graziadio and https://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]

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