Fewer than half of US business owners anticipate favorable business conditions over next six months amid concerns about overall economic outlook, finds Capital One Q4 survey

Cindy Allen

McLEAN, Virginia , February 10, 2014 (press release) – Despite many businesses experiencing a boost in sales during the fourth quarter of 2013 and an increased optimism about business prospects ahead, the overall economic outlook has worsened, with less than half of business owners anticipating favorable conditions over the next six months, according to Capital One’s latest Spark Business Barometer. The quarterly survey of small businesses measures the economic perceptions and financial conditions of small business owners across the nation, as well as the most common trends and challenges that today’s small businesses face.

“On the heels of positive short-term sales results, our survey found that a growing number of small business owners continue to have concerns related to the economy, and are exploring and embracing new technologies to help manage their business and work more efficiently,” said Keri Gohman, head of small business banking at Capital One. “This is a trend we’ll watch closely as Capital One continues to innovate and introduce digital products and services designed to optimize business.”

Results Highlights

Financial Performance:

Small business sales are stabilizing and improving, with 40 percent of small businesses nationwide reporting sales increases over the past six months. Since last quarter, the percentage of businesses reporting higher sales has increased by 8 percent, while the percentage of businesses reporting sales declines has decreased from 20 percent to 18 percent. Small businesses with an international customer base (52 percent) and firms in the finance industry (66 percent) were more likely to report sales improvements.

Despite the fact that more small businesses are reporting sales improvements, only forty-six percent of small businesses expect their firm’s financial situation to improve over the next six months and 9 percent anticipate lower performance. This is an eight percent improvement compared to Q4 2012, when only 38 percent of small businesses anticipated financial growth.

One-third (33 percent) of small business executives believe their current financial situation has improved since this time last year. Since Q3 2013, the percentage of businesses reporting a stronger financial situation over the last 12 months has declined by four points, while the percentage reporting worsening conditions has increased from 16 percent to 22 percent. Forty-three percent of small business executives believe their current financial situation is about the same as it was last year.

National sentiment about current business conditions among many small business executives is negative, as more than half (54 percent) consider conditions only fair or poor, representing a two-point increase compared to the previous quarter.

Economic Outlook:

The national economic outlook among small business executives has worsened since Q3 2013. While 52 percent of business owners were optimistic about the 12-month outlook for the national economy last quarter, only 46 percent of business owners this quarter anticipate favorable conditions. Small business executives in the western United States (54 percent) and those with a largely international customer base (58 percent) report higher-than-average optimism about the economy.

The 12-month economic outlook for local economies is predominantly positive with 56 percent of business owners reporting optimism compared to 39 percent reporting pessimism. This represents a one-point decline in confidence since the previous quarter – only a slight drop compared to the 7 percent decline between Q2 2013 and Q3 2013. As with the national economic outlook, the survey results indicate that small business executives with primarily international customers (71 percent) are more likely to anticipate favorable conditions in the year ahead.

Following are additional key trends derived from this quarter’s survey.

Most small businesses use mobile technology: Eighty-six percent of small business owners use mobile technology to interact with customers. Small business owners believe mobile technology will have the most positive impact on interacting with customers (56 percent) and sharing office documents (16 percent). Thirty-four percent of small business owners use mobile business technology (on phones and tablets) every day.
Online marketing is the top priority for small business owners going into 2014: Eighteen percent of small business owners say that marketing their business online is their number one priority going into the new year. Other priorities include improving work-life balance (14 percent) and incorporating new technologies into business management (11 percent).
Nearly half of small business owners have yet to update their 2014 business plan: Small business owners were evenly split on this issue; 46 percent of small business executives had updated their 2014 business plan before the end of Q4 2013, while 46 percent had not.
A majority (54 percent) of small business owners do not plan to have their 2014 business plan reviewed by a financial professional: Thirty-one percent report that their business has the necessary in-house capabilities, while 23 percent report that their business does not need it.
The federal government shutdown had a negative impact on small businesses: About one-third (34 percent) of small businesses nationwide were impacted by the government shutdown in October, with nearly all reporting that their finances were negatively affected.

“We continually strive to better understand the challenges and opportunities small businesses face every day. As their bankers and partners, our goal is to help our customers rise to meet those challenges and make the most of every opportunity,” Gohman said. “When small businesses grow and succeed, the economy – both locally and nationally – is better for it.”

Capital One Spark Business strives to add value to small business owners through Facebook and Twitter communities with useful tools, news, tips, and inspiration to help them achieve their business goals. Follow along on Facebook at Capital One Small Business and on Twitter at @CapitalOneSpark. Use #SparkBizBarometer to share and follow the conversation.

Survey Methodology

The findings reported in this release are from a telephone survey conducted by the opinion research firm, APCO Insight, the global opinion research division of communications consultancy, APCO Worldwide. APCO Insight interviewed a nationally-representative random sample of 400 for-profit small businesses in the U.S., weighted to Dunn and Bradstreet counts of all businesses nationwide by SIC code, employee size, and geography. Small businesses are defined as those with less than $10 million in annual revenue. The interviews were conducted from December 11 – December 19, 2013. All interviews were conducted by telephone at their places of business. One respondent per business was contacted. The margin of error is ± 4.9 percentage points at the 95% confidence level. Interviews were monitored at random. Sampling for this study was conducted using a national sample of businesses drawn from InfoUSA. All interviews were conducted using a computer assisted telephone interviewing (CATI) system. Statistical weights were designed from the United States Department of Commerce to ensure proper inclusion of all SIC codes.

About Capital One

Capital One Financial Corporation (www.capitalone.com) is a financial holding company headquartered in McLean, Virginia. Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index. Capital One's subsidiaries, which include Capital One, N.A., and Capital One Bank (USA), N.A., had $206.9 billion in deposits and $289.9 billion in total assets as of September 30, 2013. Capital One, N.A. has more than 900 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. Capital One 360 is a division of Capital One, N.A. Capital One 360 Cafés are in Chicago; Los Angeles; New York City; Philadelphia; San Francisco; Honolulu; St. Cloud, Minn; and Wilmington, Del.

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