14th May 2015

Concerns over Rising Employment Costs and Competition

Small businesses have easier time accessing capital, but struggle with transition to digital.

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Concerns over Rising Employment Costs and Competition

Less than half of small business owners (49 %) expect business growth within the next 12 months, according to the latest Small Business Health Index from CAN Capital, Inc., the market share leader in alternative small business finance. This is a decline from the 58% of small business owners who expected growth in the previous index conducted in September 2014. It seems that small businesses expect 2015 to be a year of stability rather than expansion, with 40% of owners saying they expect their businesses to remain about the same over the next 12 months, up from 34% in the fall.

CAN Capital’s Small Business Health Index, powered by SurveyMonkey™ taps into key issues and trends that can help business owners across the country expand and grow their businesses including access to capital, marketing, government regulation, competition and talent recruitment and retention.

“After years of growth, small business owners seem to think things are leveling off,” said Daniel DeMeo, Chief Executive Officer, CAN Capital. “They’re concerned about rising employment costs, competition, regulation and new trends in digital marketing and digital payments. While they recognize the opportunities that exist from investing in their businesses, they also appear to be feeling more cautious than they’ve been in the past.”

Small business owners in the Southwest and the West are the most optimistic, with 62 percent of owners in the Southwest and 60 percent in the West saying the small business environment in their regions is either excellent or good. In contrast, only 48% of small business owners in the Northeast described the environment as excellent or good, making it the only region of the U.S. where fewer than half of respondents had a positive view.

Threats & Opportunities
Rising employment costs from regulations including new minimum wage laws and the Affordable Care Act were cited by 44% of respondents as the biggest threat facing small businesses today. Competition was a close second, cited by 40%.

Many small business owners also recognize the need to do a better job of reaching their customers online, with 60% saying their knowledge of digital/social media marketing was either fair or poor. Only 29% of small businesses said they have optimized their websites for mobile devices and 27% said they don’t have a website at all.

Small businesses are also coping with the shift to digital and mobile payments. The survey found:

Less than half (44 %) of small businesses currently accept payments online. Only 13% accept mobile payments such as Apple Pay. While more than half (55%) are familiar with the transition to EMV (chip & PIN) credit cards, only 19% have taken steps to update their point-of-sale systems to be compatible with EMV. Just 18% say they plan to invest in new payments technology in the next 12 months.

“Technology is bringing revolutionary changes to small businesses,” said James Mendelsohn, Chief Marketing Officer, CAN Capital. “From new payments technology to the analytics and customer insights that are now much more readily available, there are incredible opportunities for small business owners to use these tools to better serve their customers and grow their businesses. At the same time, it can be hard to compete with the technological know-how of larger companies, and there’s danger in being left behind if they don’t invest time and money in increasing their capabilities.”

Capital Access
Only 30% of small business owners surveyed anticipate needing external capital to run their small businesses in the next year, down significantly from 43%last quarter.

For those who do apply, capital appears to be easier to come by. 38% said it is quite or extremely challenging to gain access to working capital, compared with 61% who said the same thing in the previous survey.

This survey marked the first time that bank loans through a traditional process were the number one way small businesses successfully secured funding/working capital, replacing loans from friends and family. Notably, 44% of small business owners said they have not faced any challenges obtaining access to working capital, a large increase from the 27% who said the same thing in the previous survey from September 2014.

DeMeo said, “While small businesses are having an easier time obtaining working capital, nearly half still report challenges, from being unsure of where to turn to lacking adequate collateral. Many of them are also waiting longer than necessary, with more than a third saying it took them more than a week and sometimes several months, to secure funding. CAN Capital is committed to offering fast, efficient access to capital, as well as tools and advice to help small businesses grow.”

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