Small business confidence continues to slide

SBCI declines nearly 20% since April; energy/fuelcosts a growing concern

Confidence among small businesses in the United States has decreased sharply as the economic cycle moves past the half-way mark for 2006, according to a new study from the International Profit Associates Small Business Research Board (IPA SBRB). The businesses surveyed indicated that expectations for revenue have lessened and fuel/energy costs are becoming a more critical issue.

The IPA Small Business Confidence Index (IPA SBCI), which measures expectations about revenue growth, the general economy and hiring looking forward 12 months currently stands at 39.3, declining nearly 20% from 47.3 in April and from 52 at the beginning of the year. By comparison, the IPA SBCI stood at 55 at the beginning of 2005.

Those businesses who think revenues will increase during the next twelve months have decreased significantly. Only 46% of small businesses in the current survey believe their revenue will increase during the next year. This compares to 59% in April and 67% at the beginning of 2006.

Confidence regarding hiring for the next 12 months has also declined significantly since the last IPA SBRB study. 30% of the small business owners and senior managers surveyed say they will increase hiring during the next twelve months. This compares to 39% in April and 40% in January.

Confidence in the general economy for the coming twelve months is wavering with 42% of small business owners and managers saying that the general economy will be better, compared to 44% in April and 49% at the beginning of the year.

"The IPA SBCI’s measurements of confidence in the general economy, revenue growth and hiring are all pointed downward," said Gregg Steinberg, President of International Profit Associates, the largest privately-held provider of management consulting and professional services to small and medium-size businesses in North America. "This means that small and medium-size businesses must do all they can to succeed in trying times." Steinberg also said, "When small business owners are impacted by cost increases over which they have no control, such as rising energy prices, it is even more important that they control the costs they can in their business."

The owners and managers were asked about the single most important factor impacting their businesses. The responses in the current survey are:

"The continuing spike in the price of gasoline has pushed it to the top of the list of concerns of small businesses in America," said Steinberg. "With the cost of materials second, these two cost-driven factors should remind business owners to have strong real-time controls in place that take into account changing market conditions and provide for immediate operational adjustments."