State-of-small-business-in-article.pngBy Reed Richardson.


On the heels of national Small Business Month in May, we compiled a broad statistical portrait of the state of the nation’s entrepreneurs, using data drawn from a number of private and governmental sources. In Part I of our series, which covered the demographic and fiscal state of our nation’s small businesses, we learned that entrepreneurs were often battered but remained undaunted by the recent economic headwinds blowing against them and that they appear confident about turning the corner in 2011. This second part of the series picks up from there and examines the topics of small business hiring plans for the coming year and what other obstacles remain for entrepreneurs in the current economic climate.


Are you hiring yet?

“Small business employment is showing continued strength,” explains Susan Woodward, an economist quoted in the April 2011 Intuit Small Business Employment Index. “While we have a long way to go to full employment, we have seen continued improvement now for a year-and-a-half.” Continuing an uninterrupted streak of hiring increases that stretches back 18 months, the survey found 60,000 small business jobs were added in April of this year, a 0.3% state-of-small-business-Pull-Quote.jpgbump. Add in this latest increase and it translates into 845,000 jobs added to small business payrolls since October 2009, according to Intuit, which tracks more than 65,000 small businesses with 20 or fewer employees.


Monthly hours worked and compensation per employee also rose in April, Woodward points out in the Intuit survey. But because hourly wages have trailed behind hours worked in the scale of their rebound, she explains, “the small business labor market is still soft and employers have room to hire without pushing wages up.”


Other surveys report a similarly slow but steady improvement in the attitude of small business toward hiring for 2011, with the number of small businesses expecting to hire new employees this year rising to levels not seen since before the recession hit. The rough average from these surveys works out to just over one in four small businesses adding staff in the next year. That level of hiring interest may seem small, but could actually reduce the national unemployment rate by more than 25%, as Network Solutions’ “State of Small Business Report” notes.


And of the skilled positions most needed by small businesses, accountants, social media experts, and marketing and/or sales representatives, topped the list, according to the Spring 2011 Small Business Monitor survey.


            Small business employee work/pay profile [i]        

103.6 – average monthly hours worked by non-exempt employees (April 2009)

109.8 – average monthly hours worked by non-exempt employees (April 2011)

6.2 – increase in average monthly hours worked (April 2009-’11)

$2,562 – average monthly wage for all small business employees (April 2009)

$2,653 – average monthly wage for all small business employees (April 2011)

$91 – increase in average employees’ monthly salary (April 2009-’11)


Small business hiring expectations [ii]

28% – expect to add part- or full-time staff in the next 12 months

2.3 – average number of full-time equivalent jobs expected to be added over the next year by each small business that is hiring

3.78 million – estimated number of total jobs to be created by small business hiring in the next 12 months

2.4% – potential percentage point drop in the national unemployment rate as a result of expected small business hiring (from current rate of 9.0% down to 6.6%)


Small business most pressing hiring needs [iii]

14% – are most in need of an accountant/bookkeeper

9% – are most in need of a social media expert

6% – are most in need of a marketing or sales representative


What challenges do you face moving forward?

While entrepreneurial optimism for 2011 abounds, there remain a number of concerns and issues for small business owners, whether they’re trying to regain lost momentum for an established company or ignite the successful launch of a startup.


“The rising cost of gasoline and energy featured prominently on small-business owners’ list of worries, with one-third saying fuel prices will hurt their firms the most,” noted this recent Wall Street Journal article, which was based on a small business survey released in early May. These rising costs can often pack a dangerous double whammy of both higher overhead and lower profits, the Journal story points out, because “smaller businesses often lack the pricing power to pass on those costs to consumers.”

If topline costs like fuel and raw materials continue to mount and pricing fails to alleviate the pressure, small business owners increasingly fear being caught in a cash flow pinch in the near future, according to the Small Business Monitor survey. “This spring, cash flow concerns have risen to a historic high of 66% from a near pre-recession low of 53% just six months ago,” the survey explains. “Business owners’ desire to hire an accountant or bookkeeper may be a reflection of the challenges of managing cash flow.”


In addition, large-scale business plans, like finding financing for a business expansion, and long-term personal goals, like saving for retirement, have reappeared on many entrepreneurs’ radar screens as points of worry now that they’ve moved past simple survival mode. And finally, despite increasing adoption by small businesses, social media tools continue to be a source of both confusion and disappointment, with many entrepreneurs saying their online investments have failed to meet their expectations.


Small business external pinch points [iv]

15% – say general inflation

18% – say rising cost of raw materials

33% – say increased cost of gas or energy


Small business financial concerns [iii]

29% – say access to capital is harder to find in the last six months

23% – worry about paying all the bills

14% – worry about getting paid by customers

14% – worry about having enough money to win new business

7% – worry about making payroll

7% – worry about the capacity to accurately track cash flow


Small business online profile [ii]

56% – currently have a company website

31% – currently have a social media presence

            Of those small businesses with a social media presence:

            • 27% – use Facebook

18% – use LinkedIn

8% – blog

8% – use location-based services like Yelp or Foursquare

7% – use Twitter

2% – use deal-of-the-day sites like Groupon or LivingSocial

18% – currently allow customers to pay for products/services online


Small business social media benefits/drawbacks [ii]

5% – say social media “hurt more than it helped”

9% – say their social media experience “exceeded expectations”

36% – say their social media experience “fell short of expectations”

40% – report seeing customer criticism on company social media sites

56% – say social media “used up more time than expected”

63% – say social media helped them engage with customers and build brand loyalty

15% – report losing money on social media efforts

25% – report making a profit on social media efforts


Small business owner retirement status [iii]

81% – worry about their ability to save for retirement (was 71% in 2008)

52% – say they will need $1 million or less to retire

$1,205,000 – average estimated amount needed to retire


If you haven’t already checked it out, Part I of this series dove into the data to find out what today’s small business owners look like and how well they’re doing in today’s economic climate.


i – Small Business Employment Index, April 2011, Intuit

ii – “State of Small Business Report,” February 2011, Network Solutions and Robert H. Smith Graduate School of Business at the University of Maryland

iii – Small Business Monitor survey, Spring 2011, American Express

iv – Small Business survey, May 2011, Citibank

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