2016 economic forecast: insights from small and mid-sized business owners

A Higher Degree of You02.23.16

2016 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.Dean

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

Lisa PerryDirector of Marketing & Communications

Irina ShaykhutdinovaResearch Associate

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

• 2,469 completed responses • Where relevant, responses are segmented by revenues sizes (<$5 million; $5 million to $100 million)

• Responses collected from Feb 2 – Feb 19, 2016

ABOUT THE 2016 ECONOMIC FORECAST SURVEY



This research was made possible with the support of Dun & Bradstreet.

DUN & BRADSTREET

Jeffrey StibelVice Chairman

Judy HackettChief Marketing Officer

Aaron StibelChief Technology Officer

Heather HerndonDirector, Marketing and Communications

Lauren SimpsonMarketing and Communications Manager

Bernice BrennanDirector, Creative Services

Ben PollockMarketing Manager

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2016 ECONOMIC FORECAST

Projections in January 2016 Projections in January 2015

Whole sample <$5 million $5-$100

millionWhole sample <$5 million $5-$100

million

This year US GDP 0.4% 0.4% 0.5% 1.1% 1.1% 1.6%

Next year US GDP 1.3% 1.3% 1.1% 1.6% 1.6% 2.0%

Probability of US recession in the next year 32.5% 32.8% 29.9% 25.5% 25.8% 22.1%

S&P 500 0.9% 1.1% 0.0% 4.4% 4.4% 5.1%

US Unemployment Rate (12/31) 6.3% 6.4% 5.6% 6.1% 6.1% 6.1%

6



CONFIDENCE IN GDP GROWTH PROJECTIONS

7

Very unsure

Somewhat unsure

Neither confident not unsu

re

Somewhat confident

Very confident

0%20%40%60%80%

100%

12% 11%34% 34%

8%12% 11%

33% 34%

9%13% 10%

40% 32%

5%



CONFIDENCE IN BUSINESS GROWTH PROSPECTS

8

More confident Somewhat more confident

Neither more nor less confident

Somewhat less confident

Less confident0%

20%

40%

60%

80%

100%



Impediments

Most Influential Least Influential

Respondents in 2016Respondents in 2015

Respondents in 2016Respondents in 2015Whole

sample<$5

million $5-$100 million

Whole sample

<$5 million

$5-$100 million

Limited access to capital 26% 28% 12% 24% 41% 38% 59% 40%

Government regulations (tax, healthcare) 35% 34% 41% 38% 15% 16% 10% 15%

Global political and/or economic environment 23% 22% 26% 27% 9% 9% 7% 9%

Domestic (U.S.) economic and/or political environment 23% 23% 24% 18% 28% 29% 18% 29%

THE MOST AND THE LEAST INFLUENTIAL IMPEDIMENTS TO U.S. GDP GROWTH NEXT YEAR

9



CHANGES IN ECONOMIC FORECAST OVER THE YEARS

January2016

January2015

January2014

January2013

January2012

January2011

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

Next year US GDP (Q4/Q4) 1.3% 2% 1.2% 0.9% 1.9% 2.5%

US Unemployment Rate (12/31/2012) 6.3% 26% 7.7% 8.0% 8.7% 9.1%

US Housing prices (Q4/Q4) 0.9% n/a 2.8% 3.0% -0.8% -1.8%

S&P 500 (Q4/Q4) 32.5% 4% 4.0% 3.4% 2.5% 6.5%

Probability of US Recession in 2012 0.4% 6% 29.2% 36.2% 32.0% 28.4%

10



NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS BY SIZE

11

0 1-2 3-5 6-10 11-15 16-20 21-30 31-40 41-50 51-75 76 - 100

101 - 200

0%

5%

10%

15%

20%

25%

30%

35%



NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS WITH REVENUE SIZE UNDER $5 MILLION

