state of small business report fall 2011 · state of small business report fall 2011 by dr. john k....

S TAT E O F S M A L L B U S I N E S S R E P O R T F A L L 2 0 11

By Dr. John K. PagliaDenney Academic Chair and Associate Professor of Finance

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PEPPERDINE PRIVATE CAPITAL MARKETS PROJECT | STATE OF SMALL BUSINESS REPORT – FALL 2011

© 2011 | PEPPERDINE UNIVERSITY GRAZIADIO SCHOOL OF BUSINESS AND MANAGEMENT. All Rights Reserved. | 1

TABLE OF CONTENTS

PEPPERDINE PRIVATE CAPITAL MARKETS PROJECT ............................................................................................. 3

ACKNOWLEDGEMENTS ...................................................................................................................................... 3

FOREWORD ....................................................................................................................................................... 5

STATE OF SMALL BUSINESS ................................................................................................................................ 7

Profile of Respondents .......................................................................................................................... 7

National Survey Findings...................................................................................................................... 13

State‐by‐State Survey Findings ............................................................................................................. 42

ABOUT THE AUTHOR ......................................................................................................................................... 44

INDEX OF TABLES .............................................................................................................................................. 46

INDEX OF FIGURES ............................................................................................................................................ 46

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For more information, visit:

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or contact Rachel Williams at

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NOVEMBER 14-16, 2011andAPRIL 18-20, 2012

The Certificate in Private Capital Markets (CIPCM) is a 3-day curriculum-

based training program developed by Dr. John Paglia in association with

his ground-breaking research, Pepperdine Private Capital Market Project.



PEPPERDINE PRIVATE CAPITAL MARKETS PROJECT

Senior Researcher JOHN PAGLIA, PhD, MBA, CPA, CFA

Research Support

IRINA SHAYKHUTDINOVA, MBA

Executive Officer MICHAEL SIMS

Advisor to Project RACHEL WILLIAMS

Public Relations F. DOUGLASS GORE KP PUBLIC AFFAIRS

Design

R&R PARTNERS

ACKNOWLEDGEMENTS

This research was made possible by the generous funding from the Denney Endowed Professorship.

PEPPERDINE UNIVERSITY

Dean Linda A. Livingstone, PhD Associate Dean David M. Smith, PhD

Mark W. S. Chun, PhD, Director, Center for Applied Research Dianne King

Michael Stamper Darlene Kiloglu Roger Lotho

Juan Mena Jing Zhang Doris Jones

DUN & BRADSTREET CREDIBILITY CORP.

Jeffrey Stibel, Chair and Chief Executive Officer Aaron Stibel, Senior Vice President, Technology

Judy Hackett, Chief Marketing Officer Erik Simon Brenda Gary



SURVEY DESIGN, DISTRIBUTION, AND OTHER SUPPORT

Robert T. Slee Michael McGregor

Tim Rhine Barry D. Yelton Everett Walker Samir Desai

Richard J. Crosby

Leonard Lanzi

Gray DeFevere Jan Hanssen

Robert Zielinski Kevin D. Cantrell

Scott Jones Deidre A. Brennan

Eric Nath Gunther Hofmann Michael Painter

James A. Nelson, MD John Davis Larry Gilson

Andrew Springer Jeri Harmon

Letitia Green Gloria Guenther Steven Brandt Dat T. Do

Andy Wilson Yingping Huang Jason Baum Jason Kumpf Hal Spice Jane Pak

Ralph Adams Eric Williams Dan Deeney John Graham Jeff Nagle

Greg Howath

Nevena Orbach

John Dmohowski Brad Triebsch Gary W. Clark

M. Todd Stemler Patrick George

Sean Samet Mark Walker Kelly Szejko Kevin Halpin

Andre Suskavcevic Chris M. Miller Brian Cove

Jeff Thomas

John Lonergan

Rob Brougham

Brett Palmer

Gary LaBranche

Jamie Schneier

Troy Fukumoto

Dennis Gano

Linh Xavier Vuong

Chris de Vries

Tucker Herring

Michael Nall

Simon James, PhD



FOREWORD

Too Small To Borrow

By JOHN PAGLIA

October 3, 2011 marked the three year anniversary of President George W. Bush signing into law the

Troubled Asset Relief Program (TARP) which authorized the U.S. Government to purchase assets and equity from

financial institutions to strengthen the financial sector. In addition to stabilizing the market and protecting

taxpayers, the program also aimed to encourage lending to resume to levels before the financial crisis. While the

program has been helpful over the short‐term in helping financial institutions, the major criticism of government

stimulus efforts is that they have done little to make credit available especially for small businesses.

Since the passage of TARP additional steps have been taken to help small businesses. President Obama

highlighted the importance of small businesses in the United States when he signed the Small Business Jobs Act in

September 2010; “Now this is important because small businesses produce most of the new jobs in this

country. They are the anchors of our Main Streets. They are part of the promise of America – the idea that if

you’ve got a dream and you’re willing to work hard, you can succeed. That’s what leads a worker to leave a job to

become her own boss. That’s what propels a basement inventor to sell a new product – or an amateur chef to

open a restaurant. It’s this promise that has drawn millions to our shores and made our economy the envy of the

world.”

The President’s points are spot on, yet the small business economy continues to sputter. Small businesses

are not only the anchor on Main Street, but they are also the anchor of our economy. According to the Small

Business Administration, small businesses represent 99.7% of all employer firms and employ more than half of

private sector employees in the US. They also serve as the major job creation force in our nation. In fact, over the

past 15 years small businesses have generated 64 percent of the net new job growth. In terms of Gross Domestic

Product, small businesses create more than half of the nation’s nonfarm GDP.

The Pepperdine Private Capital Markets Project State of Small Business Report gives capital providers and

policymakers a unique look at how small businesses are faring. A comprehensive solution to our economic crisis

must include input from small businesses as well as members of the private capital community.



Key findings from the report include:

1. Overall business conditions are declining and not expected to improve: The Fall 2010 report indicated

that nearly 42% of privately held businesses owners reported that economic conditions improved over the

previous six months. While that number increased in the Spring 2011 report to 51%, the Fall 2011 report

has shown a strong drop‐off of in the number of businesses ‐‐ only 19% of respondents ‐‐ who say

business conditions improved over the previous six months. Looking ahead, just 29% expect an

improvement in business conditions over the next twelve months versus 25% who expect a continued

deterioration.

2. There is an aspiration to hire: The Fall 2011 survey of more than 10,600 small businesses nationwide

indicated that 44% of respondents plan to hire in the next six months. Of those that do plan to hire, sales

and marketing skills are in greatest demand (47.8%) followed by skilled labor (41.6%) and

service/customer service (38.8%).

3. Economic uncertainty biggest impediment to growth: Nearly 38% of respondents believe that economic

uncertainty is the largest inhibitor to growth. 26% of respondents said access to capital and 25% said that

government regulations and taxes are the number one issue facing small businesses.

4. Improving access to capital will help create jobs: Companies with less than $5 million in revenue were

clear in the Pepperdine study that of those policies most likely to lead to job creation in 2012, “increased

access to capital” was number one (36.0%) followed by “tax incentives” (22.5%), and “regulatory reform”

(17.8%). 47.2% of respondents said access to bank loans declined from six months ago versus 10.3% who

say it increased.

5. Businesses that are looking to hire believe training is needed: Of the privately‐held businesses that are

looking to hire, 48% indicate that sales and marketing skills are their primary focus while 42% of

respondents are looking for skilled labor 82% of respondents believe that they will need to train those

they hire.

The current policy response to the Great Recession and tumultuous global economy is vitally important to the

success of small businesses and our nation. Through the Pepperdine Private Capital Markets Project State of Small

Business Report we gained important insight that will facilitate improved communication between small business

owners, capital providers and policy makers. We hope that this information will underscore the importance of

privately‐held businesses in America’s economy and will help guide future economic policy.



