Business owners express less optimism regarding growth opportunities this year than prior years, according to the 2013 Small Business Economic Forecast by Pepperdine University's Graziadio School of Business and Management along with Dun & Bradstreet Credibility Corp.
In fact, 36.2 percent of respondents are concerned about the probability of a recession in 2013, up from 28.4 percent in 2011. At the beginning of 2012, 54 percent of respondents reported being more or somewhat confident, but the figure dropped to 45 percent at the start of 2013.
"Small-business owners, who are optimistic by nature, are still taking a highly cautious view of the economy and their personal business prospects," says John Paglia, Ph.D., associate professor of finance and founding director of the Pepperdine Private Capital Markets Project. "The 'foxhole mentality' among small-business owners to dig in and stay low has the potential to slow the still fragile recovery."
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The main obstacle to the growth of the gross domestic product next year is taxes and health care, as cited by 41 percent of respondents, an increase from 32 percent in 2012. Meanwhile, 9 percent of respondents say the domestic political environment is the largest issue, down from 21 percent last year.
"The sentiment among business owners is that government regulations are putting a stranglehold on businesses," says Jeff Stibel, chairman and CEO of Dun & Bradstreet Credibility Corp. "We are nearing an economic recovery and the last thing businesses need is government headwind."
While 42 percent of respondents say they expect the Affordable Care Act to hike health care costs of their businesses, 33 percent of respondents say they plan to modify their health care plans in a way that will hurt employees. Another 9 percent of respondents say they anticipate eliminating employee health insurance coverage and instead pay the employer mandate penalty tax, and 3 percent of respondents intend to move to contribution health care plans. Five percent of respondents say they plan to make no changes to their health care plans but expect to reduce other benefits while 16 percent of respondents say they plan to maintain their health care plans but cut coverage.
More respondents report distributing employee raises this year at 41 percent over 39 percent in 2012; however, 83 percent of respondents say they do not plan to give their employees raises to make up for the 2 percent uptick in payroll taxes, which could be attributed to the fact that 61 percent of respondents say they are not bringing in more money than the previous year.
Despite the bad news, there are reports of some optimism. Respondents say they believe housing prices will grow 3 percent this year as opposed to the estimate decline of 1.8 percent in 2011. When it comes to unemployment, respondents project the rate hitting 8 percent by the end of the year as opposed to the forecasted 8.7 percent unemployment rate in 2012.
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