12

0 1-2 3-5 6-10 11-15 16-20 21-300%

20%

40%

60%

80%

100%



NUMBER OF EMPLOYEES BUSINESSES ARE PLANNING TO HIRE IN THE NEXT SIX MONTHS WITH REVENUE SIZE BETWEEN $5 MILLION AND $100 MILLION

13

0 1-2 3-5 6-10 11-15 16-20 21-30 31-40 41-50 More than 50

0%

20%

40%

60%

80%

100%



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

14

Whole sample <$5 million $5-$100 million0%

20%

40%

60%

80%

100%

52% 48%

74%

53% 51%

78%

56% 51%

69%

2014 2015 2016



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

15


20%

40%

60%

80%

100%

58% 55%

79%

60% 58%

77%65% 62%

80%

2014 2015 2016



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

16


20%

40%

60%

80%

100%

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

22% 23% 17%

2014 2015 2016



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

17


20%

40%

60%

80%

100%

57% 58%49%

43% 43% 41%49% 49% 46%

2014 2015 2016



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

18


20%

40%

60%

80%

100%

42% 41%52%47% 46%

58%47% 46%

59%

2014 2015 2016



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

19


20%

40%

60%

80%

100%

60% 60% 63%68% 68% 69%71% 72% 69%

2014 2015 2016



POLICIES TO HELP SPUR U.S. JOB CREATION

20

0%20%40%60%80%

100%



POLICIES SUPPORTED IN 2016

21

Raising the debt ceiling when limit is reached in early March

Balanced US Budget

Comprehensive immigration reform with a path to citizenship

Democrats retaining control of the Senate in November

Repeal of the Affordable Care Act

Significant Reform of the Affordable Care Act

Continuation of "Quantitative Easing" by Federal Reserve

Congress continuing to extend long-term unemployment benefits

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

75%

82%66%

32%

48%

55%

34%

28%



CANDIDATES FOR U.S. PRESIDENT WHICH OFFER THE BEST POLICIES FOR SMALL BUSINESS ACORDING TO RESPONDENTS

22

Donald Tru

mp

Hilary

Clinton

Bernie Sanders

Ted Cruz

John Kasich

Marco

Rubio

Jeb Bush

Ben Carson

Other

0%

20%

40%

60%

80%

100%



DETAILS ABOUT THE RESPONDENTSGEOGRAPHIC LOCATION

23



DETAILS ABOUT THE RESPONDENTS INDUSTRY

24

28%

13%9%8%7%

7%

6%5%

4%3%3%2% 1% 2% Services

ConstructionRetail tradeFinance & real estateManufacturingInformation technology or servicesTransportation and warehousingHealth careWholesale tradeEducational servicesArts, entertainment or recreationForestry, fishing, hunting or agricultureUtilities & miningUnclassified establishments