STATE OF SMALL BUSINESS

Of the 10,637 privately‐held businesses that responded to the survey, 24% had businesses that involved customer goods and services, 21% were in the manufacturing, construction and engineering industry, and 17% were in wholesale and distribution. Approximately 62% of businesses have annual revenues less than $1 million. Nearly 91% of business owners report having the enthusiasm to execute growth strategies, yet just 49% report having the necessary financial resources to successfully execute growth strategies. Other findings include: Nearly 35% of respondents tried to raise outside funding in the last 12 months. Of the respondents who were seeking financing in the last 12 months, approximately 54% anticipated to raise less than $100,000 in capital. Approximately 53% of respondents reported that they were seeking bank loans or credit card financing as a source of funding, followed by friends and family (16%). Of all financing options, bank loans emerged as the financing source with highest “willingness” for small business to use (72%), followed by angel financing (35%) and asset based lending (33%). However, results also showed that of 2,595 small businesses that sought bank loans over the past 12 months, just 50% were successful. Survey results indicated that business owners who raised capital on average contacted two banks and invested close to seven full days for the process to successfully obtain financing. Nearly half of small businesses (44%) are planning to hire additional workers. Approximately 60% of respondents indicated the American Jobs Act will not change their hiring plans for the next 12 months. According to respondents employer tax credits and payroll tax cuts are the most likely provisions of the American Jobs act to have influence on plans to hire in the next twelve months. Nearly 38% of respondents believe economic uncertainty is the number one issue small businesses face today, followed by access to capital (26%), and government regulations and taxes (25%). According to small businesses, of those policies most likely to lead to job creation in 2012, “increased access to capital” emerged as number one (34%) followed by tax incentives (24%), and regulatory reform (19%). The study showed that of those that do plan to hire, sales and marketing skills are in greatest demand (48%) followed by skilled labor (42%) and service/customer service (38%). Also, 82% of companies planning to hire indicate they’d need to train those they hire. Only 19% of respondents believe that general business conditions improved in the last six months compared to 51% surveyed in February/March 2011.

Profile of Respondents

The privately‐held business survey results were generated from 10,637 participants. The locations of businesses are distributed over all regions of the United States.

Figure 1. Respondents Distribution by State

less than or equal to 5051 - 100101 - 200201 - 300301 - 400401 - 500501 - 1000more than 1000

CA

OR

WA

MT ND MN

IDWY

SD

NV

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4 2.43.2

4.5

cessful

USINESS REPORT

GEMENT. All Right

- $500 Millio

n $500 Millio

oviders contactcontacted was

Contacted

75%67%

rivatequityroup

Hedgfun

0% 100%

aninend

Ventucapital f

2.3 2

5

2.5

T – FALL 2011

ts Reserved. | 16

on

on

ted was 3.2, wh3.7.

%

50%

ged

Venturecapitalfund

%

50%

refund

Privateequity gro

2.3 2.0

3.1 2

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Figure

Figure 3

Figure 3

5

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2.0

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PEPPERD

© 2011 | P

29. Average

30. Average

31. Average N

5.6 5.14.1

4.

6.35.25.4

4

2.2 2.5

1.3

DINE PRIVATE CA

EPPERDINE UNIVE

Number of C

Number of C

Number of C

4.7.63.8

4.34.7 4.4

53.2

4.2

2.8

APITAL MARKETS

ERSITY GRAZIADIO

Capital Provi

Capital Provi

Capital Provid

3.5 3

4.3

Successf

3.3 32.5

Successf

4.64.1

Successf

S PROJECT | STA

O SCHOOL OF BUSI

iders Contac

iders Contac

ders Contact

.22.2

3.83.

ful Unsucc

3.12.5

4.4

2

ful Unsucc

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ATE OF SMALL B

NESS AND MANAG

cted, Revenu

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ted, Revenue

2.22

2.6

cessful

2.2.5 2.6

cessful

1.0

3.9 3.8

essful

USINESS REPORT

GEMENT. All Right

ue Size Less

ue Size $1 Mi

e Size $5 Mil

2.1 1.

3.2

2.2 1.

3.2

1.3

2.

1.3

T – FALL 2011

ts Reserved. | 17

Than $1 Mill

illion - $5 Mil

llion - $10 Mi

.8 1.72.6

4.2

.8 1.62.7 3.0

.52.1

3.3 3.3

lion

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illion

2

0

3

Figure 32

Approxima

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0.01.02.03.04.05.06.07.08.0

28

0

50

100

150

200

250

300

350

PEPPERD

© 2011 | P

2. Average N

tely 54% of res

Figure

to respondents n average takes

Figu

4.6

1.61.5

23%

7%

5%

5% 3% 2%

81

166

300

150

DINE PRIVATE CA

EPPERDINE UNIVE

Number of Ca

pondents attem

33. Amount

credit card finas 281 days to co

ure 34. Avera

6

5.04.0 4.3

1% 0.3%

161110

210

APITAL MARKETS

ERSITY GRAZIADIO

apital Provide

mpted to raise l

of Capital At

ancing takes theomplete.

age Time to C

4.55.6

Successf

5

1%

18 117105 75

S PROJECT | STA

O SCHOOL OF BUSI

ers Contacte

ess than $100,0

ttempted to R

e least amount

Complete Fin

2.3

4.55.8

4

ful Unsucc

54%

79 6445

ATE OF SMALL B

NESS AND MANAG

ed, Revenue

000 in the last 1

Raise in the

of time to proc

nancing Proc

n/a

4.7

7.2

essful

Le

$1

$5

$1

$2

$5

$1

$2

$5

$1

4 4745 45

USINESS REPORT

GEMENT. All Right

Size Greater

12 months.

last Six Mon

cess (34 days), w

cess in Days

2.3 2.1.8

ess than $100,0

100,000 ‐ $499

500,000 ‐ $999

1 million‐ $1.99

2 million ‐ $4.9

5 million ‐ $9.9

10 million ‐ $24

25 million ‐ $49

50 million ‐ $99

100 million or g

45 3422.5

T – FALL 2011

ts Reserved. | 18

r Than $10 M

nths

whereas hedge

s

.9 2.32.83.7

000

9,999

9,999

99 million

999 million

999 million

4.999 million

9.999 million

9.999 million

greater

10.5Mea

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Million

e fund

7

an

dian

The averagemployees documents

Among thoimprove th

Among thofor outside capital.

0

10

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30

40

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PEPPERD

© 2011 | P

e time spent byand hired outss) was close to f

Figure 35.

ose respondentse financial heal

ose respondentscapital, followe

Figure 3

29

20

35

25

Look f

nue looking for

Look for alte

financial 'healt

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m not going to

waiting for a be

usiness would

Unfavorab

ness didn't hav

DINE PRIVATE CA

EPPERDINE UNIVE

y respondents diders making infive full days, w

. Days Spent

s who were notlth of their busi

Figure 3

s who didn’t atted by 15% who

7. Reasons f

20 15 25

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ernative source

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APITAL MARKETS

ERSITY GRAZIADIO

during the procnquiries, submithereas for hedg

t During the

t able to obtain nesses before a

36. Next Step

tempt to obtain mentioned unf

for Not Tryin

8 1713

25

Other

t of a business

whole business

tions/liquidate

equity investor

pital providers

es of financing

pany to obtain

1

0%

Other

quidating

financing

situation

r funding

onditions

financing

S PROJECT | STA

O SCHOOL OF BUSI

ess to successftting proposals,ge fund financin

Process to S

external financattempting to r

ps to Satisfy

n any external ffavorable cond

g to Obtain C

12 107 4.

3%

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0% 5%

r

s

s

e

r

s

g

n…

5%

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11%

1

10%

ATE OF SMALL B

NESS AND MANAG

ully obtain cred, meeting with ng it was almos

Successfully

cing in the last raise capital in

Financial Ne

financing in theitions as a main

Capital in the

7 65 3

9%

10%

14%

10% 15%

15%

20% 30%

USINESS REPORT

GEMENT. All Right

dit card financincapital providest 29 days.

y Obtain Fina

12 months 38%the future.

eeds

last 12 monthsn reason for no

e Last 12 Mo

6 53 2

21%

20% 25% 3

% 40%

T – FALL 2011

ts Reserved. | 19

ng (time spent brs, furnishing

ancing

% are planning t

s 56% had no nt trying to obta

onths

Mean

Median

30% 35% 4

56

50% 6

by all

to

eed ain

38%

40%

6%

60%

Only 46% oneed in extbusinesses

Figure 3Any N

Approximawould be re

Figure Reje

more t

$10

$50 millio

$25 mil

$10 mi

$5mil

$1 m

Les

more t

$10

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$25 mil

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Les

PEPPERD

© 2011 | P

of privately‐heldternal financingwhose revenue

38. PercentaNeed in Exter

tely 14% of privejected for fund

39. Percentaected for Fun

han $500 millio

00 ‐ $500 millio

on ‐ $100 millio

lion ‐ $50 millio

llion ‐ $25millio

lion ‐ $10 millio

illion ‐ $5 millio

s than $1 millio

han $500 millio

00 ‐ $500 millio

on ‐ $100 millio

lion ‐ $50 millio

llion ‐ $25millio

lion ‐ $10 millio

illion ‐ $5 millio

s than $1 millio

DINE PRIVATE CA

EPPERDINE UNIVE

d businesses whg” as a reason foes are greater t

ge of Businernal Financin

vately‐held busding” as a main

age of Businnding” as a R

0% 10%

on

on

on

on

on

on

on

on

0%

0% 2

on

on

on

on

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APITAL MARKETS

ERSITY GRAZIADIO

hose revenues aor not trying to han $5 million t

esses by Revng” as a Rea

inesses whose reason for not

nesses by ReReason for N

% 20%

3%

2%

2%

2%

2% 4%

S PROJECT | STA

O SCHOOL OF BUSI

are less than $1obtain capital ithis percentage

venue Size Tason for Not

Months

annual revenuet trying to obtai

evenue Size Not Trying to

30% 40%

5%

6%

6%

ATE OF SMALL B

NESS AND MANAG

1 million indicatin the last 12 me equals 70% or

That IndicateTrying to Ob

es are less thanin capital in the

That IndicateObtain Capi

46%

50% 6

8% 10%

USINESS REPORT

GEMENT. All Right

ted “My businemonths, wherear higher.

