Forty-four percent of small to mid-sized business execs predict interest rate increase to be detrimental to their company; report lower economic prospects amid continuing concerns
Atlanta, GA – December 22, 2015 – Last Wednesday’s announcement by the U.S. Central Bank to increase federal interest rates by 0.25 percentage points was met with immediate reactions by Wall Street and economic pundits. America’s small to mid-sized business market is reacting as well, as many SMB leaders predict the rate increase will impact their bottom lines. According to a new report released today by executive recruitment firm Lucas Group, 44 percent of surveyed SMB executives expect the Fed’s first rate increase in nearly a decade will be somewhat or very detrimental to their company. The SMB Job Generation Outlook also revealed that reactions by the U.S. stock market generate direct near-term impacts on 64 percent of American SMBs.
Each quarter, the Outlook surveys small to mid-sized business executives from industries and markets across the country. Focused intentionally on C-level execs and business owners, the Outlook addresses an array of significant topics, including the economy’s health, employment trends, political issues and SMB-specific growth plans.
“A variety of macro forces are creating a whirlwind of challenges for small to mid-sized businesses nationwide,” said Scott Smith, Chief Marketing Officer at Lucas Group. “After several quarters of incremental growth in economic optimism and a strengthening in market self-assurance, Q3 revealed a clear cooldown in SMB confidence. Executives have consistently reported plaguing concerns about rising health care costs and a tightening talent market. In addition to those ongoing concerns, executives are now sharing fresh worries about how the Fed’s rate increase will affect borrowing abilities and consumer purchasing power.”
While the vast majority of SMBs reported overall good health and stable or growing positioning during Q3, fewer express continued confidence in their company’s near-term economic and job growth prospects than had reported optimism earlier in the year. In Q3, positive economic prospects dropped 15 points from midyear and marked an 18-month low with 66 percent feeling somewhat or very optimistic. Optimism regarding company-specific job growth prospects fared slightly better, falling only three points from Q2. Fifty-five percent of Q3 respondents say they are somewhat or very optimistic about their company’s near-term job growth.
SMBs are consistently challenged by several key business concerns, according to the survey. Four out of five executives say health care costs, talent availability or market competition top their list of challenges, with health care costs leading the list each quarter for the past two years.
The persistent issue of health care costs does not appear to be driven by continued effects of the Patient Protection and Affordable Care Act (Obamacare). In Q3, 78 percent of SMBs report the ACA has either no impact or a little/some impact on their business. To combat rising health care costs, SMBs are engaging a variety of cost-saving measures, including changing plans or providers, increasing employee contributions and implementing employee wellness programs.
The Outlook also revealed SMBs are consistently challenged by talent availability. The majority of SMB execs surveyed in Q3 (58 percent) say finding qualified talent for open professional and management positions is either difficult or extremely difficult and 44 percent believe hiring has become more difficult in the last year. Behind health care and talent availability, domestic and international competition is cited as the top challenge for one-quarter of Q3 respondents.
“Despite overall economic and employment numbers showing slow-and-steady improvement, SMBs are facing significant challenges on multiple fronts,” said Smith. “As a result, hiring and growth plans have remained stagnant for more than two years. With few exceptions, between 41 and 45 percent of SMBs each quarter report material plans to increase workforce numbers.”
Since 2013, the SMB Job Generation Outlook has surveyed over 2,700 executive-level leaders from across the U.S., capturing plans and opinions on an array of business, social and political issues, including minimum wage, take-home pay, immigration reform, governmental impact and more. Additional findings from Lucas Group’s Q3 2015 survey include:
• Take-home wages have increased in the last year for 77 percent of SMB workers, and 27 percent of Q3 respondents report their companies are increasing salary offers and adding bonuses and supplementary benefits to compensation packages in efforts to better attract, hire and retain qualified professional talent.
• Fifty-nine percent say the federal government is the most influential governing body to their company. That influence, however, is not considered a positive. Sixty-nine percent of SMB executives say the U.S. Congress negatively affects both employment and the economy, and 72 percent report being pessimistic about Congressional bipartisanship and the ability of government leaders to work together.
• Fifty-six percent of respondents say raising the federal minimum wage to $10.10 per hour would have no effect on their SMB. Others predict they would reduce hiring plans, cut-back current workforce numbers and/or raise end customer pricing to offset a mandated minimum wage increase.
The SMB Job Generation Outlook survey is conducted by Polaris Marketing Research on behalf of Lucas Group. For the full Q3 2015 SMB Job Generation Outlook, click here.
About the Survey
Conducted quarterly, the SMB Job Generation Outlook is a national survey of executive-level SMB leaders. The Q3 survey was conducted by Polaris Market Research on behalf of Lucas Group. Each of the respondents was CEO, CFO, COO, chairman, president, executive vice president and/or owner of their company. Survey respondents represented a variety of geographic regions and industries including manufacturing, finance/insurance/real estate, business services, IT and transportation. Eighty-four percent of Q3 respondents were from companies with fewer than 1,500 employees and 80 percent projected 2015 business revenues under $300M.
About Lucas Group
Lucas Group is North America’s premier executive search firm. Since 1970, our culture and methodologies have driven superior results. We assist clients ranging in size from small to medium-sized businesses to Fortune 500 companies find transcendent, executive talent; candidates fully realize their ambitions; and associates find professional success. To learn more, please visit Lucas Group at www.lucasgroup.com and connect with us on LinkedIn, Facebook, and Twitter.