DETAILS ABOUT THE RESPONDENTS ANNUAL REVENUES

25

7% 5%3%

4%7%

10%15%

11%10%

9% 8%4% 3%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

26

> 50%

41-50

%

31-40

%

21-30

%

16-20

%

11-15

%6-1

0% 4-5%

2-3%

Stayed flat

2-3%

4-5%

6-10%

11-15

%

16-20

%

21-30

%

31-40

%

41-50

%> 50%

Avera

ge0%

5%

10%

15%

20%

25%

5%2% 1%

3% 3%2%

3% 2% 3%

23%

11%

6%

10%

5% 5% 4%3% 3%

6%4%

Decline Increase



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

27

> 50%

41-50

%

31-40

%

21-30

%

16-20

%

11-15

%6-1

0% 4-5%

2-3%

Stayed flat

2-3%

4-5%

6-10%

11-15

%

16-20

%

21-30

%

31-40

%

41-50

%> 50%

Avera

ge0%

5%

10%

15%

20%

25%

5%

2% 2%3% 3%

2%3%

2% 3%

23%

11%

5%

9%

5% 5% 4%3% 3%

7%

3%

Decline Increase



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

28

21-30

%

16-20

%

11-15

%6-1

0% 4-5%

2-3%

Stayed flat

2-3%

4-5%

6-10%

11-15

%

16-20

%

21-30

%

31-40

%

41-50

%> 50%

Avera

ge0%2%4%6%8%

10%12%14%16%18%20%

2%5%

2% 3% 4%2%

18%

11%

6%

14%

6%8% 7%

5%

1%

5%

8%

Decline Increase



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

29

> 50%

41-50

%

21-30

%

16-20

%

11-15

%6-1

0% 4-5%

2-3%

Stayed flat

2-3%

4-5%

6-10%

11-15

%

16-20

%

21-30

%

31-40

%

41-50

%> 50%

Avera

ge0%2%4%6%8%

10%12%14%16%

2%1% 1% 1% 2% 2% 1% 1%

15%13%

11%12%

7% 7% 7%

4% 3%

10%12%

Decline Increase



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

30

> 50%

41-50

%

21-30

%

16-20

%

11-15

%6-1

0% 4-5%

2-3%

Stayed flat

2-3%

4-5%

6-10%

11-15

%

16-20

%

21-30

%

31-40

%

41-50

%> 50%

Avera

ge0%2%4%6%8%

10%12%14%16%

2%1% 1% 1% 2% 2% 1% 1%

14%13%

10%

12%

6%7%

7%

4% 4%

12% 12%

Decline Increase



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

31

> 50%

21-30

%

16-20

%6-1

0% 4-5%

Stayed flat

2-3%

4-5%

6-10%

11-15

%

16-20

%

21-30

%

31-40

%

41-50

%> 50%

Avera

ge0%2%4%6%8%

10%12%14%16%18%

1% 1%2%

4%1%

16%

12%

15%

11% 12%

7%9%

4%

1%

4%

9%

Decline Increase



DETAILS ABOUT THE RESPONDENTS ANNUAL INCOME

32

10%9%

6%

9%14%17%

15%

7%5% 3%

2%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 RESPONDENTS TOTAL BUSINESS ASSETS

33

3%10% 8%

9%

10%12%11%9%

8%6% 6%

3%2% 5%

$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 Greater than $25,000,000



DETAILS ABOUT THE RESPONDENTS FIRM AGE

34

9% 8%7%

10%

18%20%

28%

Less than 1 year

At least 1 but less than 2





20 or more



DETAILS ABOUT THE RESPONDENTS NUMBER OF FULL-TIME EMPLOYEES

35

8%

46%19%

10%4% 13%

0 1-2 3-5 6-10

11-15 More than 15



DETAILS ABOUT THE RESPONDENTS NUMBER OF PART-TIME EMPLOYEES

36

43%

33%

13%5%2%

4%

0 1-2 3-5 6-10

11-15 More than 15



DETAILS ABOUT THE RESPONDENTS PRIMARY BUSINESS ACTIVITY

37

32%

68%

Sales Service



DETAILS ABOUT THE RESPONDENTS PERCENTAGE OF CERTIFIED WOMEN-OWNED BUSINESSES

38

Whole sample < $5 million $5 million -$100 million0%

20%

40%

60%

80%

100%

19% 20%10%



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 Pepperdine University Graziadio School of Business and Management 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 five Southern California locations and Silicon Valley, Santa Barbara, and Dallas campuses 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, and the Presidents and Key Executives MBA as well as executive education certificate programs. Follow the Graziadio School on Facebook (www.facebook.com/pepperdine.graziadio), Twitter at @GraziadioSchool (https://twitter.com/graziadioschool) and LinkedIn (https://www.linkedin.com/edu).

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Thank YouCraig Everett, Ph.D., MBA

Director, Pepperdine Private Capital Markets Projecthttp://bschool.pepperdine.edu/privatecapital

[email protected]

http://bschool.pepperdine.edu/privatecapital

mailto:[email protected]

mailto:[email protected]

2016 economic forecast: insights from small and mid-sized business owners

Economy & Finance