ed “My Businbtain Capital

n $1 million indie last 12 months

ed “My Businital in the Las

71

70%

70%

64%

60% 70%

% 12%

T – FALL 2011

ts Reserved. | 20

ess didn’t have as for privately‐h

ness Didn’t Hl in the Last 1

cated “My busis.

iness Wouldst 12 Months

75%

1%

82%

78%

%

%

80% 90%

14%

14% 16

any held

Have 12

iness

Be s

%

6%

According t“friends an

Privately‐hefollowed by

Somewh

Some

W

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W

PEPPERD

© 2011 | P

to the responded family” is the

Fig

eld businesses wy angel‐investo

Figure 41. W

Not willing

hat unwilling

Neutral

what willing

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hat unwilling

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what willing

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DINE PRIVATE CA

EPPERDINE UNIVE

ents, “bank loane least desirable

gure 40. Willi

with revenue sir financing (3.2

Willingness t

4.07

1.0

1.5

2.0

2.5

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3.5

4.0

4.5

5.0

g

3.9

1.0

1.5

2.0

2.5

3.0

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4.5

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g

APITAL MARKETS

ERSITY GRAZIADIO

ns” as a categoe source of capi

ingness to O

izes less than $).

to Obtain Fin

7

3.06

3.2

S PROJECT | STA

O SCHOOL OF BUSI

ry is the most atal to obtain.

Obtain Financ

1 million are m

nancing, Rev

2.99 2.9

3.1 3

ATE OF SMALL B

NESS AND MANAG

appealing optio

cing, All Rev

ore willing to u

venue Size L

992.83

.0 3.0

USINESS REPORT

GEMENT. All Right

n to obtain fina

venue Sizes

use bank‐loan fi

Less Than $1

2.83

2.9

T – FALL 2011

ts Reserved. | 21

ancing, whereas

nancing (3.9)

1 Million

2.712.48

2.92.6

s

8

Somewh

Some

W

Somewh

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W

PEPPERD

© 2011 | P

Figure 42. W

Figure 43. W

Not willing

hat unwilling

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what willing

Willing to use

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hat unwilling

Neutral

what willing

Willing to use

DINE PRIVATE CA

EPPERDINE UNIVE

Willingness t

Willingness to

4.3

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

g

4.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

g

APITAL MARKETS

ERSITY GRAZIADIO

to Obtain Fin

o Obtain Fin

3.0

3.0

S PROJECT | STA

O SCHOOL OF BUSI

nancing, Rev

ancing, Reve

2.9 2

2.72

ATE OF SMALL B

NESS AND MANAG

venue Size $

enue Size $5

.7 2.7

.6 2.5

USINESS REPORT

GEMENT. All Right

1 Million - $5

5 Million - $10

2.7

2.5

T – FALL 2011

ts Reserved. | 22

5 Million

0 Million

2.52.4

2.4 2.3

F

F

Somewh

Some

W

Somewh

Some

W

PEPPERD

© 2011 | P

Figure 44. W

Figure 45. W

Not willing

hat unwilling

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what willing

Willing to use

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hat unwilling

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what willing

Willing to use

DINE PRIVATE CA

EPPERDINE UNIVE

Willingness to

Willingness to

4.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

g

4.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

g

APITAL MARKETS

ERSITY GRAZIADIO

o Obtain Fina

o Obtain Fina

3.2

3.2

S PROJECT | STA

O SCHOOL OF BUSI

ancing, Reve

ancing, Reve

2.82

2.92

ATE OF SMALL B

NESS AND MANAG

enue Size $10

enue Size $25

.5 2.4

.6 2.5

USINESS REPORT

GEMENT. All Right

0 Million - $2

5 Million - $5

2.4

2.4

T – FALL 2011

ts Reserved. | 23

25 Million

50 Million

2.2 2.2

2.42.2

F

Fi

Somewh

Some

W

Somewh

Some

W

PEPPERD

© 2011 | P

Figure 46. Wi

igure 47. Wil

Not willing

hat unwilling

Neutral

what willing

Willing to use

Not willing

hat unwilling

Neutral

what willing

Willing to use

DINE PRIVATE CA

EPPERDINE UNIVE

illingness to

llingness to O

4.6

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

g

4.6

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

g

APITAL MARKETS

ERSITY GRAZIADIO

Obtain Fina

Obtain Finan

3.4

3.4

S PROJECT | STA

O SCHOOL OF BUSI

ncing, Reven

ncing, Reven

2.92

2.92

ATE OF SMALL B

NESS AND MANAG

nue Size $50

nue Size $100

.5 2.5

.5 2.5

USINESS REPORT

GEMENT. All Right

0 Million - $10

0 Million - $5

2.4

2.5

T – FALL 2011

ts Reserved. | 24

00 Million

500 Million

2.4 2.3

2.42.2

Fi

Approximabusinesses

Somewh

Some

W

0%10%20%30%40%50%60%

recur

PEPPERD

© 2011 | P

Figure 48. Wil

tely 49% of resare most focus

Figur

Not willing

hat unwilling

Neutral

what willing

Willing to use

49%

Increasingevenues fromrent products/services

DINE PRIVATE CA

EPPERDINE UNIVE

llingness to

pondents indicased on today.

