Union Bank Small Business Economic Survey reveals economic uncertainty for business owners in 2016
San Diego County CA— On Thursday, Union Bank announced the results of its annual Small Business Economic Survey, which shows San Diego County small business owners are more pessimistic about the national economy in 2016 than last year, yet remain hopeful about the future of their own businesses.
Overall, more than two-thirds of San Diego small business owners (68 percent) report that the national economy is headed in the wrong direction, a 23 percentage point increase over 2015. Nearly two-thirds also believe the state and local economies have worsened, a 20-point increase. However, when asked about their own businesses, 87 percent said they believe they are headed in the right direction.
During the 2012 election year, the Union Bank Small Business Economic Survey results reflected similar uncertainty with the national economy, while small business owners showed strong confidence in their own companies.
San Diego small business owners are generally negative about the business climate for small businesses in 2016: 40 percent said the business climate has worsened, 31 percent said it has stayed the same, and 29 percent said it has improved, the 2016 survey showed.
Forty-five of San Diego County business owners reported that they are either unprepared or admittedly do not know if they are prepared enough for interest rate changes. A plurality of small business owners said they are working the same number of hours in early 2016 as they did during the same time last year. Forty-four percent said they were working the same number of hours per week, 42 percent said they were working “somewhat or a lot more” and 14 percent said they were working “somewhat or a lot less,” the data showed.
“The feelings of uncertainty about the national economy reflected in the survey results are somewhat consistent with what we’re seeing among small business owners who are encouraged about the future of their businesses and cautiously expanding and increasing staffing,” said Union Bank Managing Director Todd Hollander, head of Business Banking. “Our clients are working smarter to sustain their businesses and many continue to seek capital, but they are closely monitoring interest rates and are concerned about interest rate changes and other government implications during this election year.”
Access to Credit, Spending
San Diego small business owners are less likely than business owners overall to apply and be approved for credit. In 2015, 13 percent of San Diego business owners applied for loans or access to credit, with 70 percent who were approved for credit, a 13-point increase over last year but still lower than the full sample of business owners surveyed (79 percent approval rate).
Overall, San Diego small business owners are spending conservatively in 2016: 73 percent said they will keep capital expenditures the same, 18 percent said they would decrease spending and 9 percent said they would increase spending.
“Access to credit and alternative financing remain top priorities for entrepreneurs,” said Kirsten (Didi) Hakes, head of the SBA Lending group at Union Bank. “The survey results reflect that more minority business owners are experiencing higher than average approval rates, and that is encouraging and consistent with the interest we continue to receive in the bank’s lending programs, such as Business Diversity Lending and Community-Based Financing, which help provide loan opportunities to women-, minority- and veteran-owned businesses.”
Top Election Year Issues
San Diego small business owners named the Affordable Care Act the election issue of most concern for their businesses, with a majority saying health care changes have increased their business costs.
Fifty-two percent of San Diego small business owners said the Affordable Care Act would most impact their business, followed by immigration laws (26 percent); equal pay (12 percent); and foreign trade (10 percent). When asked about the impact of the health care changes, 58 percent said their costs had either somewhat or greatly increased, 31 percent said costs had not changed, and 11 percent said their costs had decreased. Nearly three in four San Diego business owners said the Affordable Care Act had not impacted employment at their companies.
A large majority of San Diego County business owners are not making efforts to support policies advancing equal pay or targeting employees across generations, the Union Bank Small Business Economic Survey also showed.
Two-thirds of San Diego business owners said they had made “no conscious effort” to support equal pay policies in their businesses, nine points higher than national numbers. Twenty-three percent of San Diego business owners conducted periodic wage assessments; 18 percent created a clearly defined pay structure; and 16 percent made efforts to increase transparency.
Even larger percentages of San Diego small business owners said they had not made efforts to attract and retain employees across generations, from Millennials to Baby Boomers. More than two-thirds of San Diego business owners said they made “no conscious effort” to attract or retain Millennial workers, and 71 percent made no efforts to retain their Gen X or Baby Boomers employees, according to the survey*.
Nearly half, 48 percent, of San Diego business owners said they are “not at all concerned” about the wave of Baby Boomers reaching retirement and the subsequent impact on their staffing.
“These results showing little concern surrounding generational staffing are not completely aligned with what our clients are telling us,” said Hollander. “Many clients are focused on attracting, training and maintaining talented millennials while maximizing experienced, proven employees who have decades of experience to help streamline staff transitions of retiring workers. The skills gap also remains a growing issue in a variety of industries.”
The survey showed that the historic California drought seems to have primarily impacted local California business, especially those in the Central Valley and Central Coast. Nine in 10 San Diego business owners said the drought has not impacted their business.
Planning the Future: Ownership Structure
The proportion of San Diego County business owners planning changes to ownership structure declined slightly over 2015 levels. Among those planning to make a change, selling and making an acquisition emerged as the top options. Within five years, 28 percent said they planned to make a change in their business ownership.
“This is consistent with many of our Baby Boomer clients who are beginning to explore next steps, which may mean selling their business,” Hakes said. “If selling is in the cards, they will need to be as proactive as they have been in running their business. We recommend putting in place an exit strategy two to five years ahead of the event. It is also important to understand that running a business and selling a business take different skills.”
About the Survey
Union Bank, working with its survey partner, surveyed 654 respondents (553 in California and 101 in the Pacific Northwest) online from Jan. 11 – 26, 2016. The small business respondents were screened to ensure that they have been in operation for a minimum of two years with owners over the age of 25. The small businesses were defined for the survey as having $15 million or less in annual sales. The margin of error for the full sample is +/-4 percentage points 95 percent of the time. For the various regions, the margins of error are as follows: Southern California (+/-4%) 95 percent of the time; Northern California (+/-7%) 95 percent of the time; Pacific Northwest (+/-10%) 95 percent of the time.
About MUFG Union Bank, N.A.
MUFG Union Bank, N.A., is a full-service bank with offices across the United States. We provide a wide spectrum of corporate, commercial and retail banking and wealth management solutions to meet the needs of customers. We also offer an extensive portfolio of value-added solutions for customers, including investment banking, personal and corporate trust, global custody, transaction banking, capital markets, and other services. With assets of $115.4 billion, as of December 31, 2015, MUFG Union Bank has strong capital reserves, credit ratings and capital ratios relative to peer banks. MUFG Union Bank is a proud member of the Mitsubishi UFJ Financial Group (NYSE: MTU), one of the world’s largest financial organizations with total assets of approximately ¥295.8 trillion (JPY) or $2.5 trillion (USD)¹, as of December 31, 2015. The corporate headquarters (principal executive office) for MUFG Americas Holdings Corporation, which is the financial holding company and MUFG Union Bank, is in New York City. The main banking office of MUFG Union Bank is in San Francisco, California.