The U.S. small business sector looks to end 2018 on a high note, with most entrepreneurs reporting anticipated year-over-year revenue growth and more indicating plans to hire and expand in 2019, according to the fall 2018 Bank of America Business Advantage Small Business Owner Report.
While the majority of small business owners are pleased with the direction of the economy, they say they are confronted with a different type of challenge – finding qualified talent in one of the hottest job markets in half a century.
The report, based on a semiannual survey of 1,000 small business owners across the country, reveals that 80% of entrepreneurs are confident their 2018 year-end revenue will exceed that of 2017. Several business growth indicators are also up year-over-year, including revenue expectations and expansion and hiring plans – which have peaked to their highest levels in three years. In addition, over the next 12 months:
- Fifty-seven percent of business owners believe their revenue will increase (vs. 51% in fall 2017)
- Sixty-seven percent plan to expand (vs. 59% in fall 2017)
- Twenty-seven percent plan to hire (vs. 16% in fall 2017)
- Fifty-five percent are confident the national economy will improve (vs. 46% in fall 2017)
- Fifty-four percent express similar confidence in their local economies (vs. 48% in fall 2017)
- Fifteen percent intend to apply for a loan (vs. 8% in fall 2017)
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“Small business owners are eager to expand their businesses and take advantage of a healthy economy,” said Sharon Miller, head of small business, Bank of America. “While we are seeing an increase in hiring plans and loan applications, today’s competitive job market has created a challenging environment to attract and retain small business talent.”
As business owners make plans to hire in the year ahead, they acknowledge that identifying and retaining employees has become a significant challenge. In the last year, turnover affected 24% of all small businesses – with 11% losing 10% or more of their entire workforce. Among business owners who sought to hire new employees, 50% say the tightening labor market had a direct impact on their ability to find and hire qualified candidates.
Adapting to these challenges, business owners have modified their hiring strategies to find and recruit top talent by:
- Shifting to a more flexible culture in terms of hours, location and extra time off (25%)
- Using social media more actively (23%)
- Offering higher salaries (17%)
- Promoting how the business impacts the local community and highlighting charitable work (12%)
- Using an outside recruiter (9%)
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When it comes to the top characteristics business owners are looking for in their potential job candidates, entrepreneurs are twice as likely to value integrity (60%) than education (30%). Other top characteristics include previous work experience (53%), passion for the work and mission of the business (46%), and the ability to learn new skills (41%).
In line with the increased optimism business owners expressed regarding their economic and business outlook, they also expressed lower levels of concern about a variety of economic factors that impact their business.
The top economic issues concerning business owners are:
- Health care costs (63% vs. 72% in fall 2017)
- Interest rates (44% vs. 43% in fall 2017)
- Trade policies (43%; issue not surveyed in 2017)
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When considering trade specifically, 36% of business owners say the latest tariffs/U.S. trade policies have impacted their businesses, with 17% reporting a negative impact, 11% reporting both positive and negative effects, and 8% reporting a positive impact.
Business owners are feeling the holiday spirit, as 83% plan to offer at least one holiday perk to their employees. The top holiday perks being offered are office closures (50%), flexible hours or vacation time (41%) and salary bonuses (38%). Finally, despite unique challenges in managing a small business, entrepreneurs love what they do. Ninety-one percent say the added stress of entrepreneurship has been worth it, and 90% would recommend others follow in their footsteps.