re 49. The Mo

3.9

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

g

20%

/

Expandingproduct/serv

lines

APITAL MARKETS

ERSITY GRAZIADIO

Obtain Finan

ated increasing

ost Importan

3.8

11%

gvice

Reducexpen

S PROJECT | STA

O SCHOOL OF BUSI

ncing, Reven

g revenues from

t Area to Foc

3.3 3

%

cingnses

Findinp

ATE OF SMALL B

NESS AND MANAG

nue Size Gre

m current produ

cus On, All R

.12.9

7%

ng talentedpeople

Rase

USINESS REPORT

GEMENT. All Right

eater Than $5

ucts or services

Revenue Size

2.7

7%

aising financingecuring capita

T – FALL 2011

ts Reserved. | 25

500 Million

as the area the

es

2.5 2.5

5%

g/l

Other

eir

Fi

Fi

Fig

0%

10%

20%

30%

40%

50%

60%

recur

0%

10%

20%

30%

40%

50%

60%

recur

0%

10%

20%

30%

40%

50%

60%

recur

PEPPERD

© 2011 | P

igure 50. The

igure 51. The

gure 52. The

49%

Increasingevenues fromrrent products/

services

49%


services

53%


services

DINE PRIVATE CA

EPPERDINE UNIVE

e Most Impor

e Most Impor

Most Import

20%

/


lines

22%

/


lines

20%

/


lines

APITAL MARKETS

ERSITY GRAZIADIO

rtant Area to

rtant Area to

tant Area to F

10%

gvice

Reducexpen

13%

gvice

Reducexpen

10%

gvice

Reducexpen

S PROJECT | STA

O SCHOOL OF BUSI

Focus On, R

Focus On, R

Focus On, R

%

cingnses

Findinp

%

cingnses

Findinp

%

cingnses

Findinp

ATE OF SMALL B

NESS AND MANAG

Revenue Siz

Revenue Size

Revenue Size

9%

ng talentedpeople

Rase

9%

ng talentedpeople

Rase

10%

ng talentedpeople

Rase

USINESS REPORT

GEMENT. All Right

e Less Than

e $1 Million -

e $5 Million -

5%


5%


4%


T – FALL 2011

ts Reserved. | 26

n $1 Million

- $5 Million

$10 Million

6%

g/l

Other

3%

g/l

Other

2%

g/l

Other

Fig

Fig

Figu

0%

10%

20%

30%

40%

50%

recur

0%

10%

20%

30%

40%

50%

recur

0%

10%

20%

30%

40%

50%

60%

recur

PEPPERD

© 2011 | P

gure 53. The M

gure 54. The M

ure 55. The M

46%


services

46%


services

51%


services

DINE PRIVATE CA

EPPERDINE UNIVE

Most Importa

Most Importa

Most Importa

22%

/


lines

23%

/


lines

18%

/


lines

APITAL MARKETS

ERSITY GRAZIADIO

ant Area to F

ant Area to F

ant Area to F

13%

gvice

Reducexpen

14%

gvice

Reducexpen

14%

gvice

Finding tapeop

S PROJECT | STA

O SCHOOL OF BUSI

Focus On, Re

Focus On, Re

Focus On, Re

%

cingnses

Findinp

%

cingnses

Findinp

%

alentedple

Reex

ATE OF SMALL B

NESS AND MANAG

evenue Size

evenue Size

evenue Size $

12%

ng talentedpeople

Rase

11%

ng talentedpeople

Rase

10%

educingxpenses

Rase

USINESS REPORT

GEMENT. All Right

$10 Million -

$25 Million -

$50 Million -

4%


3%


6%


T – FALL 2011

ts Reserved. | 27

- $25 Million

- $50 Million

$100 Million

3%

g/l

Other

2%

g/l

Other

2%

g/l

Other

n

Figu

Figu

Approxima

Only 36% oworkers in

0%5%10%15%20%25%30%35%40%45%

recur

0%

5%

10%

15%

20%

25%

30%

recur

PEPPERD

© 2011 | P

ure 56. The M

ure 57. The M

tely 44% of res

Figur

of privately‐heldthe next six mo

41%


services

28%


services

36%

DINE PRIVATE CA

EPPERDINE UNIVE

Most Importan

Most Importan

pondents are p

re 58. Plans t

d businesses whonths.

22%

/


lines

22%

/


lines

20%

APITAL MARKETS

ERSITY GRAZIADIO

nt Area to Fo

nt Area to Fo

planning to hire

to Hire Addit

hose annual rev

16%

gvice

Reducexpen

17%

gvice

Reducexpen

44%

S PROJECT | STA

O SCHOOL OF BUSI

ocus On, Rev

ocus On, Rev

additional wor

tional Worke

venues are less

%

cingnses

Findinp

%

cingnses

Findinp

ATE OF SMALL B

NESS AND MANAG

venue Size $

venue Size G

rkers in the nex

ers in the Nex

than $1 million

12%

ng talentedpeople

Rase

17%

ng talentedpeople

Rase

USINESS REPORT

GEMENT. All Right

$100 Million -

Greater Than

xt six months.

xt Six Month

n are planning t

6%


6%


Yes

No

Don't kn

T – FALL 2011

ts Reserved. | 28

- $500 Million

n $500 Million

hs

to hire addition

4%

g/l

Other

11%

g/l

Other

ow

n

n

al

Approximapreventing

Figur

Fig

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

Le

Competi

Con

Economic

Competi

Con

Economic

PEPPERD

© 2011 | P

Figure

tely 33% of resthem from hiri

re 60. The Nu

gure 61. The N

36%

ess than $1million

$1$5

itiveness with f

International

Ability to fin

Government

nsumer/Busine

c uncertainty/c

itiveness with f

International

Ability to fin

Government

nsumer/Busine

c uncertainty/c

DINE PRIVATE CA

EPPERDINE UNIVE

59. Plans to

pondents believng, followed by

umber One R

Number OneR

53%

million ‐5 million

$5 m$10

foreign trade p

economic unc

I

d qualified em

Access to

t regulations an

ess demand (sp

confidence (do

foreign trade p

economic unc

I

d qualified em

t regulations an

Access to

ess demand (sp

confidence (do

APITAL MARKETS

ERSITY GRAZIADIO

Hire Additio

ve economic uny government r

Reason PrevRev

e Reason PreRevenue Size

64% 6

million ‐0 million

$10 m$25 m

0%

Other

partners

certainty

nflation

mployees

o capital

nd taxes

pending)

omestic)

1

0%

Other

partners

certainty

nflation

mployees

nd taxes

o capital

pending)

omestic)

S PROJECT | STA

O SCHOOL OF BUSI

onal Workers

ncertainty in thregulation and t

venting Privavenue Sizes

eventing Prive Less Than

1%72

million ‐million

$25 m$50 m

1%

3%

3%

9

5% 10

1%

3%

3%

5%

ATE OF SMALL B

NESS AND MANAG

s by Annual R

e U.S. market itaxes (20%).

ately-Held Bu

vately-Held B$1 Million

2% 72%

illion ‐million

$50 mil$100 m

15%

9%

15%

15%

0% 15%

14

8%

12%

14

10% 15%

USINESS REPORT

GEMENT. All Right

Revenues Si

s the number o

usinesses fro

Businesses f

% 75%

lion ‐million

$100 mil‐ $500millio

%

%

20%

20% 25%

4%

4%

17%

% 20%

T – FALL 2011

ts Reserved. | 29

izes

one reason

om Hiring, A

from Hiring,

78%

llion0n

Greater th$500 milli

3

% 30% 3

27%

25% 3

ll

hanion

33%

35%

%

30%

Fig

Fig

Fig

Competi

Con

Economic

Competi

Con

Economic

Competi

Con

Economic

PEPPERD

© 2011 | P

gure 62. The N

gure 63. The N

gure 64. The N

itiveness with f

International

Ability to fin

Government

nsumer/Busine

c uncertainty/c

itiveness with f

International

Ability to fin

Government

nsumer/Busine

c uncertainty/c

itiveness with f

International

Ability to fin

Government

nsumer/Busine

c uncertainty/c

DINE PRIVATE CA

EPPERDINE UNIVE

Number OneR

Number OneRe

Number OneRe

foreign trade p

economic unc

I

d qualified em

Access to

t regulations an

ess demand (sp

confidence (do

I

foreign trade p

economic unc

Access to

d qualified em

t regulations an

ess demand (sp

confidence (do

foreign trade p

economic unc

I

d qualified em

Access to

t regulations an

ess demand (sp

confidence (do

APITAL MARKETS

ERSITY GRAZIADIO

e Reason PreRevenue Size

e Reason Preevenue Size

e Reason Preevenue Size $

1

0%

Other

partners

certainty

nflation

mployees

o capital

nd taxes

pending)

omestic)

1

0%

Other

nflation

partners

certainty

o capital

mployees

nd taxes

pending)

omestic)

1

0%

Other

partners

certainty

nflation

mployees

o capital

nd taxes

pending)

omestic)

S PROJECT | STA

O SCHOOL OF BUSI

eventing Prive $1 Million -

eventing Priv$5 Million - $

eventing Priv$10 Million -

1%

3%

3%

8%

5% 10

1%

2%

3%

6%

8%

5% 10%

8%

1%

3%

3%

6%

8%

5% 10%

ATE OF SMALL B

NESS AND MANAG




10%

%

10%

15%

0% 15%

13%

16%

16%

15% 20%

17%

1

15% 20%

USINESS REPORT

GEMENT. All Right

Businesses f

Businesses f

Businesses f

%

19%

20% 25%

% 25% 30

9%

% 25% 30

T – FALL 2011

ts Reserved. | 30

from Hiring,

from Hiring,

from Hiring,

31%

% 30% 3

35%

0% 35% 4

34%

0% 35% 4

%

35%

40%

40%

Fig

Fig

Fig

Con

Economic

Competi

Con

Economic

Competi

Con

Economic

PEPPERD

© 2011 | P

gure 65. The N

gure 66. The N

gure 67. The N

International

Ability to fin

Government

nsumer/Busine

c uncertainty/c

Ability to fin

itiveness with f

Government

nsumer/Busine

c uncertainty/c

itiveness with f

Ability to fin

International

Government

nsumer/Busine

c uncertainty/c

DINE PRIVATE CA

EPPERDINE UNIVE

Number OneRe

Number OneRev

Number OneRev

I

economic unc

Access to

d qualified em

t regulations an

ess demand (sp

confidence (do

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foreign trade p

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t regulations an

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confidence (do

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foreign trade p

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economic unc

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APITAL MARKETS

ERSITY GRAZIADIO

e Reason Preevenue Size $

e Reason Prevenue Size $

e Reason Prevenue Size $1

0%

Other

nflation

certainty

o capital

mployees

nd taxes

pending)

omestic)

0%

Other

mployees

partners

o capital

nd taxes

pending)

omestic)

0%

Other

nflation

partners

o capital

mployees

certainty

nd taxes

pending)

omestic)

