Two small business polls you should read

What do the small business owners in Pennsylvania, Ohio, Virginia, Michigan, Nevada and Colorado have in common with those across the country?  On political demographics and opinions on some important issues apparently a lot.

Earlier this year a national survey of small business owners commissioned by the American Sustainable Business Council, Main Street Alliance and Small Business Majority found that 50% of the business owners identified as Republican or independents leaning Republican, 32% as Democrat or independents leaning Democratic and 15% as independents (not leaning toward either party).

A Small Business Majority poll released this week of small business owners in the 6 states mentioned above found that 44% identified as Republican, 38% as Democrat, and 10% as independent. 

Small business owners in both polls found high support for the federal government’s efforts to protect the environment.

In the national poll 61% supported moving the country towards energy efficiency and clean energy and 79% supported ensuring clean air and water.  The states’ poll “found that 71% of small business owners agree government has a role in driving our country toward a cleaner, more competitive economy” and 76% favored “the EPA’s federal rule that new power plants reduce previously unlimited emissions of carbon dioxide, methane and nitrous oxide.”  The states’ poll also found a majority of small business owners (58%) supporting the government investing in renewable energy “despite the failure of Solyndra.”

The two polls also found similar results relating to the continued off-base criticism in Washington that regulations are a primary concern of small businesses.  In both polls, small business owners ranked regulations way down on their list of problems—4^th in the national poll and 5^th in the states’ poll.

A sign that the economy is improving at a good pace can be found in the responses to both poll’s question of what is the biggest problem facing small businesses. 

The national poll conducted primarily in December of this past year found that the number one problem for small business owners at 34% was weak customer demand.  But in the states’ poll conducted just last month lack of customer demand came in 3^rd as the top problems at only 24%. 

Now that’s great news.

NFIB poll: regulations vs. lack of customers

I know that I pick on these guys relentlessly but every once in a while they produce some good information.  I’m talking about the NFIB (National Federation of Independent Business) or in this case the NFIB Research Foundation.

The Foundation released a new study, Small Business, Credit Access, and a Lingering Recession.  William J. Dennis Jr., Senior Research Fellow and author of the report, concludes:

The many fruitless attempts by policymakers to understand and improve the credit market for small businesses are due to the fact that they have thus far failed to adequately address the root causes of the economic crisis – lost confidence and uncertainty, and the housing crisis. The real estate situation has been the elephant in the room since the onset of the Great Recession and remains a substantial variable in the current plight of small business. Washington has responded by doing just enough to be dangerous, but far too little to have any long-term positive impact. Until a workable solution is implemented, we can only expect glacial economic improvement from the small-business sector. It is not a good time to be optimistic, but small-business owners by nature seem to be.

I’ve been saying for some time that if we solve the foreclosure problem in the country and allow underwater property owners to refinance or reduce their mortgage principals, we will get the economy rolling by improving real estate values, invigorating the housing construction industry and putting more money in homeowners’ pockets.

But diving into the provided results of this study there is a very interesting finding related to another hot controversy in Washington—what is the top problem holding back small business growth?  Is it regulations or lack of consumer spending? 

Here is what the NFIB report found regarding the issue of greatest financial concern to small business owners--“uncertainty” (33%), “poor sales” (23%) and “inability to obtain credit”  (15%). 

The report further broke down the responses for those citing “uncertainty” and found that 54% of these were related to the weak economy (“will sales strengthen or slide? and by how much?  What will happen to their input costs?”).  Another 23% of the “uncertainty” respondents cited policy/political conditions—federal and state taxes and budgets, regulations, healthcare reform, etc.  Another 23% of the “uncertainty” respondents referenced both economic and policy/political conditions.

So that you don’t have to do the math, here are the numbers if we’re just interested in the regulations vs. lack of consumer demand issue.

Of all the responses to the question of what is the greatest financial concern for small business owners, somewhere between 23% and 47% were most concerned about poor sales now and in the future.  We can’t know for sure from reading the report because the author didn’t give us enough detail about some of the “uncertainty” responses.

But we do know from the information given that regulations are well down on the small business owners’ list of concerns.  The report barely mentions regulations as a response and lumps these with non-regulation responses in the “policy/political uncertainty” category that only accounted for 7.59% of the total responses to the question.

The U.S. Senate will be addressing three anti-regulations bills soon and you can expect a lot of heated rhetoric about “job killing” regulations.  Clearly based on this NFIB study, the Senate will be wasting precious time and energy that would be better spent on solving our housing crisis.

We need customers

The Census Bureau reported yesterday that the United States now has 46.2 million people living below the poverty line—up 2.6 million people since last year.  Median household incomes fell below 1997 levels. 

No wonder the biggest threat to small business is the lack of customers, not taxes or regulations. 

Last week I told you about a McClatchy Newspaper survey that indicated that taxes and regulations were not holding back small businesses.

Kathleen Madigan, blogger for the Wall Street Journal (champion of the concept that regulations and taxes are the root of all evil) is on board with the lack of demand being the number one issue for small business.  She acknowledges that President Obama’s American Jobs Act seeks to increase consumers for business. 

Now we just need Congressional Republicans to get on board too.

Read Ms. Madigan’s blog below.

Small Business Hangs ‘Demand Wanted’ Sign

By Kathleen Madigan
Wall Street Journal
September 13, 2011

"Nobody knows the trouble I’ve seen.” That’s the song small-business owners around the U.S. are singing. But it isn’t regulation, tax policy or credit constraints causing the woes. It’s the lack of customers.

The widely watched survey of small businesses done by the National Federation of Independent Business shows optimism in August was the lowest since July 2010 when the recovery last hit a soft patch. The drop to 88.1 was the sixth consecutive decline — a record string of declines in the index.

The NFIB bleak view isn’t one dark cloud in a blue sky. Half of respondents to an August survey done by Newtek Business Services are pessimistic about the outlook, and 69% don’t plan on hiring over the next 6-12 months.

Small business-owners are worried because sales are falling and there’s no pickup in sight. The NFIB index covering sales expectations for the next three months is at its lowest since the recession.

Falling sales expectations are bad news for the jobs outlook because companies are not going to add workers if they do not think demand will increase as well.

Jonathan Basile, director of economics at Credit Suisse, points out the NFIB’s sales-expectations index is 10 points below its current hiring index. A negative spread between sales and current employment is rare, he says, and the gap has not been this large since the last recession.

What happened back then when demand kept falling? Small businesses cut jobs with a vengeance, as indicated by the NFIB survey as well as the tally of small-firm employment done by payroll processor ADP.

For now, hiring plans are still slightly positive. But if small businesses do not see more customers coming through the doors or ordering on-line, don’t expect the hiring index — currently at 5 — to stay above 0 for long.

President Barack Obama‘s jobs plan tries to answer the demand challenge by putting more money into workers’ pockets (by expanding the Social Security withholding cut) and by initiating construction projects.

Republicans, however, are voicing opposition to any new spending programs, so that aspect of the bill looks dead.

It seems more likely that the tax cut will go through. Yet it isn’t a sure thing that workers — scared about getting laid off — will spend the money. Higher savings, while a long-run economic positive, mean less demand now when the recovery needs it.

Small businesses have hung out the “Demand Wanted” sign. Until that need is satisfied, however, they won’t be posting a “Help Wanted” sign in the window.