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Small-business owners optimistic, report says

Trend: Union Bank releases survey on economy, notes more sales, less layoffs

Posted: March 18, 2011 1:55 a.m.
Updated: March 18, 2011 1:55 a.m.

Small-business owners have an improved outlook on profits, hiring and capital expenses in 2011, according to a statewide report released Wednesday.

The 11th annual Small Business Economic Survey, by Union Bank, found that Los Angeles County small-business owners are experiencing increased sales and fewer layoffs in 2010.

But business owners are also reporting a balance for  their increased optimism with conservative measures to protect their businesses.

Surveying nearly 3,000 participants across California, the Union Bank survey found that 61 percent of small-business owners believe 2011 will be a better year in terms of profitability.

That’s a 10-percent increase over last year, and a 27-percent increase over 2009.

Regional business owners haven’t been this optimistic since 2007, when 72 percent of owners anticipated improved profitability, a strong signal that the regional economic climate is improving.

“After a few years of watching their budgets, trimming expenses and running lean, a number of our Santa Clarita Valley small-business clients experienced an uptick in sales last year, and are optimistic about their profit expectations for 2011,” said Janice France-Pettit, senior vice president and regional manager for Union Bank, overseeing the Santa Clarita, Simi, San Fernando and Antelope valleys.
Improving outlook
Improved expectations follow a year of increased sales for business owners.

Forty percent of the respondents reported greater sales in 2010 compared with 2009, up 12 percent from last year’s survey. Los Angeles owners reported fewer layoffs in 2010 than owners in any county surveyed.

More than a quarter, 28 percent, of those surveyed in the local region plan to increase staffing levels and capital spending this year.

Statewide, nearly three-quarters of the business owners surveyed at least expect to maintain staffing levels and 62 percent expected capital expenditures similar to last year.

In a sign that business owners remain cautious about spending after battling the recession, 39 percent of the respondents statewide believe they will continue to seek lower vendor costs in 2011.

Nearly one-third of all business owners believe their businesses have already experienced an economic recovery, while the majority believe they will recover by the end of 2011.

“I think the profitability point is the most positive development from our survey, and it proves again why small businesses are truly the backbone of the U.S. economy,” Hollander said.

Government assistance
With owners cutting their operating costs and reducing their debt last year, the survey revealed nearly 60 percent of owners would like to see the government focus on tax cuts for small businesses.

Thirty-seven percent favor temporary tax incentives to encourage small businesses to invest in jobs, and 29 percent would like lower health care costs to ease the burden on small businesses.

The passage of 2010’s Small Business Jobs Act provided $30 billion to small banks to encourage lending to small businesses; it also gave $12 billion in business-tax incentives and expanded Small Business Administration loan programs.
But only 8 percent of owners were motivated or confident to apply for these loans or credit last year.

It will take some time for business owners to return to a mindset of applying for loans, particularly those who struggled with debt over the past few years or those who think banks aren’t lending, said Heather Endresen, senior vice president and manager of Union Bank’s SBA government lending.

Union Bank is seeing an increased interest in loan requests by small businesses, France-Pettit said.

“We are seeing an increase in the number of Santa Clarita Valley small-business clients who plan to add staff and/or increase capital expenditures in 2011,” France-Pettit said.  “This optimism has translated into an increase in the number requests we are seeing for loans.”

Biggest challenges

Since 2008, business owners have continued to identify the state’s economy as the top challenge in running a business in California, with 40 percent of owners listing this as their primary challenge.

Local business taxes were ranked as the second biggest challenge to business owners, and were the primary concern for 38 percent of Los Angeles owners.

Regionally, 26 percent of the owners ranked local business regulations as the third biggest challenge.

This is the first time that Los Angeles respondents ranked state and local business regulations among the top three challenges since the survey first included this question in 2004.

The national economy was the biggest challenge.

And concern about workers’ compensation costs tied with health care costs was cited as the fifth biggest challenge, although only a little more than one-fifth of the owners in this region experienced increases in their workers’ compensation insurance premiums in 2010.

Owners in the region said the top three advantages of doing business in California are opportunities for growth, favorable climate and family ties.


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