Small-Business Owners Send Mixed Signals on Economy: AmEx

While the employment picture is brightening, signs of recovery do not translate into immediate plans for growth.

Optimism among small-business owners is on the rise, with more than half (56 percent, up from 48 percent last fall) having a positive outlook on business prospects over the next six months, according to the American Express Open Small Business Monitor, a semi-annual survey.

At the same time, the employment picture is looking rosier, with 35 percent of small businesses surveyed planning to hire full- or part-time employees (up from 31 percent in the fall), and far fewer said they will freeze hiring or cut back (44 percent, down from 61 percent in the fall), the survey showed.

In spite of the promising outlook, these signs of recovery do not translate into immediate plans for growth. The top priority of small-business owners is maintaining their current business and sources of revenue (31 percent) followed closely by growing their business (29 percent, down from 37 percent last spring).

Navigating a tough economy has caused entrepreneurs to use low-cost marketing methods, such as social media (35 percent), educational marketing (16 percent) or partnering with noncompetitive businesses to stretch marketing budgets (11 percent). More than half of business owners use social media tools to attract new customers (55 percent, up from 50 percent last fall). Platforms they are using include, Facebook (38 percent), Google+ (14 percent), LinkedIn (13 percent) and Twitter (11 percent).

While social media use is on the rise and correlations to growth are becoming more apparent, just 27 percent say a social media presence is necessary for their company, a similar number (28 percent) say it is €œnice to have€ and more than one-third (39 percent) find it unnecessary. Most business owners tackle social media during daytime working hours (31 percent), while 23 percent tackle it after work and just 6 percent outsource it. Looking ahead, 41 percent of business owners said they plan to increase their company€™s social media presence in the next year.

Based on how their businesses are performing, more than one-third (35 percent) of small-business owners believe the economy is recovering, but they are proceeding with caution and managing their resources more closely by tempering plans for growth, hiring modestly and getting more out of their employees. Two-thirds (67 percent) say that workforce productivity has improved, and fewer are concerned about having cash available to pay bills (50 percent, versus 59 percent last spring).

€œThe research clearly shows that we cannot look at any one economic indicator in a vacuum to predict small-business investment behavior,€ said Susan Sobbott, president of American Express Open. €œWhile small business owners are more optimistic about the economic recovery, they are not turning a blind eye to the uncertainty that lingers. They are waiting for more proof that the recovery is real and sustainable before investing heavily in growth initiatives.€

Thirty-four percent of business owners say their appetite for risk is greater than it was a year ago, according to the survey, with men far more likely than women to say their appetite for risk is greater than it was a year ago (42 percent, versus 25 percent of women). The type of risk entrepreneurs are most willing to assume to grow their business is entering a new/unexplored market (19 percent).

While growth is not currently a top priority, when asked what would most help them grow their businesses, 46 percent said increased customer demand. Other growth generators include tax cuts (20 percent), access to capital (13 percent) and the ability to hire more staff (7 percent). Tax relief is the most pressing issue the president and Congress need to address (33 percent), the survey found. Entrepreneurs looking beyond U.S. borders for growth opportunities are among those most likely to experience steady revenue gains. While they are still the minority (15 percent), their success is noteworthy: They report 23 percent revenue growth on average over the last three years.