Growth Strategies

Small-business Owners Eye Slowdown

Most-frequently-cited problems remain cost and availability of insurance, as well as taxes and the quality of labor.
Stephen TaubJune 14, 2006

Small business owners are becoming increasingly pessimistic about the economy’s prospects, according to a monthly report by the National Federation of Independent Business. William Dunkelberg, chief economist of the NFIB, said: “A slowdown is definitely going to happen. The only question is how far and how fast.”

The NFIB noted a reduction in job openings and in capital-spending plans and an increase in the percentage of small-business owners who believe that business conditions will be worse in six months than they are now.

The latest survey is based on responses in May 440 NFIB members.

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Dunkelberg also observed that current economic activity was strong: reports of higher sales volumes increased, and the share of owners expecting higher volumes was unchanged. The NFIB found few signs that companies are having difficulties arranging financing. Inflation news, while not improving, was somewhat muted.

One-quarter of respondents reported unfilled job openings, down from April’s near-record level. Some 56 percent hired or tried to hire one or more workers, but 84 percent of this group couldn’t find qualified applicants. Looking ahead, 26 percent plan to add jobs in the next three to six months; 5 percent plan cutbacks.

The frequency of capital outlays over the past six months remained steady, at 62 percent of respondents, on expenditures including new equipment (46 percent), vehicles (24 percent), improvement or expansion of facilities (14 percent), new fixtures and furniture (14 percent), and new buildings or land for expansion (5 percent). Prospects for the next few months faded, however; only 28 percent have capital-spending plans during the next three to six months, compared with 33 percent who reported such plans last month.

Small-business owners also reported that credit is still fairly easy to obtain. “Regular borrowing activity was reported by 38 percent, near expansion-high levels, but historically low,” according to NFIB.

Asked about their most important problem, respondents cited the cost/availability of insurance (23 percent), taxes (18 percent), and quality of labor (12 percent), the same issues that topped the list last year.

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