S PROJECT | STA

O SCHOOL OF BUSI

eventing Priv$25 Million -

eventing Priv$50 Million - $

eventing Priv100 Million -

5%

3%

5%

7%

8%

5% 10%

2%

2%

7%

5% 10

3%

6%

6%

6%

3%

5%

ATE OF SMALL B

NESS AND MANAG




15%

16%

15% 20%

0% 15%

%

%

%

10%

USINESS REPORT

GEMENT. All Right

Businesses f

Businesses f

Businesses fn

25% 30% 3

20%

18%

18%

20% 25%

14%

17%

17%

15%

T – FALL 2011

ts Reserved. | 31

from Hiring,

from Hiring,

from Hiring,

40%

35% 40% 4

3

% 30% 3

%

%

23

20% 2

%

45%

33%

35%

3%

25%

Among thosix months

Privately‐heemployees planning to

For those blabor (42%)

0%

10%

20%

30%

40%

50%

010203040

50607080

Lessm

Finance/f

InSer

PEPPERD

© 2011 | P

ose respondents.

eld businesses win the next six

o hire 73 additio

Figure 69. A

businesses who ) and service/cu

46%

1 ‐2

5

s than $1million

$1 m$5 m

Global bHuman re

UnskilleEntrepren

financial manaMana

nformation tecrvice/customer

SkilleSales and ma

DINE PRIVATE CA

EPPERDINE UNIVE

s who do expec

Figure 68.

with annual revmonths, whereonal employees

Amount of Em

do plan to hireustomer service

Figure

31%

1

3‐5 6

51

million ‐million

$5 m$10 m

0%

Otherbusinessesourcesed laborneurshipagementagementhnologyr serviceed laborarketing

APITAL MARKETS

ERSITY GRAZIADIO

ct to hire, 46% a

Amount of E

venues less thaeas privately‐hes on average.

mployees Pla

e, sales and mare (38%).

70. The Skill

11%5

6‐10 11

10 1

million ‐million

$10 m$25 m

15%7%

10%

S PROJECT | STA

O SCHOOL OF BUSI

are planning to

Employees P

n $1 million on eld businesses w

anned to be H

rketing skills are

ls in Demand

5% 3%

1‐20 21‐

321

illion ‐million

$25 mil$50 mi

2%

13%15%

18%22%

20%

ATE OF SMALL B

NESS AND MANAG

hire one or two

Planned to be

average are plwhose revenues

Hired by Ann

e in greatest de

d for New Hi

% 1%

‐50 51‐10

1 21

llion ‐illion

$50 mill$100 mi

%25%

30%

USINESS REPORT

GEMENT. All Right

o additional em

e Hired

anning to hire fs are higher tha

nual Revenu

emand (48%) fo

ires

% 1%

00 Greater t100

31

ion ‐illion

$100 mil‐ $500million

38%42%

40%

T – FALL 2011

ts Reserved. | 32

mployees in the

five additional an $500 million

ues Sizes

ollowed by skille

2%

than Unknow

73

lion0n

Greater th$500 milli

48%

50% 6

next

are

ed

n

hanion

60%

82.0% of bu

According temerged as

Figure

Greater

$100 mil

$50 mil

$25 m

$10 m

$5 m

$1 m

Le

PEPPERD

© 2011 | P

usiness plannin

to respondents s number one (

e 73. “Increas

19%

12%8%

4%

than $500 mil

lion ‐ $500 mil

lion ‐ $100 mil

illion ‐ $50 mil

illion ‐ $25 mil

illion ‐ $10 mil

million ‐ $5 mil

ess than $1 mil

DINE PRIVATE CA

EPPERDINE UNIVE

g to hire indica

Figu

of those policie34%) followed

Figure 72. G

sed Access

18%

34

24%

0%

lion

lion

lion

lion

lion

lion

lion

lion

APITAL MARKETS

ERSITY GRAZIADIO

te they would n

ure 71. Need f

es most likely toby tax incentive

Government

to Capital” PRev

82%

4%

5% 10%

S PROJECT | STA

O SCHOOL OF BUSI

need to train th

for Training

o lead to job cres (24%), and re

Policies to L

Policy to Leavenue Sizes

Increased

Tax incen

Regulator

Other

Increased

Education

17

15%

15%

ATE OF SMALL B

NESS AND MANAG

hose they hire.

of New Hires

reation in 2012,egulatory refor

Lead to Job C

ad to Job Cre

d access to cap

tives

ry reform

d competitiven

n reform

7%

20%

22%

23%

20% 25%

USINESS REPORT

GEMENT. All Right

s

, “increased accrm (19%).

Creation

eation, Opini

Yes

No

ital

ness with foreig

%

29%

30%

% 30%

T – FALL 2011

ts Reserved. | 33

cess to capital”

ions by Annu

gn trade partne

38

35% 40

ual

ers

8%

0%

Figure

Figure

Figur

Greater

$100 mil

$50 mil

$25 m

$10 m

$5 m

$1 m

Le

Greater

$100 mil

$50 mil

$25 m

$10 m

$5 m

$1 m

Le

Greater

$100 mil

$50 mil

$25 m

$10 m

$5 m

$1 m

Le

PEPPERD

© 2011 | P

74. “Tax Inc

e 75. “Regula

re 76. “Increa

than $500 mil

lion ‐ $500 mil

lion ‐ $100 mil

illion ‐ $50 mil

illion ‐ $25 mil

illion ‐ $10 mil

million ‐ $5 mil

ess than $1 mil

than $500 mil

lion ‐ $500 mil

lion ‐ $100 mil

illion ‐ $50 mil

illion ‐ $25 mil

illion ‐ $10 mil

million ‐ $5 mil

ess than $1 mil

than $500 mil

lion ‐ $500 mil

lion ‐ $100 mil

illion ‐ $50 mil

illion ‐ $25 mil

illion ‐ $10 mil

million ‐ $5 mil

ess than $1 mil

DINE PRIVATE CA

EPPERDINE UNIVE

entives” Pol

atory Reform

ased CompeCreatio

0%

lion

lion

lion

lion

lion

lion

lion

lion

0%

lion

lion

lion

lion

lion

lion

lion

lion

0% 2

lion

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lion

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lion

APITAL MARKETS

ERSITY GRAZIADIO

licy to Lead t

m” to Lead to

etitiveness won, Opinions

5% 10%

5% 10%

2% 4%

S PROJECT | STA

O SCHOOL OF BUSI

to Job Creati

o Job Creatio

with Foreign Ts by Annual R

15%

11%

17

15%

8

6% 8%

ATE OF SMALL B

NESS AND MANAG

tion, Opinion

on, Opinions

Trade PartneRevenue Siz

21%

21%

20% 25%

23%

21%

21%

7%

20% 25%

9%

8%

10%

9%

8%

8%

% 10%

USINESS REPORT

GEMENT. All Right

ns by Annual

s by Annual R

ers” Policy tozes

28%

30%

29%

27%

% 30%

25%

26%

%

% 30%

12%

12% 14%

T – FALL 2011

ts Reserved. | 34

l Revenue Siz

Revenue Size

o Lead to Jo

33%

36%

35% 40

34%

35% 40

17%

16% 18

izes

es

b

0%

0%

%

8%

Figur

Approximamonths.

Fig

Greater

$100 mil

$50 mil

$25 m

$10 m

$5 m

$1 m

Le

PEPPERD

© 2011 | P

re 77. “Educa

tely 60% of res

gure 78. Wou

than $500 mil

lion ‐ $500 mil

lion ‐ $100 mil

illion ‐ $50 mil

illion ‐ $25 mil

illion ‐ $10 mil

million ‐ $5 mil

ess than $1 mil

32%

DINE PRIVATE CA

EPPERDINE UNIVE

ation Reform

pondents indica

uld the Ameri

0%

lion

lion

lion

lion

lion

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lion

lion

9%

60%

APITAL MARKETS

ERSITY GRAZIADIO

m” to Lead to

ated the Ameri

rican Jobs Ac

1%

1%

S PROJECT | STA

O SCHOOL OF BUSI

Job Creatio

can Jobs Act wi

ct Change Hi

%

2%

ATE OF SMALL B

NESS AND MANAG

on, Opinions

ill not change t

Hiring Plans f

3%

3%

3%

3%

3%

3%

Yes

No

Unsure

USINESS REPORT

GEMENT. All Right

by Annual R

heir hiring plan

for the Next 1

4%

4%

T – FALL 2011

ts Reserved. | 35

Revenue Size

ns for the next 1

12 Months?

6%

5% 6

es

12

6%

According tinfluence o

Figure 79

Approxima

28%

Employecredits ($4,000

hiring wolooking job for m

than 6 mo

1

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

PEPPERD

© 2011 | P

to respondents,on plans to hire

9. Provisions

tely 18% of res

%

25

er taxup to0 fororkersfor amoreonths)

