Small business optimism index falls again


Too bad Nathan Emens doesn't own a crystal ball.

Emens isn't sure what's in store for his local marketing and consulting firm, Sync Ink. The company's sales remain flat, and the Nevada Legislature's still hammering out a budget plan that could include tax increases. Federal income taxes could jump in coming years as well, Emens noted. He needs a better picture of his future costs before he can commit to expanding.

"We're in a holding pattern until we figure out what's going on," Emens said. "There's a lot of uncertainty coming from a lot of different directions."

A new report reveals Emens has plenty of company in fretting about the future.

The National Federation of Independent Business' Small Business Optimism Index declined for the second straight month in April, as a survey of the group's members showed slumping expectations for future sales and uncertainty regarding the strength of the nation's economic recovery.

"Owners simply find no reason to be optimistic about the future, and therefore, they find no reason to pick up the pace of spending and hiring," said Bill Dunkelberg, the federation's chief economist, in a statement. "It's difficult to know exactly why the outlook for small firms is in decline, but it's a safe bet that political and economic uncertainty -- about the deficit, the threat of inflation, rising energy and health care costs -- are at top of the mind for most small-business owners. Who is going to stay positive in this turbulent political environment?"

Gauging state of mind among small-business owners is important because companies with 100 or fewer workers employ 52 percent of Nevadans, said Randi Thompson, director of the federation's Nevada chapter.

"It's a frontline indicator of economic recovery. Small-business owners are the innovators and entrepreneurs that lead an economy out of recession," Thompson said. "If small businesses are optimistic, they'll start hiring. If they're not feeling optimistic, they won't hire, and they won't spend money."

Small-business optimism did improve in late 2010 and early 2011, as the holiday season brought a bump in sales and hiring. But the boost proved short-lived: Stubbornly high joblessness across the state has continued to eat away at discretionary incomes, and Thompson said many small-business owners tell her they don't know when sales will revive enough to justify permanent hiring gains. The financing woes that hobbled small businesses in 2010 have yielded to concerns about spending habits.

"Small businesses have pretty much given up trying to get credit, or they have the credit they need. Now, they just need customers. The biggest concern for Nevada small businesses in general is whether there are people to buy their goods and services," Thompson said.

That's the case for Emens and his marketing clients. Business may be up slightly for some of the bars, restaurants and other companies Emens consults with, but revenue hasn't grown enough for them to justify boosting spending on marketing. That means Emens can't grow, either.

"When they're down, we're down. The natural reaction is for people to cut back on marketing. It's the last thing they should cut, but if they don't have the money, they don't have the money. Pretty well across the board, we're still not seeing sales where we would quite like them to be," he said. "I've got some clients teetering on the edge. One more payroll tax increase will put them out of business. Things aren't like they were four and five years ago."

Optimism -- or the lack thereof -- isn't equal among all small operations, Thompson said. Companies in tourism-based industries are seeing an uptick in business as the nation's economy improves and consumers travel more. For construction-related businesses, though, the outlook remains bleak.

To see the dichotomy in action, ask Victoria Papageorge and Dayton Blaine how they feel about the future.

Papageorge, president of Victoria's Event Productions in Las Vegas, said her seven-employee convention-services company has benefited from an improved local trade-show market, as big businesses return to exhibit floors to market their products to potential customers.

"I feel very optimistic. When things are not as good as you would like them to be, you just have to work a little bit harder," Papageorge said.

For Blaine, president of Blaine Equipment Co. in North Las Vegas, business remains slow. The construction-equipment dealership's sales remain about 65 percent below their pre-recession peak, and its employee count has fallen to 25, down from more than 50 in better times. As Blaine surveys the local landscape, with its oversupply of homes and offices and fewer dollars for public-works projects, he doesn't see much hope for significant sales improvements in the near term.

"There's no construction. Some people say things are better, but we haven't seen things improve to the degree they're improving in other areas," Blaine said. "I don't know when it (the construction downturn) will end. We may be looking at four to five more years."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.

MOST IMPORTANT PROBLEM

ProblemCurrentOne year agoSurvey HighSurvey Low
Taxes1922328
Inflation84410
Pool Sales2529332
Fin. & interest rates34372
Cost of labor4492
Govt. Regs.& red tape1715274
Comp. fromlarge bus.76144
Quality of labor44233
Cost/avail. ofinsurance87294
Other55312
SOURCE: NFIB Small Business Economic Trends

 

 

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