Employecuts (pa

tax femployfrom 6.2

3.1%

1%

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4%

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DINE PRIVATE CA

EPPERDINE UNIVE

, employer tax in the next twe

s of the Ame

pondents indica

5%

1

er taxayrolloryers2% to%)

Emplocuts (p

taxemplfrom 4

3.1

9% 9%

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APITAL MARKETS

ERSITY GRAZIADIO

credits and cutelve months.

erican Jobs Ain the N

ated their busin

Figure 80. C

16%

yee taxpayrollx foroyees4.2% to1%)

Equidedu(dedvalueequi

%

2%

8%

2%

5%

S PROJECT | STA

O SCHOOL OF BUSI

s are the most

Act That Are Next 12 Mon

ness cost of equ

Cost of Equity

14%

ipmentuctionsduct fulle of newpment)

Pubp

(schroapr

%

1%

3%

4%

1

ATE OF SMALL B

NESS AND MANAG

likely provision

Likely to Haths

uity capital is in

y Capital

9%

blic worksprojectshools andad/bridgerojects)

un

1% 1%0.5%

1%

USINESS REPORT

GEMENT. All Right

ns of the Americ

ave Influence

n the range of 8

5%

Extendingnemploymentbenefits a

1%

2% 2%

1%

T – FALL 2011

ts Reserved. | 36

can Jobs act to

e on Plans to

% ‐ 12%.

4%

Localgovernment

aid (emergencypersonnel andteachers)

% 1%0.5%

1% 1

have

o Hire

yd

%

Privately‐hestrategies (with smalleprivately‐he

2

0%

5%

10%

15%

20%

25%

Le$1

Necessar

Eng

PEPPERD

© 2011 | P

eld businesses w91%) as privateer revenues repeld businesses

23%

19%

17%

ess than1 million

$1 m‐ $

mill

A

ry resources (p

Financial st

Have k

Ha

gage in plannin

Desire to

R

DINE PRIVATE CA

EPPERDINE UNIVE

Figure 81

with revenues lely‐held businesport lower levelswith higher rev

Figure 82. Us

% 19%

15% 15

illion$5lion

$5 millio‐ $10million

n outside boar

eople, money,

tatements aud

Prepare an an

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ave a solid grow

Known missi

ng beyond the

o execute grow

Revenues less t

APITAL MARKETS

ERSITY GRAZIADIO

1. Cost of Eq

less than $5 misses with revens of necessary venues (72%).

Usage of Fina

17%% 15%

on

n

$10million ‐$25million

rd of directors

, etc.) to grow

ited by a CPA

nnual budget?

nce indicators

wth strategy?

ion and vision

current year?

wth strategies

than $5 million

S PROJECT | STA

O SCHOOL OF BUSI

uity Capital b

llion on averagenues greater tharesources (peo

ancial Analys

15%15

13%

$25million ‐$50

million

$mi$m

15%

0% 10% 20%

n Revenu

ATE OF SMALL B

NESS AND MANAG

by Revenue

e have almost tan $5 million. Hople, money, etc

sis by Reven

5% 14%13%

1

$50illion ‐$100million

$100$500millio

25%%

45%

% 30% 40% 50

ues more than

USINESS REPORT

GEMENT. All Right

Sizes

the same desireHowever, privatc.) to grow (45%

nue Sizes

14%

11% 11%

0 ‐0on

Greaterthan $500million

72

7

%

51%

58%

59%

60%

67%

7

0% 60% 70% 8

$5 million

T – FALL 2011

ts Reserved. | 37

e to execute grotely‐held busine%) as compared

%

0

Mean

Median

2%

75%

74%

84%

78%

75%

81%

94%3%

91%

80% 90%100%

owth esses d to

n

%

%

Most of the3% plan to

Privately‐hethan those governmen

Figure

0%

5%

10%

15%

20%

25%

30%

th

Econo

Competit

Go

E

PEPPERD

© 2011 | P

e respondents aat the first avai

eld businesses wwith revenues nt regulations a

e 84. The Num

3% 2%

In lesshan oneyear

1 ye

omic uncertain

tion from forei

vernment regu

conomic uncer

DINE PRIVATE CA

EPPERDINE UNIVE

are planning to ilable opportun

Figure 83

with annual revgreater than $5nd taxes.

mber One Iss

%4%

ear 2 years

Ot

nty (internation

Inflat

ign trade partn

Access to cap

ulations and ta

rtainty (domes

Revenues less

APITAL MARKETS

ERSITY GRAZIADIO

transfer their onity.

3. Anticipatio

venues less tha5 million. Large

sue Facing P

5%

3 years 4

4%

3%

0%

3%

2%

2%

3%

0% 5%

ther

nal)

tion

ners

pital

axes

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s than $5 millio

S PROJECT | STA

O SCHOOL OF BUSI

ownership inter

on of the Ow

n $5 million arer privately‐held

Privately-Held

2%

11%

years 5 yea

%

%

%

5%

%

% 10% 15

on Reve

ATE OF SMALL B

NESS AND MANAG

rest in more tha

wnership Tran

e much more cod businesses are

ld Businesse

%

25%

ars Between5 and 10years

17%

22%

% 20% 25

nues more tha

USINESS REPORT

GEMENT. All Right

an five years fro

nsfer

oncerned aboute more concern

es Today by R

17%

Between10 and 15years

Be15 y

3

30%

%

5% 30% 3

an $5 million

T – FALL 2011

ts Reserved. | 38

om now while o

t access to capined about

Revenue Siz

8%

22%

etweenand 20years

After year

3%

41%36%

5% 40% 4

only

ital

zes

%

20rs

%

45%

Figure 8

Econo

Competit

Go

E

PEPPERD

© 2011 | P

85. The Numb

omic uncertain

tion from forei

vernment regu

conomic uncer

DINE PRIVATE CA

EPPERDINE UNIVE

ber One Eme

Ot

nty (internation

Inflat

ign trade partn

Access to cap

ulations and ta

rtainty (domes

Revenues less

APITAL MARKETS

ERSITY GRAZIADIO

erging Issue

3%

0% 5%

ther

nal)

tion

ners

pital

axes

stic)

s than $5 millio

S PROJECT | STA

O SCHOOL OF BUSI

Facing Priva

%

7%

5%

6%

11

5%

5%

6%

5%

% 10%

on Reve

ATE OF SMALL B

NESS AND MANAG

ately-Held Bu

1%

15% 20%

nues more tha

USINESS REPORT

GEMENT. All Right

usinesses by

21%

24%

25% 30%

an $5 million

T – FALL 2011

ts Reserved. | 39

y Revenue S

34%

34%34%

% 35% 4

Sizes

40%



Most of respondents indicated slightly increased unit sales, decreased access to capital, decreased appetite for risk, and worsened general business conditions.

Table 1. General Business and Industry Assessment: Today Versus Six Months Ago

Characteristics Decreased

significantly Decreased

slightly

Stayed about

the same

Increased slightly

Increased significantly

% increase

% decrease

Net increase/decrease

Unit sales 13% 16% 26% 28% 16% 44% 29% 15%

Prices of labor and materials 1% 4% 31% 43% 21% 64% 4% 60%

Net income 13% 22% 27% 28% 10% 38% 35% 3%

Inventory levels 8% 20% 50% 17% 5% 22% 27% -5%

Capital expenditures 12% 12% 45% 22% 9% 31% 24% 7%

Opportunities for growth 11% 16% 28% 30% 15% 45% 27% 18%

Access to bank loans 28% 16% 44% 10% 3% 12% 44% -31%

Access to equity capital 29% 17% 45% 7% 2% 10% 46% -36%

Prices of your products or services 3% 11% 46% 34% 6% 40% 14% 27%

Time to collect receivables 3% 7% 50% 27% 13% 40% 10% 30%

Number of employees 5% 12% 60% 21% 3% 24% 16% 8%

Competition 2% 12% 52% 23% 11% 34% 14% 20%

General business conditions 14% 28% 39% 16% 3% 19% 43% -24%

Appetite for risk 12% 20% 45% 18% 5% 23% 33% -10%

Probability of business closure 15% 16% 48% 14% 7% 21% 31% -9%

Time worrying about economy 4% 6% 32% 26% 31% 57% 11% 46%



Participants of the survey believe almost all general business characteristics will increase slightly in the next 12 months. However, most of the respondents expect decreases in access to capital.

Table 2. General Business and Industry Assessment Expectations Over the Next 12 Months

Characteristics Decreased

significantly Decreased

slightly

Stayed about

the same

Increased slightly

Increased significantly

% increase

% decrease Net

increase/ decrease

Unit sales 3% 7% 23% 45% 21% 66% 10% 56%

Prices of labor and materials 1% 2% 32% 54% 11% 65% 3% 62%

Net income 4% 11% 24% 44% 17% 61% 15% 46%

Inventory levels 3% 11% 53% 25% 7% 33% 14% 18%

Capital expenditures 6% 9% 45% 31% 9% 39% 15% 24%

Opportunities for growth 5% 10% 27% 39% 20% 59% 14% 45%

Access to bank loans 13% 10% 52% 20% 5% 25% 23% 2%

Access to equity capital 13% 11% 53% 17% 6% 23% 24% -1% Prices of your products or services 1% 5% 44% 44% 5% 49% 7% 42% Time to collect receivables 2% 7% 63% 22% 7% 28% 9% 20%

Number of employees 2% 4% 49% 39% 6% 45% 6% 39%

Competition 1% 8% 58% 25% 8% 32% 10% 22%

General business conditions 7% 19% 45% 25% 4% 29% 25% 4%

Appetite for risk 8% 13% 52% 22% 6% 28% 21% 7%

Probability of business closure 15% 17% 53% 9% 5% 15% 32% -18% Time worrying about economy 6% 11% 47% 20% 16% 37% 17% 20%



State‐by‐State Survey Findings

Among the states with 100 or more respondents the state of Wisconsin has the highest revenue growth in the last 12 months (4.35%), whereas the state of Alabama has the highest negative change to revenues (‐11.31%). The state of Kansas has the highest revenue growth expectation for the next 12 months (12.33%), whereas the state of Alabama has the least revenue growth expectation (2.65%). The state of Louisiana has the highest bank‐loan success rate (75%), whereas Nevada has the lowest rate of only 27%. 53% of respondents from Utah are planning to hire additional workers in the next six months, whereas only 35% of respondents from South Carolina are expecting to expand amount of employees in the next six months.

Table3.StatesRankedbyRevenueGrowthfor12MonthsEndedSept.16,2011

State Revenue growth for

the year ended Sept. 16, 2011

Revenue growth expectation for the

next 12 months Bank-loan success Plan to hire

Rate Rank Rate Rank Rate Rank Rate Rank

Wisconsin 4.35% 1 7.23% 22 70% 2 43% 19

Ohio 3.02% 2 7.38% 20 54% 10 52% 2

Kansas 2.16% 3 12.33% 1 66% 3 41% 22

Oregon 1.47% 4 8.75% 7 44% 22 36% 28

Massachusetts 1.24% 5 6.50% 27 54% 11 45% 11

Indiana 1.02% 6 6.48% 28 60% 5 46% 7

Minnesota 0.90% 7 7.95% 11 47% 19 42% 20

Washington 0.73% 8 7.78% 14 38% 26 45% 13

Michigan 0.71% 9 6.58% 26 63% 4 43% 17

Louisiana 0.43% 10 6.87% 24 75% 1 41% 23

Missouri 0.20% 11 11.68% 2 58% 7 37% 27

Virginia 0.09% 12 7.76% 15 48% 17 49% 3

Texas -0.99% 13 7.93% 12 52% 13 48% 5

California -1.01% 14 6.69% 25 41% 23 45% 12

Pennsylvania -1.04% 15 7.44% 19 56% 9 39% 25

North Carolina -1.37% 16 8.54% 9 39% 25 39% 24

New York -1.60% 17 9.18% 5 47% 20 48% 4

Colorado -1.72% 18 7.11% 23 48% 18 45% 8

Illinois -1.94% 19 7.34% 21 58% 8 43% 18

Florida -3.06% 20 7.80% 13 44% 21 43% 16

Tennessee -3.29% 21 7.53% 18 58% 6 45% 10

Utah -3.56% 22 9.23% 4 36% 28 53% 1

Arizona -3.92% 23 8.68% 8 37% 27 45% 9

New Jersey -4.25% 24 10.33% 3 51% 14 42% 21

Maryland -4.43% 25 8.14% 10 53% 12 43% 15

Georgia -4.70% 26 7.63% 17 40% 24 46% 6

South Carolina -5.68% 27 9.15% 6 48% 15 35% 29

Nevada -6.06% 28 7.72% 16 27% 29 45% 14

Alabama -11.31% 29 2.65% 29 48% 15 39% 26

Average -1.5% 7.9% 50.3% 43.5%



Among the states with fewer than 100 of respondents the state of North Dakota has the highest revenue growth in the last 12 months (11.79%), whereas the state of Montana has the highest negative change to revenues (‐8.58%). The commonwealth of Puerto Rico has the highest revenue growth expectation for the next 12 months (15.50%), whereas the state of Wyoming has the least revenue growth expectation for the next 12 months (2.48%). The states of Maine and South Dakota have the highest bank‐loan success rates (90%), whereas District of Columbia has the lowest rate of only 22%. Approximately 62% of respondents from Puerto Rico are planning to hire additional workers in the next six months, whereas only 8% of respondents from Wyoming are expecting to expand amount of employees in the next six months.

Table4.RevenueGrowthChangeandExpectation,LoanSuccessRates,andHiringPercentagesbyStates

withFewerThan100Responses

State Revenue growth

for the year ended Sept. 16, 2011

Revenue growth expectation for the

next 12 months

Bank-loan success

Plan to hire

Alaska -3.98% 6.93% 67% 21%

Arkansas 8.11% 8.54% 56% 45%

Connecticut 1.51% 11.10% 52% 42%

Delaware -6.28% 9.24% 88% 45%

District of Columbia -2.55% 12.91% 22% 49%

Hawaii -4.27% 5.57% 40% 43%

Idaho -2.38% 4.68% 38% 48%

Iowa 2.20% 6.66% 79% 40%

Kentucky 1.38% 13.05% 71% 44%

Maine -2.72% 2.87% 90% 38%

Mississippi -8.52% 10.43% 50% 32%

Montana -8.58% 7.89% 65% 33%

Nebraska -6.27% 3.21% 70% 44%

New Hampshire 6.28% 14.95% 55% 38%

New Mexico -5.98% 6.10% 45% 45%

North Dakota 11.79% 5.79% 60% 50%

Oklahoma 3.30% 4.78% 62% 54%

Puerto Rico -7.91% 15.50% 50% 62%

Rhode Island -0.18% 13.60% 50% 24%

South Dakota -3.25% 9.29% 90% 37%

Vermont 8.33% 11.19% 75% 53%

West Virginia -5.96% 4.09% 50% 50%

Wyoming -2.46% 2.48% 75% 8%

Average -1.23% 8.30% 60.89% 41.03%



ABOUT THE AUTHOR

John Paglia, PhD, MBA, CPA, CFA

Associate Professor of Finance and Senior Researcher

Pepperdine Private Capital Markets

Dr. Paglia, a former Julian Virtue and Denney Professorship recipient, is an associate professor of finance at

Pepperdine University and directs the Pepperdine Private Capital Markets Project. He has over 10 years of

university teaching experience in finance, performs business valuations for privately‐held companies, and has

testified as an expert on economic damage and valuation matters.

His work on the Pepperdine Private Capital Markets Project—the first simultaneous, comprehensive, and on‐

going investigation of the major private capital market segments—has resulted in over 20,000 report

downloads in more than 60 countries and has earned him the 2011 “George Award,” which is given to the one

faculty member annually who best leverages the business community to make a difference in the classroom.

His research has appeared in the Wall Street Journal, CNBC, USA Today, and the New York Times, been

published in a number of journals and been presented at domestic and international conferences. Dr. Paglia

holds a PhD in finance, an MBA, a BS in finance, and is a Certified Public Accountant (CPA) and Chartered

Financial Analyst (CFA) Charterholder.

Contact: [email protected]

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INDEX OF TABLES

Table 1. General Business and Industry Assessment: Today Versus Six Months Ago…………………………….…………40

Table 2. General Business and Industry Assessment Expectations Over the Next 12 Months……………………..……41

Table 3. States Ranked by Revenue Growth for 12 Months Ended Sept. 16, 2011……………………………………………42

Table 4. Revenue Growth Change and Expectation, Loan Success Rates, and Hiring Percentages by States with

Fewer than 100 Responses……………………………………………………………………………………………………………………………..43

INDEX OF FIGURES

Figure 1. Respondents Distribution by State ................................................................................................................ 7

Figure 2. Description of Entity ...................................................................................................................................... 8

Figure 3. Number of Employees .................................................................................................................................... 8

Figure 4. Ownership Role .............................................................................................................................................. 8

Figure 5. Annual Revenues ........................................................................................................................................... 9

Figure 6. Net Income ..................................................................................................................................................... 9

Figure 7. Current Sources of Financing ......................................................................................................................... 9

Figure 8. Current Sources of Financing, Revenue Size Less Than $1 Million ............................................................. 10

Figure 9. Current Sources of Financing, Revenue Size $1 Million ‐ $5 Million ........................................................... 10

Figure 10. Current Sources of Financing, Revenue Size $5 Million ‐ $10 Million ....................................................... 10

Figure 11. Current Sources of Financing, Revenue Size $10 Million ‐ $25 Million ..................................................... 11

Figure 12. Current Sources of Financing, Revenue Size $25 Million ‐ $50 Million ..................................................... 11

Figure 13. Current Sources of Financing, Revenue Size $50 Million ‐ $100 Million ................................................... 11

Figure 14. Current Sources of Financing, Revenue Size $100 Million ‐ $500 Million ................................................. 12

Figure 15. Current Sources of Financing, Revenue Size Greater Than $500 Million.................................................. 12

Figure 16. Change to Organic Revenues over the last 12 Months ............................................................................. 12

Figure 17. Expected Change to Organic Revenues in the Next 12 Months ............................................................... 13



Figure 18. Attempt to Raise Capital over the Last 12 months .................................................................................. 13

Figure 19. Capital Sources Contacted in the Last 12 Months ..................................................................................... 13

Figure 20. Success Rates, Revenue Size Less Than $1 Million .................................................................................... 14

Figure 21. Success Rates, Revenue Size $1 Million ‐ $5 Million ................................................................................. 14

Figure 22. Success Rates, Revenue Size $5 Million ‐ $10 Million ............................................................................... 14

Figure 23. Success Rates, Revenue Size $10 Million ‐ $25 Million ............................................................................. 15

Figure 24. Success Rates, Revenue Size $25 Million ‐ $50 Million ............................................................................. 15

Figure 25. Success Rates, Revenue Size $50 Million ‐ $100 Million ........................................................................... 15

Figure 26. Success Rates, Revenue Size $100 Million ‐ $500 Million ......................................................................... 16

Figure 27. Success Rates, Revenue Size Greater Than $500 Million .......................................................................... 16

Figure 28. Average Number of Capital Providers Contacted ..................................................................................... 16

Figure 29. Average Number of Capital Providers Contacted, Revenue Size Less Than $1 Million ........................... 17

Figure 30. Average Number of Capital Providers Contacted, Revenue Size $1 Million ‐ $5 Million ......................... 17

Figure 31. Average Number of Capital Providers Contacted, Revenue Size $5 Million ‐ $10 Million ....................... 17

Figure 32. Average Number of Capital Providers Contacted, Revenue Size Greater Than $10 Million .................... 18

Figure 33. Amount of Capital Attempted to Raise in the last Six Months ................................................................. 18

Figure 34. Average Time to Complete Financing Process in Days ............................................................................. 18

Figure 35. Days Spent During the Process to Successfully Obtain Financing ............................................................ 19

Figure 36. Next Steps to Satisfy Financial Needs ....................................................................................................... 19

Figure 37. Reasons for Not Trying to Obtain Capital in the Last 12 Months ............................................................. 19

Figure 38. Percentage of Businesses by Revenue Size That Indicated “My Business Didn’t Have Any Need in

External Financing” as a Reason for Not Trying to Obtain Capital in the Last 12 Months ............................. 20

Figure 39. Percentage of Businesses by Revenue Size That Indicated “My Business Would Be Rejected for

Funding” as a Reason for Not Trying to Obtain Capital in the Last 12 Months ............................................... 20

Figure 40. Willingness to Obtain Financing, All Revenue Sizes ................................................................................. 21

Figure 41. Willingness to Obtain Financing, Revenue Size Less Than $1 Million ...................................................... 21

Figure 42. Willingness to Obtain Financing, Revenue Size $1 Million ‐ $5 Million ................................................... 22



Figure 43. Willingness to Obtain Financing, Revenue Size $5 Million ‐ $10 Million ................................................. 22

Figure 44. Willingness to Obtain Financing, Revenue Size $10 Million ‐ $25 Million ............................................... 23

Figure 45. Willingness to Obtain Financing, Revenue Size $25 Million ‐ $50 Million ............................................... 23

Figure 46. Willingness to Obtain Financing, Revenue Size $50 Million ‐ $100 Million ............................................. 24

Figure 47. Willingness to Obtain Financing, Revenue Size $100 Million ‐ $500 Million ........................................... 24

Figure 48. Willingness to Obtain Financing, Revenue Size Greater Than $500 Million ............................................ 25

Figure 49. The Most Important Area to Focus On, All Revenue Sizes ........................................................................ 25

Figure 50. The Most Important Area to Focus On, Revenue Size Less Than $1 Million ............................................ 26

Figure 51. The Most Important Area to Focus On, Revenue Size $1 Million ‐ $5 Million .......................................... 26

Figure 52. The Most Important Area to Focus On, Revenue Size $5 Million ‐ $10 Million ........................................ 26

Figure 53. The Most Important Area to Focus On, Revenue Size $10 Million ‐ $25 Million ...................................... 27

Figure 54. The Most Important Area to Focus On, Revenue Size $25 Million ‐ $50 Million ...................................... 27

Figure 55. The Most Important Area to Focus On, Revenue Size $50 Million ‐ $100 Million .................................... 27

Figure 56. The Most Important Area to Focus On, Revenue Size $100 Million ‐ $500 Million .................................. 28

Figure 57. The Most Important Area to Focus On, Revenue Size Greater Than $500 Million .................................. 28

Figure 58. Plans to Hire Additional Workers in the Next Six Months ........................................................................ 28

Figure 59. Plans to Hire Additional Workers by Annual Revenues Sizes ................................................................... 29

Figure 60. The Number One Reason Preventing Privately‐Held Businesses from Hiring, All Revenue Sizes ............ 29

Figure 61. The Number One Reason Preventing Privately‐Held Businesses from Hiring, Revenue Size Less Than $1

Million ................................................................................................................................................................ 29

Figure 62. The Number One Reason Preventing Privately‐Held Businesses from Hiring, Revenue Size $1 Million ‐

$5 Million ........................................................................................................................................................... 30


$10 Million ......................................................................................................................................................... 30


$25 Million ......................................................................................................................................................... 30




$50 Million ......................................................................................................................................................... 31


$100 Million ....................................................................................................................................................... 31

Figure 67. The Number One Reason Preventing Privately‐Held Businesses from Hiring, Revenue Size $100 Million

‐ $500 Million ..................................................................................................................................................... 31

Figure 68. Amount of Employees Planned to be Hired .............................................................................................. 32

Figure 69. Amount of Employees Planned to be Hired by Annual Revenues Sizes ................................................... 32

Figure 70. The Skills in Demand for New Hires .......................................................................................................... 32

Figure 71. Need for Training of New Hires ................................................................................................................. 33

Figure 72. Government Policies to Lead to Job Creation ........................................................................................... 33

Figure 73. “Increased Access to Capital” Policy to Lead to Job Creation, Opinions by Annual Revenue Sizes ......... 33

Figure 74. “Tax Incentives” Policy to Lead to Job Creation, Opinions by Annual Revenue Sizes .............................. 34

Figure 75. “Regulatory Reform” to Lead to Job Creation, Opinions by Annual Revenue Sizes................................. 34

Figure 76. “Increased Competitiveness with Foreign Trade Partners” Policy to Lead to Job Creation, Opinions by

Annual Revenue Sizes ........................................................................................................................................ 34

Figure 77. “Education Reform” to Lead to Job Creation, Opinions by Annual Revenue Sizes .................................. 35

Figure 78. Would the American Jobs Act Change Hiring Plans for the Next 12 Months? ......................................... 35

Figure 79. Provisions of the American Jobs Act That Are Likely to Have Influence on Plans to Hire in the Next 12

Months ............................................................................................................................................................... 36

Figure 80. Cost of Equity Capital ................................................................................................................................. 36

Figure 81. Cost of Equity Capital by Revenue Sizes .................................................................................................... 37

Figure 82. Usage of Financial Analysis by Revenue Sizes .......................................................................................... 37

Figure 83. Anticipation of the Ownership Transfer .................................................................................................... 38

Figure 84. The Number One Issue Facing Privately‐Held Businesses Today by Revenue Sizes ................................. 38

Figure 85. The Number One Emerging Issue Facing Privately‐Held Businesses by Revenue Sizes ........................... 39

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